One of the areas addressed in the Patient Protection and Affordable Care Act (PPACA) affecting Acute Care hospitals is Medicare DSH. Since it is one of the few areas on the cost report where significant Medicare reimbursement is still calculated, it only makes sense that the law, which main premise is to cut back on healthcare spending, includes Medicare DSH payment reductions. Beginning in fiscal year 2014, Medicare DSH payments will be only 25% of what would be paid under the pre-PPACA policy. Estimates for the 10 year reduction in Medicare DSH payments are greater than $20 billion.

As hospitals begin their revenue budgets for calendar year 2013, this reduced DSH revenue should be included for 3 months (October, 2013 thru December, 2013), as well as the uncompensated care revenue explained below. Regardless of the pre or post period of implementation, accumulation of Medicare DSH listings will continue to be a requirement of the Medicare cost report and subject to audit.

On the positive side, an additional payment will be made for uncompensated care costs based on a formula that takes into account:

• The aggregate reduction in DSH payments to all hospitals attributable to the reduction in DSH payments (the 75% reduction value becomes the uncompensated care pool)
  
• The reduction in uninsured individuals (this pool is reduced by 2 factors, reduction in uninsured % plus artificial % decrease)
  
• Each hospital’s share of uncompensated care provided by all hospitals

The reimbursement calculation is difficult to quantify at this time because CMS has not yet identified the source of the reduction of uninsured or the basis for what makes up uncompensated care. CMS will use Worksheet S-10 for calculating this portion of the uncompensated care reimbursement and will clarify this section as the implementation date approaches. When CMS defines uncompensated care more clearly, does the hospital capture all the uncompensated care categories? If not, an examination of your accounts receivable system may be necessary to maximize your reimbursement. 

At the same time, it is anticipated that the Medicaid population should grow with the shift of an estimated 32 million of uninsured into some type of health insurance program. Under the pre-reform law, Medicaid increases would increase DSH reimbursement. Now under PPACA, DSH reimbursement payments are at 25% of pre-reform payments. In addition, the new uncompensated care formula reduces the available funds to take into account the total reduction in percentage of uninsured.

Therefore, while there continues to be Medicare DSH payments, and supposedly an increase in Medicaid patients, the combination of new DSH calculation and uncompensated care formula will result in significant reductions in Medicare reimbursement to the hospitals.

At the time of this writing, several State Supreme Courts have ruled that the law is unconstitutional, not in its entirety but due to the mandate that requires each citizen to purchase a health insurance policy. The House of Representatives, which is Republican controlled, has voted to repeal the law. Any repeal is likely not to make it past the Democratic-run Senate or President Obama’s veto. It is anticipated that the final decision will rest with the Supreme Court. Interestingly, the current Justices are comprised of 5 Republican nominated and 4 Democratic nominated Justices. Will they rule along party lines also? It is more likely that specific portions of the health care law will become targets for repeal versus the entire law. The reduction of health care costs need to come from somewhere. The reduction in DSH reimbursement is not a likely area to change significantly. 

General Comments on Medicare DSH

For Medicare providers, the 3-5 months following the close of the fiscal year involves completion of the billing process for the prior year patient services. Subsequently, with the Medicare and Medicaid cost reports due at the end of the fifth month following the close of the fiscal year, the process of generating a Medicare DSH listing for submission begins. It is a yearly, repetitive process, but for many providers it is tedious and complicated, juggling the need to get it done timely versus identifying an accurate DSH day figure that renders the most proper reimbursement due to the provider.

When I was with National Government Services (NGS) (previously Empire Medicare Services, previously Empire Blue Cross and Blue Shield of New York) as Medicare intermediary for New York, I generated an analysis that indicated Medicare paid NY DSH providers $ 1.0 billion in 2008, a staggering number. At the time, NGS was working with the Greater NY Hospital Association, NY Providers and NYS Department of Health to develop a process to compile DSH days. With the Medicare ‘dollars at risk’, it was imperative for both, the paying party - Medicare, and the receiving party - the Provider, that the system render accurate DSH reimbursement. Both sides felt the new NY DSH process seemed to achieve this goal.

During the discussion process, one of the concerns indicated by the NY providers, and it is true for providers in all the States, was that the timing of the cost report did not allow them to accumulate an accurate DSH listing. They argued that accumulating the DSH list in the 3-5 month period after the fiscal year end did not allow providers to complete its initial billing of inpatient services and as such, identify an accurate Medicaid paid and eligible population. In most states there is the issue of pending Medicaid eligibility. For example, in New Jersey, some eligibility dates will change in the system and certain program codes can take up to two years to reflect the proper code in the State system.

