OVERVIEW:
This is the first in a series of updates related to the new Medicare DSH payment under the Affordable Care Act (ACA), specifically as it relates to the identification of Uncompensated Care (UC) Cost as computed by the Medicare Cost Report Worksheet S-10. CMS, in its FY 2016 proposed rule issued in April 2015, simply stated that:
“Because of concerns regarding variations in the data reported on Worksheet S-10 and the completeness of the data, we did not propose to use data from the Worksheet S-10 to determine the amount of uncompensated care for FY 2014.”
For the same reasons stated above, CMS elected not to use S-10 data for FY 2015.
CMS stated that, “For FY 2016, we believe it remains premature to propose the use of Worksheet S-10.”
So at first blush, it appeared that CMS just “kicked the can” down the road again and while the agency reaffirmed its objective of moving to S-10 as the Factor 3 methodology, it didn’t necessarily sound as if that change was just around the corner. At least not until CMS responded to the many public comments (published in the 2016 IPPS final rule) that it received in this latest round of rulemaking.
CMS received 40+ comments, many quite detailed and comprehensive in nature, on the topic of using S-10 data for Factor 3. While most of the comments supported CMS’ decision to delay the transition to Worksheet S-10, there were a number of comments that called for its use immediately. In this first update, we are providing a recap of the IPPS proposed rule comments so that you can get a flavor for what is being said. In future installments, we will delve more deeply into the underlying issues related to the components of Worksheet S-10 and the UC calculation itself as we all prepare for the eventuality that a shift to Worksheet S-10 will occur.
COMMENTS RECAP:
The provider community overwhelmingly supported the use of S-10 at some point but not now (read all comments and DSH section of the FY16 IPPS final rule HERE)
Commenters support the use of S-10 only after:
CMS provides more guidance and clearer instructions
CMS subjects the data to audit validation before use
CMS provides a reporting and revision methodology/process similar to that used for wage index
CMS implements a transition plan to move from the current Factor 3 to the new Factor 3 using S-10 data
Some of the specific areas that commenters thought CMS should devote time and attention to included:
The calculation of the ratio of cost-to-charges, specifically as it relates to how DGME costs are treated and to incorporate expenses in excess of RCE limits
The definition and timing of Charity Care & Bad Debts
The issue of reconciling varied policies and procedures related to Charity Care and Bad Debts across hospitals and states and how those policies and procedures reconcile with state laws
Implementing a comprehensive and uniform audit process that includes “requiring hospitals to produce documentation of charity care and bad debt write-offs recorded, before the data are used as the basis for distributing uncompensated care payments.”
Addressing the issue of uninsured versus charity care
Addressing definitional issues related to indigent vs. charity, Medicaid non-covered charges or exhausted days as well as the calculation of UC costs for bad debts given different copay arrangements
CMS’ responses to these comments included:
We expect reporting of S-10 data to improve over time, particularly in the area of charity care
We have not decided on revisions to S-10 but are committed to making improvements if warranted
We remain convinced that S-10 can ultimately serve as an appropriate source of UC cost
“At this time, we are considering a possible timeline for using worksheet S-10 data to calculate Factor 3, and we intend to discuss this further in the FY 2017 IPPS proposed rule, which is typically released in April of the preceding fiscal year.”
CONCLUSION:
The take-away here is “objects in the mirror are closer than they appear.” Based principally on the same feedback from the same entities, CMS has elected to not use data reported on the cost report S-10 worksheet for 2014, 2015 or 2016. All the while, it has been CMS's stated opinion that the reporting of data on S-10 would improve over time. Time has passed now and it is apparent that CMS is poised to act as evidenced by the clear signal that their thinking on this topic will be outlined in the NPRM for IPPS 2017 that will be issued in April 2016.
Many providers have gotten a jump on the process by embarking on “deep dive” reviews of current S-10 reporting as well as policy, procedure and practice reviews. The prevailing thought for many providers is that regardless if CMS uses current reported data or revises the definitions and data requirements, deep knowledge into how things are working and being reported now is a plunge all hospitals will ultimately have to take. Where is your hospital in the process?
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In anticipation of S-10 being adopted to distribute the UC pool dollars, SCA’s comprehensive S-10 Uncompensated Care Compliance Program will address a provider’s process for accumulating and reporting required data on Worksheet S-10. SCA’s S-10 compliance program encompasses, but is not limited to, the review of the provider’s bad debt policy, self-pay discount policy, etc. and an analysis comparing/contrasting the provider’s policies to the program reporting requirements for worksheet S-10. In addition, SCA will also review the process of recording the applicable write-off transactions through the patient accounting and general ledger systems to determine compliance to policies and procedures. Ultimately, SCA will prepare the provider’s Worksheet S-10 for filing with its MAC along with future recommendations, if any, including the identification of areas which are inconsistent with Medicare program regulations and instructions in order for the hospital to maintain ongoing compliance. Please visit our website at www.southwestconsulting.net for more information and be sure to request our analysis modeling what reimbursment will look like for your facility as a result of migrating to S-10 UC distribution.
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