MEDICARE DSH AND WHY YOUR WORKSHEET S-10 MATTERSHFMA Gulf Coast Summer ConferenceSeptember 18, 2019

• WHY DOES WORKSHEET S-10 MATTER?• BACKGROUND AND OVERVIEW• FFY 2019 IPPS FINAL RULE• WORKSHEET S-10• TEXAS MEDICAID DEMONSTRATION YEAR

(DY) 9 UNCOMPENSATED CARE (UC)• MEDICARE WORKSHEET S-10 AUDITS• ACTION ITEMS

MEDICARE DSH AND WHY YOUR WORKSHEET S-10 MATTERS

WHY DOES WORKSHEET S-10 MATTER?

• Medicare and Medicaid Reimbursement Medicare uncompensated care (UC) Disproportionate

Share Hospital (DSH) payments Texas Medicaid Demonstration Year (DY) 9 UC payments

• Greater focus, transparency & emphasis on charity care provided by hospitals

• Compare charity care reported across all publicly available documents for consistency Publicly available data

• Worksheet S-10• IRS Form 990 – Schedule H• Community benefit reporting

WHY DOES WORKSHEET S-10 MATTER?

• Increased scrutiny of hospital tax-exempt status from a 501(R) perspective

• Senator Grassley (IA) Nonprofit hospitals should spend at least 5% of the their

patient revenue on charity care

• Charity care and bad debt trends Growth of high deductible plans Medicaid expansion

• Future 340B eligibility?

WHY DOES WORKSHEET S-10 MATTER?

BACKGROUND AND OVERVIEW

• Medicare DSH hospitals receive an additional Medicare inpatient payment for treating a disproportionate share of low income patients

• The Medicare DSH payment is an add-on to the hospital’s inpatient DRG payment

• Designed to compensate hospitals for the higher cost of treating low income patients

BACKGROUND AND OVERVIEW – MEDICARE DSH PAYMENTS

• Effective October 1, 2014, there are two components in determining Medicare DSH payments Traditional Medicare DSH – 25% Uncompensated Care – 75%

BACKGROUND AND OVERVIEW – MEDICARE DSH PAYMENTS

• Disproportionate patient percentage of 15.0% or more determined by the sum of two ratios: Medicaid Ratio: Patient days that are eligible for Medicaid

& not entitled to Medicare Part A divided by total patient days

Medicare/SSI Ratio: Total patient days that are entitled to Medicare Part A benefits & federal supplemental security income (SSI) benefits divided by patient days entitled to Medicare Part A benefits

BACKGROUND AND OVERVIEW – TRADITIONAL MEDICARE DSH PAYMENTS

• Example calculation Rural Hospitals < 499 beds

• >=15.0% but <20.2%: 2.5% + [ .65 x (DSH % -15%)] capped at 12.00%

• >=20.2%: 5.88% + [.825 x (DSH % - 20.2%)] capped at 12.00%

• 340B Eligibility Sole Community Hospitals and Rural Referral Centers

• 8% Medicare DSH payment percentage All Others

• 11.75% Medicare DSH payment percentage

BACKGROUND AND OVERVIEW – TRADITIONAL MEDICARE DSH PAYMENTS

• Medicare DSH UC payment factors Factor 1

• 75% of the estimated traditional total Medicare DSH payments for the current Federal fiscal year (FFY)

Factor 2• The change in the uninsured percent for individuals

under 65 from FFY 2013 to the current FFY

• Factor 1 multiplied by Factor 2 determines the total Medicare DSH UC pool payments available

BACKGROUND AND OVERVIEW - MEDICARE DSH UNCOMPENSATED CARE PAYMENTS

• Medicare DSH UC payment factors Factor 3

• Hospital specific • Determined based upon a hospital’s uncompensated

care as a percentage of the total uncompensated care for all Medicare DSH hospitals

• The hospital specific Factor 3 is multiplied by the total Medicare DSH UC pool payments available

BACKGROUND AND OVERVIEW - MEDICARE DSH UNCOMPENSATED CARE PAYMENTS

• Total Medicare DSH UC payment pool amount Factor 1 multiplied by Factor 2

• Individual qualifying hospitals Medicare DSH UC payment amount Qualifying hospital’s Factor 3 as a percentage of all

Medicare DSH qualifying hospitals in the country multiplied by the total Medicare DSH UC payment pool amount

BACKGROUND AND OVERVIEW - MEDICARE DSH UNCOMPENSATED CARE PAYMENTS

FFY 2019 IPPS FINAL RULE

• Factor 1 - 75% of total Medicare DSH payments FFY 2019 - $12,200,000,000 FFY 2020 - $12,400,000,000