The way the NY DSH process was developed, it was thought that the identification of paid and eligible days 3 months after fiscal year end would not differ materially in total from if it were accumulated 10 months after fiscal year end. The NY CMS Regional Office concurs with this. There would be a certain population of Medicaid paid days and then another population of patients who were eligible for Medicaid. If the accumulation took place 10 months after the close of the fiscal year there would be a definite increase in the paid Medicaid day population and a decrease in eligible Medicaid day population. The intermediary and CMS contend that the total DSH days would be relatively close. In my years at the intermediary I had not seen evidence that proved or disproved this belief.

There is a definite difference in the determination of DSH days depending on when the analysis is completed. The bottom line is, no matter when you accumulate the list, it must maximize the Medicare DSH reimbursement due to the provider within the rules set by CMS. Is running the DSH analysis 3-5 months after the close of the year really generating the most accurate listing and maximizing DSH reimbursement?

An important issue is that each State has its own specific Medicaid programs that are, or are not, matched by the Federal government. This is the primary determinant for the days to be included in Medicare DSH and is necessary to ensure the accuracy of the final DSH list. Many providers use their internally accumulated Medicaid days for purposes of the cost report. This practice overstates paid days because it includes Medicaid days applicable to non-allowable codes and understates DSH days as it may exclude all eligible but unpaid days. 

The goal is to produce an accurate DSH listing compliant with CMS’ rules of includable Title XIX Medicaid days. Working with CMS and the intermediary/MAC helps to assure that they are also following the CMS rules when it comes to DSH. The best practice is to estimate DSH days for purposes of the cost report based on historical data and then do a detailed review around 8-11 months after the close of the fiscal year. However, producing the listings for submission with the cost report and then revisiting the listing later in the year is an option if the provider chooses.”

Remember, assuming your DSH list is accumulated 3-5 months after the close of the fiscal year and it is not 100% accurate, if the intermediary decides not to review it, you lose your right to appeal it. To appeal to the Provider Reimbursement Review Board (PRRB), you need an audit adjustment made to your reported DSH days on your submitted cost report. No audit adjustment, no appeal rights. There is also an uncertainty as to whether the intermediary will accept a reopening request for additional DSH days.

From a provider’s standpoint, what can you do to help ensure an accurate listing?

1. Make sure your admitting department captures all Medicaid or potential Medicaid information from each patient. Keep in mind that you should see significant increases to the Medicaid populations from the current population of uninsured people.
   
2. For providers with a nursery, be sure to identify the Mother’s (or Father’s) Medicaid number and capture it on the baby’s Accounts Receivable record.
   
3. Have patients without Medicaid, but who meet the Medicaid criteria apply for Medicaid while they are still in the hospital. This will help ensure a more accurate Medicaid listing.

PRRB Appeals Issues Related to Medicare DSH:

Medicare DSH is one of the most contentious reimbursement regulation CMS has ever enacted. In February, 1997, CMS had lost so many PRRB and District court cases in reference to Medicaid paid vs. Medicaid eligible days that it issued Ruling 97-2 indicating DSH days are inclusive of all eligible days, not just paid. This seemed to open up the proverbial “Pandora’s Box” on almost all other aspects of DSH. DSH issues have been, and continue to be, tested at the PRRB and in the court system. In December, 1999 CMS issued Program Memorandum A-99-62 commonly called the “Hold Harmless” provision. This rule identified the type of Medicaid day that are federally matched and could be included in the Medicare DSH vs. the other state-only days that would be excluded. That Ruling continues to generate much PRRB and court action.

Some DSH issues that are appealed include:

• Medicaid dual eligible days in Medicare Fraction
• Medicaid dual eligible days in the Medicaid Fraction
• Are all SSI/Medicare days included in the CMS generated SSI%
• Charity care days in the Medicaid Fraction
• State-Specific Medicaid days not Federally participating included in DSH
• Provider with 100 beds if you include Observation beds are entitled to DSH
• Out of State days
• Removal of Observation days from numerator and denominator

The issues are numerous and contentious. The key here is to ensure the provider gets what is rightfully theirs when it comes to Medicare DSH reimbursement even though, in these type cases, reimbursement may not occur until years after filing the Appeal. CMS has also written into the PPACA law very limited occasions to appeal the uncompensated care calculation. There shall be no administrative or judicial review on any estimate of the Secretary for purposes of determining factors or any period selected by the Secretary for such purposes.

BESLER Consulting has served as the provider advocate and representative the DSH issues listed above and has been accumulating DSH listings for over 10 years in many states, including New Jersey, New York, Pennsylvania, Massachusetts, and beyond. To learn about how we can assist your hospital in generating, reviewing or auditing your annual DSH listing including conducting a second sweep to increase your submitted days, please contact George Porette at (732) 839-3894 or gporette@besler.com.