In this post, we will examine the current landscape of Medicare DSH reimbursement with regards to Factor 3 and how the FY 2016 IPPS final rule will affect a hospital's work identifying Medicaid eligible days for As-Filed cost reports and on a retroactive basis.
CMS is implementing an important change to the data used to develop Factor 3 of the DSH computation for federal fiscal year 2016, effective October 1, 2015. The reaction to this change should include an examination of how providers prepare their as-filed DSH calculation and what retrospective work should be done to affect their federal fiscal year 2017 factor – as the opportunity to make changes is fast closing.
Federal Fiscal Year 2016 Factor 3 Compilation Change:
Recapping FY 2015, the Factor 3 data was derived from “the most recently available full year cost report and the most recent cost report data submitted to CMS by IHS hospitals for the Medicaid days and the most recently available SSI ratios, which for FY 2015 were data obtained from the 2011/2012 cost reports and the 2010 cost report data submitted by IHS hospitals for the Medicaid days, and the FY 2012 SSI ratios for the Medicare SSI days.” In other words, for FY 2015, the cost reporting periods generally used were:
September 30, 2012
December 31, 2012
March 31, 2013
June 30, 2013
CMS stated that since the publication of the FY 2015 final rule, the agency had been informed that the hospital community was having difficulties submitting accurate data within prescribed timeframes. CMS cited a variety of difficulties including a hospital’s ability to receive eligibility data from States. CMS also noted that there is variability among hospitals and MACs with regard to the submission and acceptance of amended cost reports.
To remedy this situation, CMS elected to “provide hospitals more time to submit these data and MACs with more time to consider these submitted data before they are used in the computation of Factor 3.” As a result, the same cost reporting periods used to derive Factor 3 for FY 2015 will be used to derive Factor 3 for FY 2016. What are some of the ramifications of this and what should hospitals be doing to ensure that the most accurate data is being used for their hospitals?
What Effect Did This Change Have on Factor 3:
While in theory this change will allow hospitals more time to obtain the needed data and have it incorporated into the cost report, in actuality, that is not necessarily happening. The fact is that almost 80% of the DSH providers had the same Medicaid days used for the FY 2016 Factor 3 used for the FY 2015 Factor 3. As such, it doesn’t appear that the additional grace year had a significant impact on updating the Medicaid days used to distribute the UC pool. In part this is because providers didn’t know in advance that CMS would be making this change, and therefore, didn’t pursue having the Medicaid days data updated and transmitted to CMS. Additionally, there are many cases in which providers attempted to update the cost report information only to receive denials from the MAC when trying to amend the cost report.
By holding the cost reporting period constant, some of the 2012/2013 cost reports have been settled in the last calendar year (approximately 27%). This creates an uneven playing field as some hospital data is in fact updated, while many others are not. Another result is that by holding the period constant, CMS further delayed the impact that Medicaid expansion will have on the days used to compute Factor 3. Under the current scenario, FY 2018 will be the first year the 2014 cost reports will be used for Factor 3 (it would have been FY 2017 under the previous method of computing Factor 3).
What Are Hospitals To Do:
While hospitals could guess what cost report will be used for the FY 2017 Factor 3 and focus their attention on that report, we would suggest given the unpredictable nature of CMS, hospitals should be focusing on multiple years.
First, if CMS doesn’t revert back to the original schedule, then it is anticipated that the 2012/2013 cost reports will be used for the FY 2017 Factor 3. In other words, for FY 2017, the cost reporting periods presumed to be used are:
September, 30, 2013
December 31, 2013
March 31, 2014
June 30, 2014
However, if CMS yields to the many comments noting that the change in policy didn’t necessarily result in better data, CMS may revert back to the original schedule in which case the following cost reporting periods are presumed to be used:
September 30, 2014
December 31, 2014
March 31, 2015
June 30, 2015
CMS utilizes data contained in the first quarter HCRIS file in the final rule, which in this case will be the file as of March 31, 2016. Therefore, hospitals do not have a lot of time to obtain revised eligibility matches, prepare revised DSH calculations with supporting documentation, prepare and submit amended cost reports and work with the MAC’s to get those reports accepted and input into HCRIS in time.
We urge hospitals to carefully evaluate their situation and resources and to implement a plan to update their Medicaid eligible days data to ensure that they are receiving all the ACA reimbursement that the hospital is legally entitled to. We've got more to say on this subject, stay tuned for part 2 or better yet, subscribe to our updates below...
