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The More Things Change the Less We Get Paid Medicare Hospital Reimbursement Update

The More Things Change the Less We Get Paid Medicare Hospital Reimbursement Update. 2013 Spring Conference May 17, 2013. Medicare Hospital Reimbursement Update. Recent and potential future legislative actions FY 2014 IPPS Proposed Rule: Medicare DSH Revisions Everything else. 2.

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The More Things Change the Less We Get Paid Medicare Hospital Reimbursement Update

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  1. The More Things Changethe Less We Get PaidMedicare Hospital Reimbursement Update 2013 Spring Conference May 17, 2013

  2. Medicare Hospital Reimbursement Update • Recent and potential future legislative actions • FY 2014 IPPS Proposed Rule: • Medicare DSH Revisions • Everything else 2

  3. Recent and Potential Future Legislative Actions

  4. Medicare Hospital Reimbursement Update • American Taxpayer Relief Act of 2012 (aka the Fiscal Cliff deal) • “Doc fix” to the Medicare physician fee schedule until 1/1/14 • Hospitals helped pay for the “doc fix” • CMS to reduce inpatient PPS payments by a total of $11+ billion during FY 2014 - 2017 • Intended to recoup alleged overpayments related to MS-DRGs from FY 2008-2013 • Additional $4+ billion in cuts to Medicaid DSH on top of cuts already coming from PPACA

  5. Medicare Hospital Reimbursement Update • ATRA (cont.) • Some relief for certain rural hospitals • Hospital low-volume payment adjustment provisions extended one year through 9/30/13 • Medicare Dependent Hospital (MDH) status extended through 9/30/13 • Certain previous MDHs must re-apply • Hospitals that elected Sole Community Hospital (SCH) status • Hospitals that gave up rural status • All other previous MDHs automatically reinstated retroactive to 10/1/12

  6. Medicare Hospital Reimbursement Update • ATRA (cont.) • Some relief for certain rural hospitals • MDH and low-volume payments retroactive to 10/1/12 • Contractors were able to begin reprocessing on 4/1/13 • CMS has instructed contractors to have all retroactive claims reprocessed by 6/30/13

  7. Medicare Hospital Reimbursement Update • ATRA (cont.) • Unfortunately OPPS hold-harmless transitional outpatient payments (TOPS) were not extended • Expired 12/31/12 for rural hospitals with < 100 beds • Expired 2/29/12 for Sole Community Hospitals (SCH)

  8. Medicare Hospital Reimbursement Update • Sequestration • Officially began 3/1/13, but not applicable to Medicare until 4/1/13 • 2% cuts to Medicare • Applied to only the remaining Medicare payment after coinsurance, deductibles, MSP payments • Example $100 total payment, including $20 coinsurance 2% x ($100-$20) = $1.60 cut, not $2.00 • Being applied to interim pass-through payments • Medicare EHR incentive payments are subject to 2% cut: This 2% reduction will be applied to any Medicare EHR incentive payment for a reporting period that ends on or after April 1, 2013. If the final day of the reporting period occurs before April 1, 2013, those incentive payments will not be subject to the reduction.

  9. Medicare Hospital Reimbursement Update • Sequestration (cont.) • Projected Medicare cuts of ~$10 billion for remainder of 2013, with close to half specifically related to hospitals • Sequestration less painful compared to cuts Congress might implement in a spending reduction bill? • $400+ billion over 10 years? • More Medicare bad debt reductions? • GME payment reductions? • Reduction or elimination of special designations such as CAH, MDH, SCH, etc?

  10. Medicare Hospital Reimbursement Update • Future of MDH • In late April Senators Schumer (D-NY) and Grassley (R-IA) and Representatives Reed (R-NY) and Welch (D-VT) introduced legislation to extend MDH through September 30, 2014 • Further action may not come for several months depending on other legislation

  11. Medicare Hospital Reimbursement Update • PPACA Medicaid DSH Reductions • PPACA “requires aggregate reductions to state Medicaid Disproportionate Share Hospital (DSH) allotments annually from fiscal year (FY) 2014 through FY 2020.” • On May 13 CMS issued proposed rule to implement $1.1 billion in cuts for FY 14 and 15 • Proposed cut for WV – 4.34% • Proposed overall cut for “Regular DSH States” – 4.42% • 33 states including WV, plus DC • Proposed overall cut to “Low DSH States” – 1.20% • 17 states • National average – 4.28%

  12. FY 2014 IPPS Proposed Rule – Medicare DSH Revisions

  13. Medicare DSH Background • Enacted by statute in 1986. • Purpose is to provide additional reimbursement for hospitals that serve a disproportionate share of low income patients. • Low income patients tend to have more health issues and do less health maintenance and thus increase the amount of resources required to serve their health needs. • Medicare DSH reimbursement has increased significantly over the last ten years.

