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Category: SNF PPS

Inpatient Prospective Payment System Proposed Rule – FFY2022

CMS-1752-P drafted on 4/27/2021; Published in the Federal Register on 5/10/2021
 
On April 27, 2021, the Centers for Medicare & Medicaid Services (CMS) issued the Federal Fiscal Year (FFY) 2022 Inpatient Prospective Payment System (IPPS) Proposed Rule.  The Proposed Rule builds on key priorities to close health care equity gaps and support greater access to life-saving diagnostics and therapies during the public health emergency (PHE) and beyond. CMS proposes to create polices supporting a hospital’s readiness to respond to future public health threats and develop the health care workforce in rural and underserved communities.  CMS proposes to revise their reporting requirements for scoring, payment, and public quality data in their effort to reduce the adverse impacts of the pandemic and any future unplanned events.  The Proposed Rule updates Medicare payment policies and rates for hospitals under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS), effective for discharges on or after October 1, 2021
 
Due to the PHE, CMS provides two data sets on the FFY2022 IPPS Proposed Rule Home Page for projecting Medicare IPPS payments in FFY2022. CMS provides data 1) excluding (and before) the PHE; and 2) including the PHE (i.e., “alternative” data). Notably, the alternative data uses discharges and case-mix indices (during the PHE) from FFY2020 MedPAR and FFY2019 cost reports. The proposed data (before the PHE) uses discharges and case-mix indices from FFY2019 MedPAR and FFY2018 cost reports. CMS proposes to use data before the PHE, stating alternative data (inclusive of PHE) is “less suitable for FFY2022 rate setting.”  Toyon estimates national FFY2022 IPPS payments excluding PHE data at $130bn, $13bn (11%) greater than estimated national payments of $117bn including PHE data.  Please contact Fred Fisher at fred.fisher@toyonassociates.com for a free evaluation of CMS’s proposed FFY2022 IPPS payments for your hospital(s).  
 
CMS proposes to establish new requirements and revise existing requirements for the Hospital Value-Based Purchasing (VBP) Program, Hospital Readmissions Reduction Program, Hospital-Acquired Condition (HAC) Reduction Program, Hospital Inpatient Quality (IQR) Reporting Program, Long Term Care Hospital (LTCH) Quality Reporting Program, PPS-Exempt Cancer Hospital Reporting (PCHQR) Program, and the Medicare Promoting Interoperability Program.  CMS proposes to “suppress” measurements impacted by the PHE, to “ensure these programs do not reward or penalize hospitals based on circumstances caused by the PHE for COVID-19 that the measures were not designed to accommodate.” In addition, CMS is requesting comments regarding the modernization of the quality measurement enterprise to digital quality measurement. 
 
Overall, the proposed rule is projected to result in an estimated increase of $2.5bn in payments to providers.  Included in that amount is a reduction of approximately $0.9bn in Medicare DSH and Uncompensated Care payments.  Increases to hospital payments before the DSH and UC reduction for FFY 2022 is $3.4bn (2.8 percent). 
 
Comments must be sent to CMS no later than 5 p.m. EDT on June 28, 2021 at the applicable address provided in each section of the Proposed Rule or submitted electronically at http://www.regulations.gov.  When commenting, please refer to file code CMS-1752-P. 
 
Rural Redesignation Update 
In addition to the Proposed Rule, CMS has issued an Interim Final Rule with Comment (IFC) amending current regulations at § 412.230.  This amendment would allow hospitals with a rural redesignation to reclassify through the Medicare Geographic Classification Review Board (MGCRB) using the rural reclassified area as its geographic location.  These regulatory changes align CMS policy with the decision in Bates County Memorial Hospital v. Azar, 464 F. Supp. 3d (D.D.C. 2020).  See also https://www.cms.gov/newsroom/press-releases/cms-proposes-enhance-medical-workforce-rural-and-underserved-communities-support-covid-19-recovery

 
Medicare IPPS Base Rates
 
CMS is proposing a base rate increase of 2.8% for hospitals, mostly driven by a market basket increase of 2.5%, reduced by 0.2% and the reversal of the MACRA coding adjustment of 0.5%. The FY 2021 budget neutrality factors for Allogenic Stem Cell Acquisition as well as Transition have not been applied for FY 2022.
 
