FFY 2024 IPPS Proposed Rule – Uncompensated Care (UC) DSH 

On April 10, the Centers for Medicare & Medicaid Services (CMS) published the FFY 2024 IPPS Proposed Rule (effective for discharges on or after October 1, 2023).” Toyon is pleased to provide our summary of:  Topic 3 – FFY 2024 IPPS Proposed Rule –  Uncompensated Care (UC) DSH. 
 
Uncompensated Care (UC) DSH 
 
CMS proposes to decrease Medicare UC DSH payments by $169 million, to $6.8 billion in FFY 2024. For FFY 2024 and forward, CMS is using a three-year average of UC cost (i.e., FFY 2018-2020) to determine each DSH hospital’s proportion of the fund (i.e., Factor 3). In this Proposed Rule, CMS uses UC costs from Worksheet S-10 of the Medicare cost report from the December 2022 HCRIS update. For the Final Rule, CMS intends to use the March 2023 HCRIS update. 
 
Hospitals have until Friday, June 30, to notify CMS of any discrepancies due to Medicare auditor mishandling of UC cost data and/or issues related to UC costs at merged providers. Please see CMS’s filed entitled “FY 2024 IPPS Proposed Rule Medicare DSH Supplemental Data File” (ZIP file) at CMS’s FFY 2024 Proposed Rule website. Providers may contact CMS at Section3133DSH@cms.hhs.gov to request corrections. 
 
Table 4 – Trend of National UC DSH Funding 
 
Toyon’s Take 
Factor 1 Adjustment 
(FFY 2024 Medicare DSH projections from baseline FFY 2020 data) 
 
Toyon recommends providers comment to CMS requesting an increase to the Factor 1 update, including but not limited to: 
  • A more recent and accurate market basket is applied in Factor 1 “Update.” Per MedPAC’s March 2023 Report to Congress: 
  • Input prices in fiscal year 2022 grew 5.7 percent, which is 3.0 percentage points higher than what CMS uses in the “Update” Factor. 
  • MedPAC recommends CMS increase the FFY 2024 update to hospital payment plus 1 percent. 
  • More complete data is applied to the projection of Medicare FFS discharges for FFY 2022 through 2024. Specifically, CMS could estimate Medicare FFS discharges using updated factors as provided in the March 2023 Medicare Trustee Report (pg. 121 Admission incidence). 
 
Toyon estimates the UC DSH would increase by $1 billion if CMS applied changes to the Factor 1 update as discussed above. 
 
Factor 2 Adjustment 
(Measurement of the change in the uninsured population since ACA Implementation) 
 
Toyon recommends providers comment to CMS to recognize recent data for Factor 2 estimates, including, but not limited to, changes in Medicaid enrollment (i.e., due to the expiration of the continuous enrollment provision in the Families First Coronavirus Response Act, FFCRA).     
 
In the FFY 2024 IPPS Proposed Rule, CMS estimates Medicaid enrollment will decrease by 11.1% in FFY 2024 due to beneficiaries losing coverage after the conclusion of the COVID-19 Public Health Emergency (PHE). This decrease is applied in CMS’s “Other” Factor 1 assumptions (as a downward adjustment), but CMS does not indicate if this assumption was used to increase the Factor 2 uninsured estimate. Naturally Occurring Retirement Community (NORC) projects 3.8 million people will lose Medicaid coverage and become uninsured due to the sunsetting provisions of the FFCRA. 
 
Factor 3 Allocation 
(Each DSH hospital’s proportion of the UC DSH fund) 
 
As CMS is now using a three-year average of UC costs for UC DSH payments, providers may amend or reopen prior cost reports to correct prior year UC costs on Worksheet S-10, if necessary. CMS states any changes to prior year UC costs (i.e., from 2018, 2019 and/or 2020) needed to be submitted earlier this year so that the data was available in the March 2023 HCRIS update. If necessary, Toyon recommends providers request amended cost reports and/or re-openings for any material UC cost changes applicable to prospective data used for UC DSH payments (e.g., FFY 2025 will use 2019, 2020 and 2021 UC cost data).  Toyon recommends providers comment to CMS requesting a clear S-10 revision timeline and process, like wage index. 
 
For more information, please contact Fred Fisher at fred.fisher@toyonassociates.com
Comments are due to CMS by Friday, June 9 via https://www.regulations.gov/ (see instructions under the “submit a comment” tab and reference file code “CMS-1785-P”). Toyon will share our comment letter in the coming weeks. 
 
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