On August 2, 2016, CMS posted the 2017 IPPS final rule. While we will provide a comprehensive summary of the rule in the near future, this post relates to the changes that CMS is making regarding Medicare DSH reimbursement and the use of cost report worksheet S-10 to calculate factor 3 for federal fiscal years 2018-2021. As you recall, in the 2017 proposed rule, CMS indicated that it would begin using S-10 to calculate factor 3, at least in part, beginning in FFY 2018. However, in the final rule CMS states:
CMS is not finalizing its proposed methodology for incorporating S-10 data in the factor 3 computation for 2018.
CMS intends to clarify and revise the instructions used to complete worksheet S-10 in the future.
Due to the time lag in implementing prospective changes such as contemplated here, CMS believes that cost reporting periods beginning in FY 2017 would be the first cost reporting periods that would reflect revised S-10 data under the new instructions.
The revised data using the new instructions would be available for use no later than FFY 2021.
So it sounds like S-10 reporting issues may now be deferred until new instructions are issued – right? Not so fast. CMS also stated in the final rule:
“We will consider further whether current Worksheet S-10 data or a proxy should be used to calculate factor 3 for years between FY 2017 and FY 2021 in future rulemaking.”
Change Request 9648, Transmittal 1681: “as a first step in the process of ensuring complete submissions of Worksheet S-10……we instruct MACs to accept amended Worksheets S-10 of FY 2014 cost reports……(submitted) no later than September 30, 2016.” “CR 9648 is one of the multiple steps we intend to take over the next several years to ensure more accurate and uniform reporting of uncompensated care costs on Worksheet S-10.”
There appears to be conflicting information as to what hospitals should do with regard to reporting S-10 data for FY 2014, FY 2015 and FY 2016 cost reports. On one hand, CMS seems to have passed on the use of S-10 until Medicare cost report instructions have been revised. On the other hand, CMS appears to have left the door open to using S-10 data, at least in part, for the federal fiscal years 2018-2020. SCA is attempting to seek clarification from CMS on that point.
Absent CMS clarification on this issue, our thoughts are as follows:
Hospitals are obligated to report S-10 data correctly and in accordance with the Medicare cost report instructions, or at least based on a hospital’s best interpretation of the cost report instructions, regardless if the data is being used for payment purposes.
If a hospital believes its previously reported S-10 data is incomplete, incorrect, or not otherwise adequately supported (i.e. patient level detail) then a hospital should submit revised data to its MAC. In particular, be mindful of the 9/30/16 deadline for FY14 cost report amendments.
Continue to review and compile S-10 data in accordance with your best interpretation of the current instructions and have detailed patient level support for the amounts being claimed on Worksheet S-10. No one knows if/how FY 2014, FY 2015 and FY 2016 data will be applied to a payment proxy for FFY 2018-2020 in some capacity.
Protect yourself! CMS does not have a clear direction on this issue. They have flip-flopped on their published intentions and expected timeframes. Providers must be prepared for future changes to the Factor 3 formula. Make sure your Medicaid days and S-10 data are sound to best position your organization for any future direction CMS pursues.
If you have any questions related to this issue or would like to discuss it further, please do not hesitate to contact us at 972-732-8100. We will follow up with you if we do in fact receive some clarification from CMS regarding questions that we know hospitals have and we will also be following up with a more comprehensive summary of the Medicare DSH portion of the final 2017 IPPS rule in the very near future.
