Implementation of Disproportionate Share Hospital Adjustment Payments Audit Rule

1. Implementation of Disproportionate Share Hospital Adjustment Payments Audit Rule

2. Presented by: • Frank Vito, Partner • David McMahon, Sr. Manager • Cara Cantu, Manager • Lamont McKenzie, Manager • Emilie Deveraux, Manager • Joe Lackey, Sr. Associate

3. Agenda Items • Recap of Final Rule • Hospital documentation and how it corresponds to reporting requirements • Issues & results of 2008 audit • Proposed Rule: Disproportionate Share Hospital Payments – Uninsured Definition

4. Purpose of Disproportionate Share Hospital Payments Final Rule Published December 19, 2008 Implements 42 CFR §447.299(c) & (d) and 42 CFR §455.300 through §455.304 to satisfy requirements set forth under the Social Security Act §1923(j) as amended by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 §1001(d). Plain English Translation: Implements requirements for reporting of DSH program payments by States and the audit of such reporting.

5. Reason for the DSH Audit Rule • To ensure that the hospital specific DSH limits have not been exceeded. • Hospital specific DSH limit is uncompensated costs incurred during the year of furnishing hospital services by the hospital to individuals who either are eligible for medical assistance under the State plan or have no health insurance (or other source of third party coverage) for services provided during the year.

6. Calculation of Uncompensated Care

7. Calculation of Uncompensated Care

8. Calculation of Uncompensated Care

9. Verification Steps Mandated For Certified Audit Under §455.304(d) • Verification Step #1 • Each hospital that qualifies for a DSH payment in the State is allowed to retain that payment so that the payment is available to offset its uncompensated care costs for furnishing inpatient hospital and outpatient hospital services during the Medicaid State plan rate year to Medicaid eligible individuals and individuals with no source of third party coverage for the services in order to reflect the total amount of claimed DSH expenditures.

10. Verification Steps Mandated For Certified Audit Under §455.304(d) • Verification Step #2 • DSH payments made to each qualifying hospital comply with the hospital-specific DSH payment limit. For each audited Medicaid State plan rate year, the DSH payments made in that audited Medicaid State plan rate year must be measured against the actual uncompensated care cost in that same audited Medicaid State plan rate year.

11. Verification Steps Mandated For Certified Audit Under §455.304(d) • Verification Step #3 • Only uncompensated care costs of furnishing inpatient and outpatient hospital services to Medicaid eligible individuals and individuals with no third party coverage for the inpatient and outpatient hospital services they received as described in section 1923(g)(1)(A) of the Act are eligible for inclusion in the calculation of the hospital-specific disproportionate share limit payment limit, as described in section 1923(g)(1)(A) of the Act.

12. Verification Steps Mandated For Certified Audit Under §455.304(d) • Verification Step #4 • For purposes of this hospital-specific limit calculation, any Medicaid payments (including regular Medicaid fee-for-service rate payments, supplemental/enhanced Medicaid payments, and Medicaid managed care organization payments) made to a disproportionate share hospital for furnishing inpatient hospital and outpatient hospital services to Medicaid eligible individuals, which are in excess of the Medicaid incurred costs of such services, are applied against the uncompensated care costs of furnishing inpatient hospital and outpatient hospital services to individuals with no source of third party coverage for such services.

13. Verification Steps Mandated For Certified Audit Under §455.304(d) • Verification Step #5 • Any information and records of all of its inpatient and outpatient hospital service costs under the Medicaid program; claimed expenditures under the Medicaid program; uninsured inpatient and outpatient hospital service costs in determining payment adjustments under this section; and any payments made on behalf of the uninsured from payment adjustments under this section has been separately documented and retained by the State.