Click here for the full base rate calculation table and comparison to prior year.

 
Proposed Repeal of Market-based Data Collection, MS-DRG Relative Weights
 
CMS proposes to repeal the requirement that a hospital include on the Medicare cost report the median payer-negotiated inpatient services charges for Medicare Advantage organizations by MS-DRG, for cost reporting periods ending on or after Jan. 1.
 
CMS is also proposing to repeal, effective FFY2024, the market-based MS-DRG relative weight methodology effective that would have used these data to set relative Medicare payment rates for hospital procedures. Rather, CMS would continue using the existing rate-setting methodology for FFY2024 and subsequent years.

 
Changes to the New COVID-19 Treatments Add-on Payment (NCTAP)
 
CMS, in their response to the pandemic established the New COVID-19 Treatments Add-on Payment (NCTAP) for eligible discharges during the Public Health Emergency (PHE). CMS expects that hospitals will continue to witness inpatient cases of COVID-19 beyond the end of the PHE. As a result of CMS’s effort to continue to mitigate potential financial disincentives for hospitals in their providing of new COVID-19 treatments as well as to minimize any potential payment disruption immediately following the end of the PHE, CMS proposes to extend the NCTAP payments for eligible COVID-19 products for through the end of the fiscal year in which the PHE ends.
 
CMS is also proposing to discontinue NCTAP for discharges on or after Oct. 1, 2021 for a product that is approved for new-technology add-on payments beginning in FFY2022.

 
Changes to Wage Index
 
Based on the CMS proposed rates for FFY2022, the occupational mix adjusted national average hourly wage is estimated to be $46.37, representing an increase of 2.52% from the prior year.
 
Continuation of Prior Year Wage Index Policy Changes
CMS proposed and finalized a policy in FFY2020 to reduce wage index high-to-low disparities by increasing the values for low wage index hospitals below the 25th percentile (or a WIF of 0.8418 in FFY2021). In FFY2020, CMS anticipated that it would continue this policy for at least four years, acknowledging that providers in these lower-quartile states would improve employee compensation within four years because of the higher wage index. Accordingly, CMS is proposing to continue this policy in FFY2022. Consistent with the finalized policy in FFY2020 and 2021, in FFY2022 CMS will “fund” this policy by applying a uniform budget neutrality adjustment. The proposed low wage index hospital policy budget neutrality factor is 0.998108 (compared to 0.997970 in FFY2021).
 
Also, in FFY2020, CMS proposed and finalized a change to the rural floor calculation by removing urban-to-rural reclassifications from the statewide rural floor. CMS is proposing to continue this policy in FFY2022 (as it did in FFY2021) so that state rural floors would be calculated without including the wage data of urban hospitals that have reclassified as rural.
 
Lastly, in FFY2021, CMS proposed and finalized changes to specific Core-Based Statistical Areas (CBSAs) based on updated census data as released by the Office of Management and Budget (OMB) in its OMB Bulletin No.18-04 dated September 14, 2018. In unprecedented fashion, CMS incorporated the revised OMB delineations to CBSAs impacted in FFY2021, which included new CBSAs, urban counties that became rural counties, rural counties that became urban counties, and existing CBSAs that were split apart. CMS is proposing in FFY2022 to continue to use the OMB delineations adopted beginning with FFY2015 and updated most recently in OMB Bulletin No. 18-04.
 
As a result of the policy changes noted above, in FFY2020 and FFY2021 CMS finalized a “transition” policy which included a cap of 5% on the decrease of any hospital’s wage index from the prior year. For instance, in FFY2021, a hospital could not receive a final wage index that was less than 5% of what it received in FFY2020. While this transition policy was set to expire in FFY2021 and as proposed, CMS did NOT include a transition policy in FFY2022, CMS acknowledged the ongoing Public Health Emergency (PHE) in the Proposed Rule and is seeking comment on whether it is appropriate to apply a transition policy to the FFY2022 wage index. If CMS were to apply a transition to the FFY2022 wage index for hospitals that are negatively impacted by any of the policy changes described above, CMS is also seeking comment if it is appropriate to apply a transition policy in a budget neutral manner as it did in FFY2020 and FFY2021. In FFY2021, the transition policy’s budget neutrality factor was 0.998851.
 