• Factor 2 - Change in the uninsured Office of the Actuary (OACT) estimate of the change in

the uninsured population• FFY 2019 – 67.51%• FFY 2020 – 67.14%

• Medicare DSH UC payment pool amount FFY 2019 - $8,300,000,000 FFY 2020 - $8,400,000,000

FFY 2019 IPPS FINAL RULE – MEDICARE DSH UC PAYMENTS

• Factor 3 – Low income proxy FFY 2019 low income proxy calculation

• Average of the three percentages below• Individual hospital’s FFY 2013 cost report Medicaid days

and FFY 2015 SSI ratios as a percentage of all qualifying Medicare DSH hospitals

• Individual hospital’s FFY 2014 Worksheet S-10 charity care and bad debt expense data as a percentage of all qualifying Medicare DSH hospitals

• Individual hospital’s FFY 2015 Worksheet S-10 charity care and bad debt expense data as a percentage of all qualifying Medicare DSH hospitals

FFY 2019 IPPS FINAL RULE – MEDICARE DSH UC PAYMENTS

• Factor 3 – Low income proxy FFY 2020 low income proxy calculation

• Individual hospital’s FFY 2015 Worksheet S-10 charity care and bad debt expense cost as a percentage of all qualifying Medicare DSH hospitals Worksheet S-10, Line 30

FFY 2019 IPPS FINAL RULE – MEDICARE DSH UC PAYMENTS

WORKSHEET S-10

• Definition of uncompensated care Based upon definitions in 2552-10, Transmittal 11 Charity care – Worksheet S-10, Line 20 Bad debt expense – Worksheet S-10, Line 26 Excludes Medicaid shortfalls reported on Worksheet S-

10, Line 16

WORKSHEET S-10

• Cost reporting periods beginning on or after October 1, 2016 Line 20, Column 1 – Charity Care Charges Uninsured Patient

• Total charges, or the portion of total charges, written off to charity care In accordance with the hospital’s charity care policy or financial

assistance policy (FAP) Written off to charity care during the cost report period Includes patients with coverage from an entity that does not have

a contractual relationship with the hospital who meet the hospital’s charity care policy or FAP

Charges for non-covered services provided to patients eligible for Medicaid or other indigent care programs (if included in policy)

WORKSHEET S-10

• Cost reporting periods beginning on or after October 1, 2016 Line 20, Column 2 – Charity Care Charges Insured Patient

• Deductible and coinsurance payments required by the payer for insured patients covered by a public program or private insurer with which the provider has a contractual relationship that were written off to charity care

• Non-covered charges for days exceeding a length-of-stay limit for patients covered by Medicaid or other indigent care programs (if included in policy)

• Do not include Medicare bad debt

WORKSHEET S-10

• Line 20, Columns 1 & 2 Do NOT include

• Charges of uninsured patients that do not meet the hospital’s charity care or FAP/uninsured discount policy

• Physicians and other professional services• Non-covered services• Charges for patients given courtesy allowances who do

not meet the hospital’s charity care criteria• Charges for prompt-pay discounts• Medicare deductible or coinsurance amounts

WORKSHEET S-10

• Line 26 – Total Facility Bad Debts Total bad debt expense written off during the cost report

period• Excludes physicians and other professional services• Includes Medicare bad debts

WORKSHEET S-10

• CMS Transmittal 11 key changes Full or partial charity/FAP charges discounts can be

included Non-covered charges for Medicaid and other indigent

patients can be included Non-covered charges for Medicaid and other indigent

patients exceeding spell of illness limits can be included Changes to payments for inclusion of payments for

uninsured and insured charity (prior to change “expected payments” had to be included)

Cost to charge ratio no longer applied to insured charity/FAP patients deductible and coinsurance amounts

WORKSHEET S-10

HOSPITAL UNCOMPENSATED AND INDIGENT CARE DATA Provider CCN:

Period

From:To:

1.00 2.00 3.00Uncompensated and indigent care cost computation

1.00 Cost to charge ratio (Worksheet C, Part I line 202 column 3 divided by line 202 column 8) 0.35 1.00

Uninsured patients Insured patientsTotal (col. 1 + col.

