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Category: DSH

Good News from the Supreme Court

Here’s what happened: A major victory was won today for Providers who have appealed the inclusion of Medicare Part C days in the SSI ratio/exclusion of dual-eligible Medicare Part C days in the Medicaid ratio for years ending 2004-2012.

The Supreme Court of the United States has affirmed Allina Health Services, et al. v. Price, 863 F.3d 937 (CADC 2017), wherein the United States Court of Appeals supported Providers and held that HHS violated the Medicare Act when it changed its reimbursement formula without providing notice and opportunity for comment

HHS arbitrarily began including Part C days in the Medicare fraction through its 2004 Final Rule, and Toyon has been helping Providers in appealing the agency’s actions. The Providers’ position has consistently been that only Medicare Part A days should be included in the SSI ratio and that dual-eligible Part C days instead belong in the numerator of the Medicaid ratio calculation. Providers argued CMS’ actions were tantamount to retroactive rulemaking, which the D.C. Circuit agreed was impermissible in Northeast Hospital Corp. v. Sebelius, 657 F.3d 1 (CADC 2011). Providers also disputed the fact that HHS violated statutory notice-and-comment obligations in establishing its practice of including Medicare Part C days in the SSI ratio, a position both the DC Circuit Court and U.S. Court of Appeals upheld through the prior Allina decisions. 

What it means to you
Today the Supreme Court settled the issue once and for all by agreeing with Providers and holding that HHS did indeed violate its rulemaking obligations in including Part C days in the SSI ratio. This decision should effectively invalidate the agency’s actions andProviders should expect to be offered settlement amounts from CMS for any negative reimbursement impacts caused by its inclusion of Part C days.

What Now?
No details are yet available on how or when the amounts will be calculated nordispensed to affected Providers, but Toyon Associates, Inc. will be contacting affected hospitals in the coming weeks as more details become available.

Please contact Karen Kim at (925) 685-9312 or if you have any questions or concerns. 

The following is the link to the ruling.

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PRRB Appeal Changes

In an effort to address the large number of cases before the PRRB, CMS is considering actions to assist in the reduction of the current PRRB case backlog:
* Develop standard formats and more structured data for submitting cost reports and supporting documentation.
* Create more clear standards for documentation to be used in auditing of cost reports.
* Enhance the MCReF portal by creating more automation for letter notifications and increased provider transparency during the cost report submission and audits.
* Utilize artificial intelligence (AI) protocols based on historical audit data to drive audit processes.
* Triage the current PRRB case inventory and expand the provider’s options for resolving issues through the reopening process.

Procedural Changes Specific to Appealing Empirical DSH Updates
CMS has determined that a significant number of appeals are related to hospitals’ disproportionate patient percentage (DPP), specifically concerning updating the Medicaid fraction. To address this, CMS is proposing that regulations be developed to govern the timing of the data for determining Medicaid eligibility. These routine updates would be handled via reopening, with CMS issuing directives to the MACs requiring them to reopen cost reports for this issue at a specific time and realistic period during which the provider could submit updated data.

CMS is also considering allowing hospitals a one-time option to resubmit cost reports with updated Medicaid eligibility information, similar to SSI realignments. CMS would need to undertake rulemaking in order to determine the timeframe for exercising this option.

CMS is soliciting public comments on these procedural changes, as well as the optimal time for such a review to occur.

For additional information, please contact Karen Kim at
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UCC DSH Payments

CMS is proposing a modest increase to Medicare DSH UC payments by $215M, to $8.5B in FFY2020. This increase is partially driven by a statutory elimination of the 0.2% reduction factor in the determination of DSH UC funding.  

Two major changes are proposed by CMS:

* Hospital DSH UC payments (Factor 3) will be determined from one base-year of W/S S-10 uncompensated care data as opposed to the prior method that used an average of three years of data.

* CMS is seeking public comment on whether to use FY2015 or FY2017 uncompensated care data from W/S S-10 as the base year for FFY2020 DSH UC payments. CMS is interested whether changes between 2015 and 2017 have resulted in more accurate hospital reporting. CMS is not proposing to use uncompensated care cost from FY2016 as, “the instructions for that year were similar to the reporting instructions from the FY2015 cost reports.”

Action Required for Hospitals Selected for Review of FY2015 W/S S-10 Amounts

The FY2015 (and FY2017) W/S S-10 data in the Proposed Rule was derived from the February 15, 2019 HCRIS data set. This file does not contain the reversal of the “expected payment adjustment,” which adversely affected many hospitals subject to this year’s MAC reviews. Approximately 600 hospitals nationally were selected for this review.

Hospitals should check both the FY2015 and FY2017 data used in the Proposed Rule and notify CMS of any corrections within 60 days from the date of public display of the rule, which is anticipated to be 5/3/2019. Corrections should be sent to CMS at

Action Required for Hospitals in Receipt of a FY2017 W/S S-10 Audit Letter from the MAC

CMS is in the process of outreach to hospitals with W/S S-10 data from FY2017 that is “aberrant.” For these hospitals, CMS is proposing to replace FY2017 and FY2015 uncompensated care data if the FY2017 amounts “remain unchanged without an acceptable response or explanation from the provider.” If you are in receipt of this letter, please be sure to respond to the auditor in a timely manner.

Toyon’s Take: During the CMS and MAC reviews of FY2015 W/S S-10 uncompensated care data, many issues were identified, resulting in hospitals having to entirely resubmit data. This was primarily due to the cost reporting instructions in place during FY2015, which can be challenging to understand and are often subject to interpretation. This points to an industry-wide issue (beyond the hospitals selected for review) and indicates that FY2015 may continue to include aberrant data. 

For FY2017 uncompensated care amounts, there is a new set of reporting instructions. There is considerable industry agreement that these instructions are less challenging than instructions in place for FY2015. 

Toyon is developing a national analysis to assist our clients with the evaluation of FY2015 and FY2017 data and the relationship to FFY2020 DSH UC payments. We will be providing this analysis over the coming weeks. 

Click here  for the DSH Supplemental PUF data. 
Click here  for the Analysis of UCC DSH Factor 1. 

For additional information, please contact Fred Fisher at
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