 
Toyon’s Take
The continuation of the policy changes implemented by CMS over the course of the last two years of rulemaking is not surprising and was anticipated. However, the potential continuation of a transition policy is a bit surprising. The revised OMB delineations notably impacted urban hospitals in the Northeast, primarily New York-New Jersey, as a number of counties were redefined to new CBSA designations and “moved out” of New York City which historically has produced a higher wage index for such hospitals. While the impact to these hospitals was mitigated in FFY2021 due to the transition policy, beyond FFY2021 the impact was likely to be significant and the continuation of a transition policy would be a welcome relief to continue to mitigate this potential impact. However, as noted and discussed further below, a potential transition policy will not mitigate the impact for these hospitals in FFY2022 due to the proposed inclusion of an imputed rural floor for “all-urban” States, which as proposed, includes New Jersey, Delaware, Rhode Island, Washington D.C., and Connecticut.
 
Toyon applauds CMS’s efforts to recognize the PHE and its overall financial impact on the provider community. We encourage hospitals to comment on the proposed transition policy and its potential financial benefit, where applicable, noting that an applied budget neutrality factor of 0.998851 (from FFY2021) will reduce payments overall by approximately 0.10%.
 
Proposed Occupational Mix Adjustment using Calendar Year (CY) 2019 Survey Data
CMS provides for the collection of data every three years on the occupational mix of employees for each short-term, acute care hospital. In 2016, CMS collected survey data to compute an occupational mix adjustment for the FFY2019, FFY2020 and FFY2021 wage indices. For FFY2022, an updated measurement of occupational mix was required using data from CY2019. CMS is proposing to utilize this data using the same methodology as prior years to calculate an occupational mix adjustment factor. CMS provides analysis in the Proposed Rule pertaining to the impact of the occupational mix adjustment on provider types (e.g., urban vs. rural) which is consistent with previous years. The unadjusted national average hourly wage is $46.42 compared to the occupational mix adjusted national average hourly wage of $46.37.
 
Reincarnation of the Imputed Rural Floor in “All-Urban” States
In FFY2005, CMS adopted an imputed rural floor policy as a temporary three-year regulatory measure to address concerns from hospitals in all-urban States that argued they were disadvantaged by the absence of rural hospitals to set a wage index floor for those States. After extending the imputed rural floor policy eight times since FFY2005, the policy expired and was not renewed in FFY2018 and has not been included in FFYs 2019 through 2021.
 
However, as required by Section 9831 of the American Rescue Plan of 2021 enacted on March 11, 2021, CMS proposes to permanently reinstate the imputed rural floor wage index calculation for hospitals located in all-urban States, which refers to States without designated rural areas. In accordance with the American Rescue Plan of 2021, “For discharges occurring on or after October 1, 2021, the area wage index applicable under this subparagraph to any hospital in an all-urban State…may not be less than the minimum area wage index for the fiscal year for hospitals in that State.”
 
CMS is required by the statute to reinstate the previous imputed rural floor methodology, and this rate cannot be less than the imputed rural floor CMS calculated for such States in FFY2018. Unlike FFY2018 and prior, the new statute specifies that the adjustment pertaining to the imputed rural floor policy shall not be applied in a budget neutral manner, which means that any increase to the wage index for these all-urban States will not be offset by a decrease to the standardized amount or applied to wage indices. Toyon is collaborating with hospitals and associations in these all-urban States to calculate estimate benefit.
 
In the FFY2022 Proposed Rule, CMS does not account for application of the imputed rural floor impact as there was “not sufficient time available to incorporate the recently enacted statutory provision providing for the imputed floor adjustment in a non-budget neutral manner beginning in FFY2022 into the rate setting, calculation of the wage index and tables…” CMS plans to include the imputed rural floor adjustment into rate setting, calculation of the wage index and tables of the Final Rule.
 