14. Verification Steps Mandated For Certified Audit Under §455.304(d) • Verification Step #6 • The information specified in paragraph (d)(5) of this section includes a description of the methodology for calculating each hospital’s payment limit under section 1923(g)(1) of the Act. Included in the description of the methodology, the audit report must specify how the State defines incurred inpatient hospital and outpatient hospital costs for furnishing inpatient hospital and outpatient hospital services to Medicaid eligible individuals and individuals with no source of third party coverage for the inpatient hospital and outpatient hospital services they received.

15. Analysis of Six Verifications • How does the independent auditor verify these six verifications? • Review and analysis of hospital documentation • Review and analysis of State documentation • PDSS (Provider Data Summary Schedule) • All in state hospitals receiving DSH payments • Limited reporting for all out of state hospitals receiving DSH payments

16. Hospital Documentation Hospital documentation needed in order to populate the PDSS and meet the 6 verifications

17. Reporting Periods • Cost report period • Certain documentation is needed by cost reporting period in order to verify requirements by MSP rate year • Medicaid State Plan (MSP) rate year • Audits must be completed with information on the MSP rate year §447.299(c) • MSP rate year October 1-September 30 annually • Michigan State Plan, Attachment 4.19-A • If the hospital cost report period does not coincide with the MSP year, then documentation needed may be two or more cost reports

18. Reporting Periods • Cost report periods -How is that data used? • MSP year=10/1/08-9/30/09 • Cost report period=7/1/08-6/30/09 • Cost report period=7/1/09-6/30/10 • Example of the calculation of Medicaid costs from PS&R data: Medicaid charges from 10/1/08-6/30/09 x 7/1/08-6/30/09 cost to charge ratios + Medicaid charges from 7/1/09-9/30/09 x 7/1/09-6/30/10 cost to charge ratios = Medicaid costs for MSP 10/1/08-9/30/09

19. Time Line for 2009 DSH Audits • Documentation due to PHBV Partners on: March 23, 2012

20. OB Requirement • Request list #1 • Cost report period • PDSS column 4 • 2 obstetricians with staff privileges and are Medicaid approved physicians and UPIN numbers • Exceptions to OB requirement • Rural facilities may have two physicians with staff privileges at the hospital that perform non-emergency obstetrics • Patients are predominately under (18) years of age • Facility did not offer non-emergency obstetric services as of December 22, 1987

21. OB Requirement • Hospital must meet the OB requirements to qualify for DSH under verification 1 • §455.304(d) • MI State Plan Attachment 4.19-A

22. MIUR (Medicaid Inpatient Utilization Rate) • PDSS column 2 & 4 • Hospital’s MIUR must be at least 1% • Medicaid inpatient days / total inpatient days • Sub-provider days on L14 should be included • Therapy • Rehab • Psych • Swing beds, SNF days, or other sub-providers should not be included in calculation

23. Working Trial Balance • Request list #2 • Cost report period • If the cost report period does not coincide with the MSP rate year, two or more trial balances will need to be provided that fall within the MSP rate year • Possible sources of revenue to be offset • Accounting records required under Final Rule

24. Audited Financial Statements • Request list #3 • Cost report period • Possible sources of revenue to be offset • Accounting records required under Final Rule

25. Expenses and Revenue Mapping to Worksheets A & C of Medicare Cost Report • Request list #4 • Cost report period • Used in conjunction with the trial balance to ensure proper matching of cost and charges are reported on the Medicare cost report • Cost to charge ratios are used to determine costs for both Medicaid and Uninsured

26. Transplant Providers • Request list #5 • Cost report period • List of charges: • Medicaid by organ • Uninsured by organ • Payment information • Medicaid FFS • Medicaid Managed Care • Out of State

27. Crosswalks • Request list #6-9 • Cost report period • Utilized to map revenue codes to cost centers of cost report • Provide crosswalks in excel format (see example in request list) • If crosswalk is not provided/usable then charges are allocated on a percent to total of charges reported on the cost report

28. Summary Listing of Payments by Payer Code • Request list #10 • MSP rate year • Used as reasonableness test to ensure detailed listing of self pay payments is complete • Total payments received by payer, which may include but is not limited to: • Medicaid • Medicare • Primary Insurance • Secondary Insurance • Self-Pay • Charity Care 1 • Charity Care 2 • Worker’s compensation

29. Provider Payer Code Listing with Descriptions • Request list #11 • MSP rate year • Listing is needed to determine what payer codes are uninsured, insurance, or other payers.

