CMS Reverses Decision on Use of S-10 Beginning in FY2018

To:  Clients and Friends

From:  Ronald Knapp, Toyon Associates, Inc.

Subject: CMS Reverses Decision on Use of S-10 Beginning in FY2018

In response to numerous public comments to CMS’s proposed use of S-10 information to allocate the DSH Uncompensated Care pool, CMS decided to defer use of S-10 data (based on FY2014 Cost Report Data) until a later date.

CMS originally communicated its intention of using S-10 data to serve as the proxy for FFY 2018 Uncompensated Care payment.  So relief is in order from this decision, but this merely sets things aside temporarily until ultimate implementation of this policy sometime soon.

S-10 Amended Cost Report FY2014 Not Necessary
Filing an amended FY2014 cost report with accurate worksheet S-10 data bySeptember 30, 2016 is no longer necessary.  This S-10 information will not be used as the basis for the DSH Factor 3 determination in FY 2018 that serves as the basis for apportionment of the Uncompensated Care pool.

CMS Final Rule Summary on Worksheet S-10
The following is a summary of CMS’s plans compiled from the Acute IPPS Final Rule published on August 2, 2016:

• Will not be finalizing the proposed transition to the use of Worksheet S-10 data to determine the amounts and distribution of uncompensated care payments proposed to start in FY2018.
• Will be issuing new Worksheet S-10 instructions soon.  They anticipate these instructions will be used for the FY 2017 cost report filings (i.e., FYE 12/31/17 and 6/30/18).
• Intends to implement certain quality control and data improvement measures that will include audits process to ensure the better data quality.
• Intends to implement use of S-10 data for use in the DSH Uncompensated Care allocation no later than FY2021.  The rationale is that FY2017 will be the first year of clean Worksheet S-10 information based on the updated instructions.
• Leaving open the possibility of using an Uncompensated Care proxy as early as FY2018 until the appropriate Worksheet S-10 data is available for use.
• Intend to re-propose through rule making a definition of uncompensated care costs that include use of Charity Care & Non-Medicare Bad Debts from Worksheet S-10 as the proxy for Factor 3. This is consistent with the initial proposed rules use of Worksheet S-10 data.
• Intend to revise Worksheet S-10 cost report instructions concerning the timing of reporting charity care, such that charity care will be reported based on the date of write-off, and not based on date of service.  This will be a prospective application effective for cost reports beginning on or after October 1, 2016 (FY2017).
• Acknowledge that All-Inclusive Rate Hospitals do not fit the current Worksheet S-10 format.  It is likely that there will be a different type of reporting for these types of providers.

Recommended Preparation Changes
Many of our clients have already contacted us to perform reviews of the FY2014 cost reports for Worksheet S-10 filings.  In preparation of this imminent change, we recommend a comprehensive review of your policies, procedures and practices that include but is not limited to the following:

• Review of your organization’s current Charity Care & Bad Debt Policies
• Review (inclusive of selective sampling) of your current practices to determine if your organization’s practices match its policies.
• Review, analyze and sample transaction code summaries that appear to be utilized for Charity Care or Bad Debt write off (adjustment).
• Tracing of transaction code detail to groupings on the general ledger to ensure appropriate financial reporting of these deductions.
• Based on the review and practices, consider updating your Charity Care policy that will allow the inclusion of certain types of write-offs that may not meet the existing policy.  CMS, in the final rule, stated, “We believe that hospitals have the discretion to design their charity care policies as appropriate, and may include discounts offered to uninsured patients as ‘charity care’.”
• Analyze how each of the patient accounting transaction codes are used by the providers.  These are a key driver of the review performed, and so a discussion with the appropriate individual at each hospital and/or centralized operations is a critical element of the work plan.
• Address any ambiguity within the charity care and bad debt policies through discussion with the appropriate individual at each hospital and/or centralized operations.
• Meet with staff responsible for the IRS Form 990 filing.  The intent is to mirror any analysis already performed and use it as a baseline if warranted.
• Meet with staff responsible for any community benefit reporting is also a critical element of the work plan.  The intent is to mirror any analysis already performed and use it as a baseline if warranted.
• Develop understanding of any provider tax payments and assessments that affect each hospital as needed to ensure proper reporting on worksheet S-10.

It is important that you begin this process as soon as possible to ensure that you identify potential changes in your policies, procedures and practices that can be implemented by the start of the FY 2017 cost reporting timeframe (FYE 12/31/17and FYE 6/30/18).

If you have questions or need further assistance, please contact us at 925-685-9312.

Toyon Associates, Inc.
1800 Sutter Street, Suite 600
Concord, CA 94520
Phone:  925.685.9312
FAX:  925.687.9013
www.toyonassociates.com