 
 
Other Proposed Changes Impacting Wage Index
– CMS proposes to make two changes to the timing of a hospital’s request to cancel a previously granted reclassification from urban to rural, which would in effect lock a hospital into its rural status for a longer period. CMS acknowledges that these changes are necessary to address the practice of applying for and canceling rural reclassification to influence a State’s rural wage index, which is “detrimental to the stability and accuracy of the Medicare wage index system”. These two changes are described below.
  • First, CMS proposes that requests to cancel rural reclassifications be submitted to the CMS Regional Office no earlier than one calendar day after the date when the reclassification became effective, and
  • Secondly, CMS proposes to replace an existing rule, which requires cancellation of reclassification no later than 120 days prior to the end of Federal Fiscal Year to be effective at the beginning of the next Federal Fiscal Year, with a requirement that cancellation requests become effective in the Federal Fiscal Year that begins in the Calendar Year after the Calendar Year in which the request was submitted.
 
– In a separate interim final rule released in conjunction with the Proposed Rule, CMS is applying a decision from 2020 in the U.S. District Court for D.C. that requires CMS to treat hospitals reclassified as rural as rural for the purpose of comparing its average hourly wage data. Previous policy stated that a hospital that opted to reclassify from urban to rural was required to compare its average hourly wage data to that of the urban area where the hospital was physically located rather than the Statewide rural area (e.g., the “106% average hourly wage test”). The court decision ruled that CMS’s previous policy violated the Medicare Act and thereby, CMS is changing its policy effective immediately without a comment period.
 
  • With the release of the FFY2022 Proposed Rule on April 27, 2021, the specified “lock-in” date for hospitals to be included in the rural wage index calculation for FFY2022 is established as proposed as June 28, 2021. In addition, Medicare Geographic Classification Review Board (MGCRB) reclassification withdrawals will need to be submitted to the MGCRB no later than 45 days after the Proposed Rule is published in the Federal Register, which was May 10, 2021, thereby confirming a deadline of June 24, 2021.
 
Toyon’s Reminder
Reclassified hospitals are not eligible to receive an out-migration factor adjustment, so hospitals that are expected to receive a rural floor wage index (imputed or Statewide rural floor) should consider reclassification withdrawal to secure an outmigration adjustment.
 
– For all IPPS hospitals whose wage indexes are greater than 1.000, CMS proposes in FFY2022 to apply the wage index to the proposed labor-related share of 67.6% of the national standardized amount, compared to 68.3% in FFY2021.
 
For additional information regarding wage index changes or updates, please contact Ryan Sader at ryan.sader@toyonassociates.com

 
Proposed Changes to Indirect and Direct Graduate Medical Education (IME and GME)
 
There are three provisions contained in the Consolidated Appropriations Act of 2021 (“CAA”) which will affect IME and GME payments to teaching hospitals as well as new requirements for submission of resident data through the Intern and Resident Information System (IRIS). 
 
Additional IME and GME Slots
Section 126 of the CAA will make available 1,000 new resident FTE cap slots funded by Medicare over five years (no more than 200 per year), starting 7/1/2023. These cap slots will be distributed to hospitals that are included in the following four categories: 
 
  1. Hospitals located in rural areas or that are treated as being in a rural area. 
  2. Hospitals that are training residents over their cap amount
  3. Hospitals located in the 35 states (listed in the rule) with new medical schools or additional locations and branches of existing campuses. 
  4. Hospitals whose campuses or provider-based facilities serve areas that are designated as Health Professional Shortage Areas (“HPSAs”). 
 
HPSA scores will be a key criterion for all four categories, not just category 4. As an alternative methodology, CMS is considering a prioritization approach for FY 2023 in which the 200 additional residency positions would simply go to hospitals that qualify under one or more of the listed categories. Higher priority is given to those that qualify in multiple categories. Under either methodology, CMS is proposing to limit the new cap slots to 1 FTE per hospital. Applications for the first year’s 200 slots will be due 1/31/2022 for slots effective 7/1/2023. 
 
 
Proposal for Implementation of Section 127 of the CAA, ‘‘Promoting Rural Hospital GME Funding Opportunity’’
Section 127 of the CAA is intended to provide flexibility for both rural and urban hospitals in partnerships that will focus on the need for additional physicians in rural markets. The agency proposes four changes to the rural training track (“RTT”) program.
 