30. Detail Listing of Self-Pay Payments • Request list #12 • MSP rate year • PDSS column 11 • Uninsured self-pay cash basis payments received during the MSP year • Payments should be on a cash basis and agree to the MSP rate year, regardless of the date when charges were incurred • Self-pay payments are often made for years, this ensures all the payment data is eventually captured • Limited to collections on uninsured accounts only

31. Detail Listing of Self-Pay Payments • Payments are compared to uninsured clean listing and prior year clean listings • If the uninsured charges were not reported, the payments will not be offset • If data is not received • An average percentage of payments made by hospitals is computed • That average percentage is then applied to total uninsured charges to calculate a payment amount to be offset

32. Medicaid Managed Care Organizations and Out of State Medicaid Agencies • Request list #13-16 • MSP rate year • PDSS column 9 (costs) • PDSS columns 5 & 6 (payments) • Michigan does have MCO, please provide any out of state MCO as well • Charges and payments are calculated from MCO and out of state data

33. Medicaid Managed Care Organizations and Out of State Medicaid Agencies • Detailed log or detail and summary reports • Inpatient • Outpatient • Patient Name • Account Number • Beneficiary ID Number • Dates of Service • Charges • Payments • Days • Revenue Code

34. Dual Eligible • Request list #17 • MSP rate year • PDSS column 9 (costs) • PDSS column 5 (payments) • Comparison is made to Medicaid charges and uninsured to ensure no duplicate charges are reported • Those not duplicated will be used to calculate cost and payments to be applied

35. Dual Eligible • Log of patients eligible for Medicare and Medicaid • Inpatient • Outpatient • Patient Name • Account Number • Beneficiary ID Number • Dates of Service • Charges • Payments • Days • Revenue Code

36. Other Payments • Request list #18-20 • MSP rate year • PDSS column 7 • Offset against Medicaid costs • Supplemental/Enhanced Medicaid payments • UPL • Cost report settlements • GME (graduate medical education) • Any other IP/OP payments covered under DSH • Out of state DSH payments received are enhancement payments • Should be provided for • In state • Out of state • MCO out of state

37. Intergovernmental Transfers (IGTs) • Request list #21 • MSP rate year • Documentation from provider records detailing payment of IGTs • Must be from provider records, not documentation received from State • General ledger • Journal entries • Revenue journal • Reconciliation • Bank statement • Auditor must verify the provider is allowed to retain the DSH payment

38. DSH Payments • Request list #22 • MSP rate year • Documentation from provider records detailing payment of DSH payments • Must be from provider records, not documentation received from State • Bank statements (preferred) • Reconciliation • General ledger • Journal entries • Revenue journal • Auditor must verify the provider is allowed to retain the DSH payment

39. Federal Section 1011 Payments • Request list #23 • PDSS column 12 • MSP rate year • Listing of section 1011 payments (undocumented aliens) • Inpatient • Outpatient • Patient Name • Account Number • Beneficiary ID Number • Dates of Service • Charges • Payments • Days • Revenue Code

40. Medicaid Not Billed • Request list #24 • MSP rate year • PDSS column 9 (costs) • Costs will be calculated and added to total Medicaid costs • Medicaid not billed is usually when hospitals have not billed because they know they will not receive payment • Exhausted days • Liability exceeds charges

41. Medicaid Not Billed • Detailed log of Medicaid eligible residents that incurred charges but were never billed to Medicaid • Inpatient • Outpatient • Patient Name • Account Number • Beneficiary ID Number • Dates of Service • Charges • Payments • Days • Revenue Code