2)

20.00 Charity care charges for the entire facility (see instructions) 1,000 25 1,025 20.00 21.00 Cost of patients approved for charity care and uninsured discounts (see instructions) 350 25 375 21.00 22.00 Partial payment by patients approved for charity care - - - 22.00 23.00 Cost of charity care (line 21 minus line 22) 350 25 375 23.00

26.00 Total bad debt expense for the entire hospital complex (see instructions) 2,000 26.00 27.00 Medicare bad debts for the entire hospital complex (see instructions) 400 27.00 27.01 Medicare allowable bad debts for the entire hospital complex (see instructions) 260 27.01 28.00 Non-Medicare and non-reimbursable Medicare bad debt expense (line 26 minus line 27) 1,600 28.00 29.00 Cost of non-Medicare and non-reimbursable Medicare bad debt expense (line 1 times line 28) 560 29.00 30.00 Cost of uncompensated care (line 23 column 3 plus line 29) 935 30.00

Cost Report Periods Beginning on or After October 1, 2016

Worksheet S-10

WORKSHEET S-10

• Charity care discount categories Charity patients 100% discounts Charity patients sliding scale discount Presumptive eligibility Insured patients the complete a charity care or financial

assistance policy application Uninsured (self pay) discounts Insured patients where the hospital has no contract with

the payer Patients exceeding the spell of illness limit Non-covered services provided to patients eligible for

Medicaid or other indigent care programs

WORKSHEET S-10

TEXAS MEDICAID DY 9 UC

• UC pool size – approximately $3,000,000,000 Allocation process - Worksheet S-10 uninsured charity care

costs, plus Schedule 1 & 2 uninsured costs, less DSH payments that exceeds Medicaid shortfalls, plus DSH only uninsured costs

DSH year data – 10/01/2017 to 09/30/2018 S-10 data from cost report period ending in calendar year

2018 Identify charges/days/payments duplicated in DSH

uninsured totals and Worksheet S-10 data

TEXAS MEDICAID SFY 2020 / DY 9 UC

TEXAS MEDICAID DY 9 UC

UC Charity Care Payments S-10,

Column 3, Line 22 (See Instructions

for Non S-10 Providers)

Ancillary Charges Routine Days Ancillary Charges Routine Days Payments7.1 Inpatient Data 7.2 Outpatient Data

Payments Duplicated in DSH

and UC

Payments for Noncovered

Services (reported in S-10 Column 1) see instructions for

Non S-10 Providers

Ancillary Charges Routine Days Payments Ancillary Charges Routine Days Payments7.1 Inpatient Data 7.2 Outpatient Data

-$ -$

Charges and Days For Noncovered Services (reported in S-10 Column 1)

see instructions for Non S-10 Providers

Description

DSH Total Uninsured

UC Charity Care Charges and Days S-10, Column 3, Line 20 (See Instructions

for Non S-10 Providers)

Description

Charges and Days Duplicated in DSH and UC

MEDICARE WORKSHEET S-10 AUDITS

• FFY 2015 Worksheet S-10 audits completed Selected hospitals represented 50% of the total amount of

uncompensated care payments• FFY 2017 Worksheet S-10 audits in process Hospitals given three weeks to submit requested

information Details regarding charity care policies Specific information on report query process Detail listings by patient and revenue code for charity care

and bad debt Crosswalk of all transaction/adjustment codes Reconcile bad debt general ledger expenses to detail bad

debt write-offs

MEDICARE WORKSHEET S-10 AUDITS

• Claim type (insured or uninsured)

• Primary payer plan• Secondary payer plan• Hospital Medicare number• Patient Identification Number• Patient Encounter ID• Patient’s Date of Birth• Patient’s Social Security

Number• Patient’s Gender• Patient’s Name

• Admission Date• Discharge Date• Service Indicator

Inpatient or Outpatient• Revenue code Total Charges

for Claim• Date of Write-Off to Charity

Care or Bad Debt• Deductible & Coinsurance• Non-covered Charges • Other Contractual Amount• S-10 Charity or Bad Debt

Amount

MEDICARE WORKSHEET S-10 AUDITS

• Effective for cost reporting periods beginning on or after October 1, 2018, in order for hospitals reporting charity care and/or uninsured discounts to have an acceptable cost report submission, the hospital must submit a detailed listing of charity care and / or uninsured discounts that corresponds to the amount in the hospitals cost report.

MEDICARE WORKSHEET S-10 DATA SUBMISSION REQUIREMENTS

ACTION ITEMS

Review Policies

Review Transaction

Codes

Compile Detail Data

Sample Test Data

Report Data

ACTION ITEMS

• Review charity care and financial assistance policy• Comply with Worksheet S-10, Transmittal 11 instructions and definitions• Ensure charity care amounts comply with the hospital’s charity care/FAP

policy• Create and implement procedures for accumulating charity care and bad

debt expense amounts• Evaluate who needs to be involved in the process:

Reimbursement Finance IT Patient financial services ?

• Maintain auditable documentation for charity care and bad debt amounts on Worksheet S-10

• Evaluate cost allocation statistics and non-reimbursable cost centers

ACTION ITEMS

QUESTIONS?

FOR MORE INFORMATION

THANK YOU!Steven M. PardeManaging Directorsparde@bkd.com713.499.4645