Southwest Consulting Associates Blog

Since CMS first contemplated using cost report worksheet S-10 as the source of Factor 3, which is used for the distribution of the uncompensated care pool under the Affordable Care Act (ACA), most stakeholders have objected and advised CMS to delay the use of S-10. Their objections are based primarily on the fact that there are anomalies with the data being reported and that CMS needs to revise the form and instructions to facilitate more accurate and uniform reporting of uncompensated care data. However, from the outset there has been one group advocating the use of S-10, or something like it, that being the Medicare Payment Advisory Commission (MedPAC).

In its comments to the FY 2014 IPPS NPRM, citing its 2007 report, MedPAC stated that:

• At most, 25 percent of the DSH payments were empirically justified by higher costs of treating low-income Medicare patients.

• The disproportionate patient percentage¹ was a poor predictor of uncompensated care costs and that Medicaid plus SSI days “does a poor job of directing funds toward hospitals with high shares of uncompensated care”.

• S-10 is a better source of data and should eventually be used.

• A four-year transition is advisable and would accomplish the goal of the legislation.

• A review of submitted S-10 data in the 3/31/2013 data set compared to the 12/31/2012 data set indicates that “the data is getting better”.

In its comments to the FY 2015 IPPS NPRM, MedPAC reiterated much of what it stated in the prior year:

• The use of low-income days results in misallocating uncompensated care dollars.

• S-10 data is not perfect but does provide a better estimate of uncompensated care costs.

• If there are questions regarding the quality of the data, then CMS should instruct its contractors, the MACs, to work with hospitals regarding the data being reported.

• Using S-10 for payment purposes will help data reporting improve over time.

In its 2016 comments, MedPAC in part reiterates much of what has been stated in the prior two years and adds the results of some new analysis:

• The use of low-income days results in misallocating uncompensated care dollars.

• S-10 data is not perfect but does provide a better estimate of uncompensated care costs.

• This year MedPAC took a new approach, that being to assess the correlation between reported S-10 data and the audited data Medicaid programs collect regarding the cost of caring for the uninsured for hospitals that receive Medicaid DSH. In other words, how closely does S-10 data match audited uncompensated care data.

• MedPAC found that the correlation was over .80 when comparing S-10 data to audited uncompensated care data. MedPAC further found that the correlation between low-income days and audited uncompensated care data was only .50.

• Given these findings, as well as the results of previous analysis and comments, MedPAC again urged CMS to transition to S-10.

As the most recognized and vocal proponent supporting the move from using low-income days to using S-10 to distribute the uncompensated care pool, MedPAC continues to urge CMS to make this change. MedPAC does support a transition period to avoid the financial shock hospitals may experience due to this change in methodology. However, it is unclear where the starting point in this transition may be – i.e. data that has already been reported and may be flawed or new data, using new instructions from some future period.

Hospitals will need to continue weighing what may occur, and how, and make some decision regarding how they will approach addressing all the issues surrounding the complexity associated with reporting S-10 data.

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¹The disproportionate patient percentage is the sum of the Medicare SSI fraction and the Medicaid fraction. The Medicare SSI fraction represents the ratio of Medicare patients that also receive supplemental security income payments. The Medicaid fraction represents the ratio of a hospital’s Medicaid days to total hospital patient days in a cost reporting period.