42. Medicaid Costs & Payments (FFS) • Costs • MSP rate year • PDSS column 9 • MMIS data for the MSP rate year will be obtained from MDCH to calculate Medicaid costs • MMIS data is by cost center • Applicable cost to charge ratio from the Medicare cost report is used to calculate costs • Payments • MSP rate year • PDSS column 5 • Medicaid FFS including crossover and liability will be offset

43. Uninsured Charges • Request list #26-27 • MSP rate year • PDSS column 13 • Inpatient and Outpatient • Used to calculate Uninsured costs by utilizing charges and cost to charge ratios from the Medicare cost report

44. Uninsured Charges • Patient name • Provider Type • Account Number • Beneficiary ID Number • Medical Record Number • Admit Date • Discharge Date • Primary Payer • Secondary Payer • Hospital Charges • Professional Charges • Primary Payer Payments • Secondary Payer Payments • Patient Payments

45. Credit and Collection Policy • Request list #28 • Auditor is required to verify that hospitals attempt collection efforts for all uninsured patient balances and that all collection effort recoveries received during the MSP rate year are recorded to patient specific accounts and offset for DSH limit

46. Uninsured Cleaning “Cleaning” analysis will be performed • The “Uninsured Inpatient/Outpatient Schedule” tab contains the original uninsured data sent to Clifton Gunderson. This tab tests each uninsured account for the following characteristics: • Is the claim a duplicate entry (“Duplicate Entries” column) • Is the claim outside of the fiscal period being tested (“Fiscal Year Test” column) • Does the Beneficiary ID on the claim match the MMIS Patient Detail received from the state of Michigan Department of Community Health for the period under review. In addition, does the date or service or discharge date fall during the recipients eligibility period

47. Uninsured Cleaning • Does the account number on the claim match the account number on the listing of dual eligible residents received from the provider (“Dual Eligible Coverage” column) • Does the account number on the claim match the account number on the listing of out of state Medicaid residents received from the provider (“Out-of-State coverage” column) • Does the account number on the claim match the account number on the listing of MCO accounts(“MCO Coverage” column) • Does the claim have an insurance code for credible insurance (“Insurance Test” column)

48. Uninsured Cleaning • For claims that matched in step g., is the insurance workers compensation and if so was there a payment made by this insurance (“Workers Comp Test” column) • Does the account number on the claim match the account number on the listing of the Medicaid eligible residents that were not billed to state of Michigan Medicaid (“Medicaid Not Billed” column) • Does any payment that was received for the claim exceed 40% of the total charge (“Payment to Charge Ratio” column) • Were any payments received on a claim with no charges (“Payments But No Charge” column)

49. Uninsured Cleaning • Any claims that did meet the characteristics in step 1 above will be rejected to a separate excel worksheet for that reason. (for example: “Reject-Duplicates”) • Any claims that did not have any of the characteristics in step 1 above were summarized in the “clean listing” tab. • In the “Clean Listing” tab, scroll to the far right to see a summary of all charges that were accepted and rejected by type. The total amount of clean data and rejected data will reconcile back to the original amount submitted by the provider.

50. Uninsured Cleaning-Rejects • In the “Reject Sample Population” tab we have summarized a list of claims that were selected from the “reject” tabs noted in step 1, items d thru j, which were rejected for various reasons of possible insurance. In the first column of the worksheet, there will be either “sample” or “pass”. Please provide UB 92 Charge detail (or patient billing statement showing charges by revenue code) and Patient Accounting detail (payment detail and collection notes) for those claims that should be considered uninsured and are marked as “sample”. Please upload this information to your facility’s distribution folder on the secure FTP website. • Please note that accounts rejected due to Medicaid Eligibility (Item c above) will be included in the calculation of Medicaid shortfall. Therefore, these charges are simply shifted to the Medicaid cost calculation rather than being included in the uninsured cost calculation.