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Category: IP Rehab PPS

Measuring Healthcare – Uncompensated Care DSH

The Affordable Care Act (ACA)
According to the ACA, Medicare’s Uncompensated Care Disproportionate Share (DSH) recognizes “the amount of uncompensated care for…treating the uninsured.”

“Uninsured” – as opposed to “charity” (or similar for low-income patients) – presents the following questions:

  • When is a patient considered uninsured? 
  • What is the difference between low-income uninsured patients and all other patients? 
  • How does a comprehensive process identifying all categories of uninsured patients affect hospital operations and the financial assistance policy?

This article looks at CMS’s proposed cost report instructions to provide more insight to these questions, while providing recommendations for hospital teams.

Notable Proposed Cost Report Changes
In November 2020, CMS proposed new cost reporting instructions for FFY 2021uncompensated care cost reporting on Worksheet S-10.[1] These proposed instructions include changes and clarifications in reporting noteworthy categories of uncompensated care cost:

  • Allowed: Liability for patients with insurance but determined to be uninsured.
    More under “Other Uninsured Charity Care”
  • Not Allowed: Charge discounts from inferred contractual relationships.
    More under “Inferred Contracts and Significant Losses”…
  • Allowed: Implicit Price Concessions[2] are reportable as bad debt costs.
    More under “Bad Debt and Discovery”
  • Not Allowed: Sub-acute care costs outside general short term hospital inpatient and outpatient services (not billable under the hospital CCN). This is a major shift in reimbursement.
    More under “Short Term Hospital Services Only”

[1] Federal Registers, Vol 85 No 218


[2] Accounting Standards Update, Topic 606



 

Other Uninsured Charity Care
CMS’s proposed language clarifies providers may report other forms of “charity” related to insured patients, provided this care is in the financial assistance policy.  Specifically, CMS states providers may report:

  • the “…portion of total charges for insured patients that were determined uninsured for the entire hospital stay;”[1] and
  • “charges other than deductible, coinsurance and copay (C+D) amounts that represent the insured patient’s liability for medically necessary hospital services”[2]

Both instructions relate to insured patients with charges that are not covered by the patient’s insurance carrier. Therefore, providers may consider reporting non-covered charges and exhausted benefit charges from all payers as forms of charity care, provided these discounts are specified in a hospital’s financial assistance policy. 

But what does it mean to specify non-covered charges from all payers as charity care in a financial assistance policy? For tax exempt providers, how does allowing non-covered charges from all payers relate to IRS 501 (r) requiring hospitals to include amounts and methods for patients to receive free or discounted care?

Contrary to complex cost reporting instructions, the financial assistance policy is a public facing document designed to help patients navigate the healthcare system. As more cost reporting instructions are dependent on this policy, it becomes muddied with caveats, as opposed to a concise, easy-to-read, patient-centered document. An internal policy – apart from the patient financial assistance policy – delineating the accounting of charity care may be prudent to 1) maintain a separate patient friendly policy; and 2) present evidence of compliance with cost report instructions.

When it comes to financial assistance policy governance, generally CMS does not regulate how providers articulate charity care in their policies (one notable exception relates to Medicare FFS bad debts, whereby CMS does not allow presumptive charity eligibility determinations).  For all other forms of charity, CMS states:

“(CMS) does not set charity care criteria policy for hospitals, and within reason, hospitals can establish their own criteria forwhat constitutes charity care in their charity care and/or financial assistance policies.[3]

CMS has not further elaborated on what constitutes “within reason,” to be considered as charity care. However, as presented above, the proposed cost report instructions indicate a broad definition including charges from a remaining patient liability.

Recommendation: Evaluate the reporting of non-covered and exhausted charges from all payers against current hospital procedure.  Hospital teams are encouraged to assess:

  • If patients are billed the outstanding amount. 
    For instance, a provider may pursue payment from secondary and tertiary payers, and then the patient for non-covered services.
  • When and where these transactions are reported in the patient financial system (i.e., account adjudication). 
    For instance, after collection attempts, and a payment is not received, the resulting “write-off” can end up in various transaction types including 1) bad debt – recognized as uncompensated care cost; 2) contractual allowance – not recognized as uncompensated care cost; or 3) denial | non-covered transaction code – recognition of uncompensated care cost depends (typically, providers report charges related to non-covered Medicaid from these codes). 
  • and 3) the benefit of changing policy and procedures so these amounts may be recognized as charity care.  