  14. Medicare DSH Reimbursement Total federal spending: ($ billions) • FY 2000 5.18 • FY 2001 5.68 • FY 2002 6.63 • FY 2003 7.10 • FY 2004 7.82 • FY 2005 9.00 • FY 2006 9.18 • FY 2007 9.40 • FY 2008 10.12 • FY 2009 10.42 • FY 2010 10.83 • FY 2011 11.59 • FY 2012 11.93 Source: CMS, Office of the Actuary

  15. Medicare DSH Reimbursement Percentage of Inpatient Hospitals that Qualify for Medicare DSH • FY 2003: 63% • FY 2004: 67% • FY 2005: 71% • FY 2006: 73% • FY 2007: 75% • FY 2008: 75% • FY 2009: 77% • FY 2010: 76% • FY 2011: 78% • FY 2012: 78% Source: CMS, Office of the Actuary

  16. Medicare DSH Reimbursement The DSH add-on is based on the sum of two fractions: (1) Medicare / SSI Fraction Days for patients entitled to Medicare Part A and entitled to SSI benefits Divided By Days for patients entitled to Medicare Part A (2) Medicaid Fraction: Days for patients eligible for Medicaid and not entitled to Medicare Part A Divided By Days for patients in acute care areas (including nursery)

  17. Medicare DSH “New” Methodology • Section 3133 of PPACA requires significant revisions to Medicare DSH • Effective FY 2014 (beginning October 1, 2013) – only a few months away! • FY 14 IPPS proposed rule published on April 26, 2013 was the first guidance provided by CMS.

  18. Medicare DSH “New” Methodology • The “new” Medicare DSH will have two components: • Part one will be 25% of the amount determined using the current payment calculation. • Part two will be an allocation of a pool of funds: • The pool will be based on the remaining 75% • Each hospital’s share of the pool will be based on the hospital’s uncompensated care as a percentage of total uncompensated care for all hospitals sharing the pool.

  19. Medicare DSH Proposed Rule FFY 2014 • UCC portion of funds to be allocated based on 75% of what would have been paid for DSH for FFY 2014 under old rule less estimated reduction in uninsured less statutory reduction. • Source used for estimated DSH payments for 2014 under old rule – Office of Actuary.

  20. Medicare DSH Proposed Rule FFY 2014 • DSH Payment under old rule = $12.34B, 75% = $9.25B • Uninsured percentages based on CBO estimates. • Uninsured for 2013 published in 2010 = 18%, estimate for 2014 published in Feb 2013 = 16%. • 1-[(.16-.18)/.18] = 1 - .111 = .889 less statutory reduction .001 = .888. • $9.2535B x .888 = $8.217B

  21. Medicare DSH Proposed Rule FFY 2014 • Total DSH funds for allocation of UCC = $8.217B • How will these funds be allocated? • Months of speculation in the industry • Most believed the source would be cost report Worksheet S-10 • CMS proposes use of a proxy to estimate UCC - Medicaid days plus Medicare SSI days

  22. Medicare DSH Proposed Rule FFY 2014 • Why was S-10 not used as the source? Proposed rule discusses in some length • S-10 is “a new data source” and has been “used for specific payment purposes only in relatively restricted ways” (EHR) • S-10 has not been subject to audit other than related to EHR • CMS believes that when information requested drives payment, it is more likely to be accurate • CMS uses wage index as example that information must be audited to be used for payment purposes • Hospitals expressed concern that they have not had enough time to learn how to submit accurate and consistent data on Worksheet S-10

  23. Medicare DSH Proposed Rule FFY 2014 • Why was S-10 not used as the source? (cont.) • S-10 instructions still require clarification to ensure consistency. • May propose to use S-10 in the future “once hospitals are submitting accurate and consistent data” • Medicaid days have been the driver of the DSH payment since the inception of the DSH regulation. They have also been subject to audit • Many providers contacted CMS to voice concerns over issues with using S-10 • CMS requests comments on the proposed rule related to S-10

  24. Medicare DSH Proposed Rule FFY 2014 • Source of UCC portion • Same rules apply for counting Medicaid days • Source for Medicaid days – “most recent available filed cost report” • Appears to be based on cost report period beginning in FFY2011 for most providers • Source for Medicare SSI days – “most recent available SSI ratios” • Currently the most recent SSI is 2010 but CMS expects to update to 2011 in final rule

  25. Medicare DSH Proposed Rule FFY 2014 • Table published that includes Medicaid and Medicare SSI days and hospital percentages for allocation • Available online at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html • If amended cost report was processed by MAC, those appear to be included. If additional Medicaid days submitted for audit, those are not included in table because final settlement is not complete

  26. Medicare DSH Proposed Rule FFY 2014 • Hospitals have 60 days from Proposed rule to notify CMS of change in subsection (d) status • No change can be made to Medicaid days • ACA prescribes that the estimates used by the Secretary are not subject to judicial review • Estimates include the factors used as well as the time period used

  27. Medicare DSH Proposed Rule FFY 2014 • What will be the timing of payment determination? • Prospectively paid on federal fiscal year regardless of hospital year • Paid on an interim rate and subject to cost report settlement? • No cost settlement except potentially for SCH • Will all hospitals be allowed to share in the 75% pool or just those also eligible for the 25% payment? • Only those eligible for any DSH payment, providers still must reach the 15% threshold to receive any DSH

