CMS Archives

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

May 15, 2023

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.

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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.

FFY 2024 IPPS Proposed Rule – Empirical DSH

May 15, 2023

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 4 – FFY 2024 IPPS Proposed Rule – Empirical DSH

Section 1115 Demonstration Days

Although not in the FFY 2024 IPPS Proposed Rule, earlier this year CMS proposed⁴ changes to regulations on the inclusion of certain Section 1115 demonstration days in the Medicaid fraction of the empirical DSH calculation. If adopted, CMS’s changes would be effective for discharges occurring on or after October 1, 2023 (FFY 2024).

CMS proposes allowable 1115 demonstration days include patient days from:

Patients who receive health insurance authorized by a section 1115 demonstration, or
Patients who buy health insurance with premium assistance provided to them under a section 1115 demonstration, where State expenditures to provide the health insurance or premium assistance is matched with funds from title XIX.

Section 1115 demonstration days are allowable whereby a patient is not entitled to Medicare Part A benefits and 1) their health insurance covers inpatient hospital services; or (2) premium assistance covers 100 percent of the premium cost to the patient, which the patient uses to buy health insurance that covers inpatient hospital services.

CMS also proposes that days are to be excluded for patients whose inpatient hospital costs are paid for with funds from an uncompensated/undercompensated care pool authorized by a Section 1115 demonstration. CMS states these patients are not regarded as “eligible for Medicaid.”

Capital DSH for Rural Reclassified Providers

Due to recent court decisions (Toledo Hospital v. Becerra, the U.S. District Court), CMS proposes DSH hospitals reclassified as rural under 42 CFR § 412.103 will be eligible to receive capital DSH payments. This proposal is effective for discharges on or after October 1, 2023 (FFY 2024).

Toyon’s Take

Providers are encouraged to review their respective State’s section 1115 demonstration program to determine if any cohort of beneficiaries meet CMS’s new proposed criteria for inclusion in the Medicaid fraction of the empirical DSH calculation. CMS notes the following seven states whereby patient days would qualify in the DSH calculation (as these states provide benefits that are 100% of the premium cost to the patients):

Arkansas
Massachusetts
Oklahoma
Rhode Island
Tennessee
Utah
Vermont

For more information, please contact Dylan Chinea at dylan.chinea@toyonassociates.com.

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⁴ Federal Register /Vol. 88, No. 39 /Tuesday, February 28, 2023 / Proposed Rules Medicare Program; Medicare Disproportionate Share Hospital (DSH) Payments: Counting Certain Days Associated With Section 1115 Demonstrations in the Medicaid Fraction (42 CFR Part 412).

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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.

FFY 2024 IPPS Proposed Rule – Safety Net Hospitals

May 15, 2023

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 5 – FFY 2024 IPPS Proposed Rule – Safety Net Hospitals

Request for Information on Safety-Net Hospitals

CMS is requesting providers respond to 17 questions concerning challenges faced by safety-net hospitals and potential approaches to help safety-net hospitals meet those challenges. CMS highlights the importance of identifying safety-net hospitals for policy purposes. Notably, CMS cites recent MedPAC recommendations to Congress⁵ to establish a hospital Medicare Safety-Net Index (MSNI) that measures the following three variables:

Medicare Low-Income Subsidy (LIS) Enrollment Ratio – Medicare dually eligible discharges (full or partial Medicaid benefits) + Part D LIS⁶ recipients. This population is then compared to the total number of Medicare inpatient discharges for the LIS ratio.
Ratio of Uncompensated Care Costs to Total Operating Revenue.
Medicare Share of Total Inpatient Days.

For FFY 2024, MedPAC recommends Congress should:

Begin a transition to redistribute empirical DSH and UC DSH payments through the MSNI.
Add $2 billion to the MSNI pool.
Scale fee-for-service MSNI payments in proportion to each hospital’s MSNI and distribute the funds through a percentage add-on to payments under the inpatient and outpatient prospective payment systems.
Pay commensurate MSNI amounts for services furnished to Medicare Advantage (MA) enrollees directly to hospitals and exclude them from MA benchmarks.

MedPAC’s report simulates a linear redistribution of DSH and UC DSH payments qualifying hospitals with a MSNI in the 10th percentile and above. MedPAC also considers using the 5th percentile as a qualifying threshold.

As a potential alternative, CMS also provides an “Area-level Index Approach,” based on recommendations from the Assistant Secretary for Planning and Evaluation (ASPE). The ASPE states the Area Deprivation Index (ADI) or the Social Deprivation Index (SDI) are “the best available choices when selecting an index for addressing health related social needs or social determinants of health.”

Toyon’s Take

Although MedPAC recommends CMS transition DSH (and UC DSH) payments in FFY 2024, it is very unlikely CMS will apply any changes for this upcoming federal year. Any significant changes to DSH methodologies and reimbursement would need to first go through a proper rule-making process. Toyon will continue to monitor this MedPAC recommendation and provide updates as more information is available.

For more information, please contact Fred Fisher at fred.fisher@toyonassociates.com.

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⁵MedPAC Report to Congress March 2023, MedPAC Report to Congress June 2022

⁶ Limited assets and an income below 150 percent of the Federal poverty level

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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.

Category: CMS

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

FFY 2024 IPPS Proposed Rule – Empirical DSH

FFY 2024 IPPS Proposed Rule – Safety Net Hospitals

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