A statistic to help this evaluation: Providers are reimbursed approximately $250,000 for every $1M in charity cost.[4] 

A thought on policy variation and Section 501(r) – For reporting as uncompensated care cost, it is important to include financial assistance policy language discussing non-covered charges as patient financial assistance.  This helps ensure the policy includes the basis and method patients may receive financial assistance.  In question is the appropriateness of two beneficiaries with the same plan, whereby one is responsible for the coinsurance, while the other received charity related to a non-covered service.  This is an important question that must be considered and continuously evaluated.


[1] Reported on Worksheet S-10 Line 20, Column 1

[2] Reported on Worksheet S-10 Line 20, Column 2 and Line 25.01 Column 1

[3] FFY 2021 IPPS Final Rule


[4] Charges reduced by the cost to charge ratio.



 

Inferred Contracts and Significant Losses
As discussed above, non-covered charges and exhausted benefits charges from all payers are forms of charity care.  Okay got it.  However, CMS also proposes providers cannot report charges from insured patients under contract, or inferred contract with the hospital.  In the proposed cost report instructions for FFY 2021, CMS states providers may report:

“the portion of total charges for patients with coverage from an entity/insurer that does not have a contractual or inferred contractual relationship (a contractual relationship between an insurer and a provider will be inferred where a provider accepts an amount from an insurer as payment, or partial payment, on behalf of an insured patient) with the provider.” 

Separate from a “non-covered charge,” this proposed language seemingly follows the principle that payment shortfalls are not a form of charity care, focusing on insured patients not under contract with the hospital (e.g., “out of network”).   Consider the following example:

  • Charges: $200,000
  • Cost: $50,000
  • Payment from Auto Policy: $5,000
  • Unreimbursed Cost = $45,000

sizable charitable discount, the $45,000 shortfall may not be considered a form of charity care. 

However, this brings back the question – at what point does this patient become uninsured? 

Recommendation: Evaluate the out of network population, and determine if “splitting the account” is appropriate to break-apart the insurance portion from the patient portion.  If the $45,000 is considered as the patient portion, this may be the practical approach for recognizing the amount as charity care.[1]  As discussed above, this accounting exercise may be another reason an internal policy is beneficial to hospitals, while maintaining a separate patient centered document.  

It does not go unnoticed developing an internal policy may become a “Pandora’s box” identifying all types of charity care – resulting in variation of DSH hospitals across the country.  To address this issue, it is recommended CMS and other industry leaders develop a payment to cost ratio for out of network reimbursement.   Amounts below a threshold of “normal and customary” rates should be considered and re-evaluated as charity care eligible. 


 


[1] Provider would report $195,000 in charges, netting to approximately $45,000 in uncompensated care cost. 



 

Bad Debt and Discovery
After years of industry contemplation, CMS’s cost report instructions for reporting bad debt includes implied price concessions.[1]  Essentially, this is business as usual for reporting bad debts on Worksheet S-10 of the cost report.  Due to the change in bad debt reporting for audited financial statements, during audit providers may not be able to produce a bad debt “roll forward” schedule.[2]  In these cases, it is recommended providers disclose how “bad debts” relate to financial statements and request to be waived from the requirement of producing this reconciliation. 

Although it is business as usual for reporting bad debts, providers continue to discover anomalies with prior year bad debt accounts.  More specifically, providers are discovering old bad debt accounts that qualify for charity care. 

Why is this important?  Because when patient C+D amounts are reported as bad debt, they are reduced to an amount less than cost.  However, when patient C+D amounts are reported as charity care, the full amount is recognized as uncompensated care cost.  CMS has employed this calculation since the inception of uncompensated care cost for Uncompensated Care DSH payments (starting FFY 2018). 

Consider the impact to uncompensated care cost from thousands of accounts like the example below:

Reported as Charity Care

  • Amount Written Off to Charity Care: $5,000
  • Charity Cost: $5,000 (amount of recognized uncompensated care cost on Worksheet S-10)

The question that looms for providers discovering charity care in aged bad debt accounts – may old bad debt accounts be reversed and reclassified as charity care?  In a system of write-offs and reversals, this seems like a real possibility – especially considering the practice of “smoothing” costs so that the true answer is achieved over time. Another example of “smoothing” in reimbursement is in the wage index – providers report salaries from the general ledger (accrual-based accounting) and hours associated with paid salaries from the payroll file (cash-based accounting).[3] 

Ultimately, the ability to reclassify bad debt accounts may come back to how the amounts relate to a hospital’s financial statement in prior years.  A reclassification of bad debts may require a restatement of financial statements.  For optimization of Uncompensated Care DSH payments, these efforts certainly can be worth the time and resources. 