  28. Medicare DSH Proposed Rule FFY 2014 • How will the 12% cap currently applicable for many rural and certain urban hospitals be applied? • Cap is not addressed in the proposed rule at all • Calculated payment using CMS table results in total DSH payment above 12% for certain capped hospitals we have assessed

  29. Medicare DSH Proposed Rule FFY 2014 • SCH – whether or not they will participate in the interim DSH pool will be estimated • If the estimate is incorrect, adjustment will be made at cost report settlement • SCH reimbursement – Greater of HSP or Federal + 25% DSH portion - the 75% is not to be included in comparison. • SCHs should check their status on the table

  30. Medicare DSH Proposed Rule FFY 2014 • No redistribution per proposed rule! If SCH received allocation and should not have, no retroactive change to other hospital percentages • Reason provided in proposed rule – this is “inherent use of estimates”. (CMS) “does not know of any reason to believe there will be a bias toward systematic overpayment or underpayment.”

  31. UCC Percentage – Top 15 Hospitals

  32. Case Study • Generally, winners appear to be those hospitals with high Medicaid + low Medicare. • Generally, losers appear to be those hospitals with low Medicaid + high Medicare.

  33. Days Utilization – 2011 Cost Report Medicare 22% Medicaid 52% All Others 26% 100%

  34. Days Utilization – 2011 Cost Report Medicare 11% Medicaid 44% All Others 45% 100%

  35. Days Utilization – 2011 Cost Report Medicare 63% Medicaid 22% All Others 15% 100%

  36. Medicare DSH “New” Methodology Recommendations • Verify numbers used in Proposed Rule Table. May be worth commenting on if there are systematic problems. • Verify status of qualifying for DSH in Table. • Include all appropriate Medicaid days in future filed cost reports. Depending on timing, amendments may not be included in the allocation. • Example - we found $800,000 understatement in allocation because provider did not do Medicaid analysis before cost report was filed.

  37. Medicare DSH “New” Methodology Recommendations • Comment on the proposed rule. • Comments due to CMS by June 25, 2013. • Watch for final rule which should be published in August. Final rule will include comments from proposed rule and CMS responses.

  38. FY 2014 IPPS Proposed Rule – Everything Else

  39. Medicare Hospital Reimbursement Update • Inpatient vsObservation • CMS offers new guidance in an effort to clarify: Under our proposal, Medicare’s external review contractors would presume that hospital inpatient admissions are reasonable and necessary for beneficiaries who require more than 1 Medicare utilization day (defined by encounters crossing 2 “midnights”) in the hospital receiving medically necessary services. If a hospital is found to be abusing this 2-midnight presumption for nonmedically necessary inpatient hospital admissions and payment (in other words, the hospital is systematically delaying the provision of care to surpass the 2-midnight timeframe), CMS review contractors would disregard the 2-midnight presumption when conducting review of that hospital.

  40. Medicare Hospital Reimbursement Update • Inpatient vsObservation • CMS offers new guidance in an effort to clarify (cont.): Similarly, we would presume that hospital services spanning less than 2 midnights should have been provided on an outpatient basis, unless there is clear documentation in the medical record supporting the physician’s order and expectation that the beneficiary would require care spanning more than 2 midnights or the beneficiary is receiving a service or procedure designated by CMS as inpatient-only.

  41. Medicare Hospital Reimbursement Update • Inpatient vsObservation • CMS offers new guidance in an effort to clarify (cont.): • Extensive additional discussions on admission and medical review criteria for hospitals to consider • Current guidance remains in effect until if/when this new policy is finalized • CMS has concluded this new guidance will result in an increase in overall inpatient activity and has proposed a .2% decrease in the FY 14 standardized amounts (both operating and capital) to offset

  42. Medicare Hospital Reimbursement Update • CMS implementing additional CCRs for developing MS-DRG relative weights • In recent years hospitals have been required to break out certain items separately on cost report: • Implantable devices • MRI • CT scan • Cardiac cath • CMS believed this would result in more accurate relative weights • Proposal to go from 15 to 19 CCRs in FY 14 to break each of these out separately

  43. Medicare Hospital Reimbursement Update Proposed payment update:

  44. Medicare Hospital Reimbursement Update

  45. Medicare Hospital Reimbursement Update

  46. Medicare Hospital Reimbursement Update • FY 2014 proposed wage index is based on wage data from cost reporting periods beginning in Federal Fiscal Year 2010 (3,427 hospitals included) • Wage index also reflects Occupational Mix Survey for calendar 2010 submitted in 2011 • FY 14 proposed national average hourly wage (adjusted for occupational mix) = $38.2094 (2.0% increase from FY 13 final of $37.4608)

  47. Medicare Hospital Reimbursement Update FY 2014 proposed wage index Highest: Santa Cruz-Watsonville, CA 1.7180 Lowest: Rural Alabama 0.7123

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