Recommendation: Hospitals are encouraged to evaluate prior year bad debt write-offs to determine if any amounts are truly charity care.


[1] Accounting Standards Update, Topic 606.

[2] Scheduling showing bad debts relationship in accounts receivable at the beginning of the hospital fiscal year vs. the end of the fiscal year.


[3] Per CMS 2552-10 instructions for wage index – “Although this methodology does not provide a perfect match between paid costs and paid hours for a given year, it approximates a match between costs and hours.”



 

Short Term Hospital Services Only
CMS’s proposal shifting Uncompensated Care DSH to only recognize short-term hospital services is a major change, especially for safety net hospitals providing essential sub-acute care services to low-income patients (e.g., behavioral health, rehabilitation, SNF, etc.).   Providers with subacute care need to prepare for significant decreases in Uncompensated Care DSH payments, estimated to be effective in FFY 2025.  This change emphasizes the importance of identifying all other uninsured costs, as discussed throughout this article.   In FFY 2021, providers with subacute care received $5.3bn (63%) of the $8.3bn in national Uncompensated Care DSH funding.

Recommendation: Hospitals providing subacute care[1], billed under a CMS Certification Number (CCN) apart for the Hospital CCN, should evaluate the portion of uncompensated care cost (Charity and Bad Debt), as well as the cost-to-charge structure, to determine the amount of uncompensated care cost CMS is proposing to exclude from future Uncompensated Care DSH payments.  This information can help hospitals prepare for this a potentially large swing in Medicare reimbursements. 

Uncompensated Care DSH and COVID-19

There is no doubt COVID-19 has changed access to healthcare and the amount of uncompensated care provided during 2020 and 2021.  Under CMS’s current method, these years would be the baseline driving Uncompensated Care DSH payments in FFY 2024 and FFY 2025. However, the data is atypical and with an uncertain future, recognizing these uncompensated care costs comes with consequences.  For instance, there will be variation in the amount of uncompensated care delivered at hospitals in states with longer stay at home mandates vs. hospitals in states with-out these restrictions (or less restrictions).  

Recommendation: As the industry moves forward, we should do so with caution, carefully evaluating the appropriateness using data from the public health emergency.  Last Federal Year, FFY 2020, CMS applied a COVID related adjustment to Uncompensated Care DSH, using a more current estimate of unemployment in determining “Factor 2,” resulting in an additional $500M in national funding.

The ACA mandates Uncompensated Care DSH is based on “appropriate data” or other “alternative data” that is “a better proxy for the costs. . . of treating the uninsured.”  As we adapt to life during and after COVID-19, the industry may also have to discover the alternative data that best measures uncompensated care provided during this extraordinary time.    


[1] Billed under a CMS Certification Number (CCN) apart from the Hospital CCN


 



Thank You

Toyon Associates, Inc. appreciates the opportunity to present and discuss reimbursement issues with thought leaders in the healthcare industry.  For more discussion and information, please contact Fred Fisher at 888.514.9312 or fred.fisher@toyonassociates.com.

Respectfully,

Toyon Associates, Inc.

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COVID-19 Regulatory Changes

 
President’s National Emergency Declaration; CMS COVID-19 Fact Sheet
 
For more information regarding CMS Current Emergency response and issuances, use the link below:
 
See additional COVID-19 updates below:
 
Skilled Nursing Facilities (SNFs)
CMS is temporarily waiving the following requirements for SNFs:
 
3-Day Prior Hospitalization Coverage for SNFs
For those individuals who need to be transferred as a result of an emergency related to the COVID-19 virus, Medicare will waive this requirement when the following conditions occur:
  • Evacuated from a nursing home in the emergency area;
  • Discharged from a hospital (in the emergency or receiving locations) in order to provide care to more seriously ill patients; OR
  • Need SNF care as a result of the emergency, regardless of where the individual resided
Renewal of SNF Benefit Period
Medicare beneficiaries who have recently exhausted their SNF benefits may have their SNF coverage renewed without having to start a new benefit period. The 60-day post-discharge wellness requirement for a new 100-day SNF benefit period to begin will be waived.
  • Additional SNF care related to the COVID-19 virus will be covered without requiring a break in the spell of illness
  • Individuals who had either begun or were ready to begin the process of ending their spell of illness will receive up to an additional 100 days of SNF Part A coverage
Standard MDS Timeframes Waived
CMS will waive the standard timeframe requirements for Minimum Data Set (MDS) assessments and transmissions, which are normally due at the time of admission, within 14 calendar days after admission or change in condition, and upon discharge/transfer, among others.
 
Toyon’s Take:
Providers will need to educate their clinical and billing staff on these changes. How quickly will the MACs’ billing systems be ready to accept bills containing these changes? Billing departments may expect to have claims rejected at first and to require additional help to code and resolve claims.
 
Critical Access Hospitals (CAHs)
CMS is waiving the following requirements for CAHs:
  • Limitation for the number of beds to 25
  • Limitation for the average length of stay to 96 hours
Toyon’s Take:
This waiver will allow CAHs to accept COVID-19 patients in rural areas where bed space may be scarce. How quickly can CAHs increase staffing in order to handle an increase in patients?
 
Acute Care Patients in Excluded Distinct Part Units
CMS is allowing the following changes for housing acute care patients in hospitals:
  • Hospitals may be allowed to house acute care patients in excluded distinct part units, where appropriate, as a result of this emergency
  • The patient’s medical record should be annotated to indicate that the acute care patient is being housed on an excluded unit due to the emergency

Excluded Unit Patients in Acute Care Settings

CMS is waiving the following requirements regarding care for excluded unit patient in the acute care settings of hospitals:
  • Hospitals may be allowed to house excluded distinct part IPF unit patients in acute care settings, as a result of this emergency, and continue to bill for services under the IPF PPS, where the environment is appropriate and conducive to safe care
  • Similarly, hospitals may be allowed to house excluded distinct part IRF unit patients in acute care settings, as a result of this emergency, and continue to bill for services under the IRF PPS, where the environment is appropriate, and patients continue to receive intensive rehab services
  • CMS will allow IRFs to exclude patients, who are admitted to the unit as a result of this emergency, from the IRF population for purposes of calculating the 60% threshold that is required for an IRF to maintain its special certified status
Long-Term Care Hospitals (LTCHs)
LTCHs will be allowed to exclude patient stays related to this emergency in order to meet the 25-day average length of stay requirement.
 
Toyon’s Take:
Providers will need to consider whether or not it is safe to place patients with non-psychiatric diagnoses on IPF units that house more acute psychiatric patients and vice versa.
 
Presumably, CMS will consider both misplaced acute patients on IRF units and misplaced IRF patients on acute care units when calculating the 60% threshold during this fiscal year. The appropriate coding on the claims will need to be verified in order to identify these patients.
 
Coverage and Payment Issues
CMS is making the following changes to Medicare beneficiary coverage:
  • Vaccine:  Once developed, the COVID-19 vaccine will be covered in full under Part D
  • Hospital Stays:  Patients with the virus who no longer meet the need for acute inpatient care but are being quarantined in a hospital patient room may not be charged a private room accommodation differential and will not have to pay an additional deductible for the quarantine period
  • IPPS Payment:  Medicare will pay any DRG and outlier payment, including any quarantine time, until discharge, even when the patient no longer meets the need for acute inpatient care
  • Telehealth:  Patients who have an established relationship with their physician or practitioner may have a “virtual check-in” in any healthcare facility as well as their homes, where the communication need not be related to a medical visit within the previous seven days and does not necessarily lead to a medical visit within the next 24 hours.  This expansion of services will also allow patients to access their physicians using a wider range of communication, including telephones with audio and video capabilities.  In addition, CMS is granting Medicaid waivers to cover broader telehealth services for its beneficiaries.
Toyon’s Take:

If necessary, hospitals should create a new Medicare COVID-19 private room charge in their CDMs to reflect similar charges for both private and semi-private room accommodations, when patients are diagnosed with the virus.  Unless the patient is in an ICU room, it is unlikely that the charges from additional days will generate an outlier payment.

Coverage and Payment Issues

CMS is making the following changes to Medicare beneficiary coverage:
  • Vaccine:  Once developed, the COVID-19 vaccine will be covered in full under Part D
  • Hospital Stays:  Patients with the virus who no longer meet the need for acute inpatient care but are being quarantined in a hospital patient room may not be charged a private room accommodation differential and will not have to pay an additional deductible for the quarantine period
  • IPPS Payment:  Medicare will pay any DRG and outlier payment, including any quarantine time, until discharge, even when the patient no longer meets the need for acute inpatient care
  • Telehealth:  Patients who have an established relationship with their physician or practitioner may have a “virtual check-in” in any healthcare facility as well as their homes, where the communication need not be related to a medical visit within the previous seven days and does not necessarily lead to a medical visit within the next 24 hours.  This expansion of services will also allow patients to access their physicians using a wider range of communication, including telephones with audio and video capabilities.  In addition, CMS is granting Medicaid waivers to cover broader telehealth services for its beneficiaries.
Toyon’s Take:

If necessary, hospitals should create a new Medicare COVID-19 private room charge in their CDMs to reflect similar charges for both private and semi-private room accommodations, when patients are diagnosed with the virus.  Unless the patient is in an ICU room, it is unlikely that the charges from additional days will generate an outlier payment.

Provider Enrollment
CMS will be making the following changes to the provider enrollment process:
  • Waiver of application fee
  • Waiver of site visits
  • Postponement of all revalidation actions
  • Allow licensed providers to render services outside of their state of enrollment
  • Expedited pending or new applications from providers
Toyon’s Take:
Even though many of the steps in the standard provider enrollment process may be temporarily waived, providers should be prepared for CMS and State Agencies to revisit these applications and perform a more thorough follow-up review, after this emergency has passed. Providers should maintain all documentation related to any provider enrollment action until that follow-up review is conducted should that be necessary.
 
Medicaid Programs
CMS is allowing states the flexibility to make changes, such as the following examples:
  • Waive prior authorization requirements for fee-for-service programs
  • Permit providers located out of state to provide care to another state’s Medicaid enrollees who are impacted by this emergency
  • Temporarily suspend certain provider enrollment and revalidation requirements
  • Temporarily waive requirements that physicians and other healthcare professionals be licensed in the state in which they are providing services, so long as they have an equivalent license in another state
  • Temporarily suspend requirements for certain pre-admission and annual screenings for nursing home residents
States can assess their needs in the Medicaid Response Toolkit.
 
COVID-19 Testing: HCPCS U0001 / HCPCS U0002
Beginning April 1, providers can bill Medicare and other insurers for COVID-19 testing provided on or after Feb. 4 using the following Healthcare Common Procedure Coding System (HCPCS) codes:
  • HCPCS U0001 – Medicare will reimburse approximately $36 to allow providers to bill for using CDC’s RT-PCR Diagnostic Test Panel
  • HCPCS U0002 – Medicare will reimburse approximately $51 for validated, in-house developed COVID-19 diagnostic tests.
Please refer to the link below for COVID-19 Test Pricing by MAC jurisdiction:
 
Other Recently Published Rules
 
Interoperability and Patient Access Final Rule [CMS-9115-F]
(FR Publish Date TBD)
  • Improved exchanges for dually eligible patients, which will change from monthly to daily (beginning April 1, 2022)
  • CMS will begin publicly reporting hospitals and clinicians that may be blocking information, based on their EHR attestations (late 2020)
  • CMS is modifying provider CoPs to require that electronic event notifications of a patient’s admission, discharge, and/or transfer be sent to healthcare facilities or practitioners in an effort to improve coordination of care (effective 6 months after publication of this Final Rule)

This information was current as of the time it was published.

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Other Rules, Transmittals, and Articles Recently Published

Inpatient Psych Facility PPS Proposed Rule [CMS-1712-P]
(Display Copy available here 4/18/2019; FR Publish Date 4/23/2019)
Fact Sheet LinkFederal Register Link
* Per diem base rate increase from $782.78 to $803.48.
* Elimination of 1-year lag in WIF, aligning it with concurrent IPPS WIF.

Inpatient Rehab Facility PPS Proposed Rule [CMS-1710-P]
(Display Copy available here 4/17/2019; FR Publish Date 4/24/2019)
Fact Sheet Link
Federal Register Link
* Standard payment conversion factor increase from $16,021 to $16,573.
* Elimination of 1-year lag in WIF, aligning it with concurrent IPPS WIF.

Long-Term Care Hospital PPS Proposed Rule [CMS-1716-P]
(Display Copy available here 4/23/2019; FR Publish Date 5/3/2019) – Published as part of the IPPS Acute Care Hospital Proposed Rule
Fact Sheet Link
Federal Register Link
* LTCH-PPS payments expected to increase by 0.9% or $37M.
* Proposal to modify the “Discharge to Community” measure to exclude nursing home residents who already reside in the nursing home.

Skilled Nursing Facility PPS Proposed Rule [CMS-1718-P]
(Display Copy available here 4/19/2019; FR Publish Date 4/25/2019)
Fact Sheet Link
Federal Register Link
* Increase in unadjusted Federal per diem rates of 2.5%.  

Supplemental Security Income (SSI) Data for FFY2017 (Trans 2271, CR 11187)
(Publish Date 3/29/2019) 

CMS Change in Policy for Accounting of Medicare Crossover Bad Debts (MLN Connects)
(Notice Date 4/4/2019) Click here  for a copy of the MLN Connects article from CMS.
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