  • The first change is in reference to Cap Adjustments for Urban and Rural Hospitals Participating in Rural Training Track Programs. It is proposed that each time a RTT program begins between an urban and rural hospital, both may receive a “rural track FTE limitation” regardless of whether the RTT program meets the newness criteria for Medicare payment purposes.
  • The second change, Cap Adjustments When the Urban Hospital Adds Additional Rural Training Tracks, proposes that urban hospitals with existing RTT caps can receive RTT cap adjustments for additional RTT programs. Rural hospitals would also receive an RTT cap increase. 
  • The third proposed change, Removal of Requirement That Rural Track Must Be ‘‘Separately Accredited,’’ would remove the requirement that RTT programs be separately accredited. This is provided that the program in its entirety is accredited by the ACGME, and at least 50% of the residents’ time is spent in rural areas. If these conditions are met, then it may qualify as a RTT and both hospitals (urban and rural) will receive RTT caps. 
  • The fourth change, Exemption From the 3-Year Rolling Average During the 5-Year Rural Track FTE Limitation Window, proposes that the RTT program residents will not be included in the hospital’s 3-year rolling average resident cap calculation during the build-up period. 
Hospitals Qualifying to Reset Their FTE Resident Caps
Section 131 of the CAA provides an opportunity for hospitals with previously established low or zero per resident amounts and/or FTE caps to establish new per resident amounts (PRA) and FTE caps. Eligible hospitals fall into two categories:
 
  • Category A – hospitals whose PRA and/or resident cap was set based on less than 1.0 FTE in a cost reporting period beginning before October 1, 1997. 
  • Category B – hospitals whose PRA and/or resident cap was established based on training less than 3.0 FTEs in a cost reporting period beginning on or after October 1, 1997 and before December 27, 2020.  
CMS proposes that these eligible Category A hospitals will have a new PRA established if they train at least 1.0 FTE and Category B hospitals would be eligible if they train more than 3.0 FTEs in a cost reporting period beginning on or after December 27, 2020 and before December 26, 2025. In order to be eligible for a revised FTE cap (not for a PRA), the hospital would have to start a brand-new program after 12/27/2020. 
 
Proposal for Intern and Resident Information System (IRIS) Data
Effective for cost reporting periods that begin after October 1, 2021, the regulations (42 C.F.R. § 413.24(f)(5)(i)) that govern IRIS data are proposed to be amended. The amendment will now state that submitted IRIS data must contain the same total counts of direct GME FTE residents (unweighted and weighted) and of IME FTE residents as the total counts of direct GME FTE and IME FTE residents reported in the hospital’s cost report, or the cost report will be rejected for lack of supporting documentation.
 
Toyon’s Take
The benefit of the additional 1,000 cap slots is quite limited (1 FTE per hospital for each of the five years in the roll-out). Hospitals must commit to increasing their FTE count for the new cap slot(s); they cannot just use them for an existing FTE excess over cap. There will likely be a lot of competition for the 1,000 new cap slots, and CMS is clearly prioritizing hospitals in the most severe HPSAs, using the 1-25 HPSA scale. Other hospitals may not have much of a chance to win the cap slots. While 1,000 new slots is a start, much more relief is needed to have a real impact on national physician shortages.
 
The RTT rules provide much more flexibility and benefits to hospitals that create these training tracks, by incenting both the urban hospital and its rural partners, and by eliminating some of the prior limitations. The opportunity to re-set PRAs and caps is designed to provide significant relief to the fairly small number of hospitals that were saddled with small PRAs or caps due to the strict application of prior rules. 
 
Please contact tom.hubner@toyonassociates.com with IME/GME questions.

 
Implications of Using FFY2019 Data for New Technology Add-on Payment
 
IPPS payments are generally based on the most recently available Medicare claims and cost report data. These sources tend to have a lag of 2-to-3 years, and as a result, the statute provides temporary additional payments for cases with high costs under the New Technology Add-on Payment (NTAP) policy. 
 
Medicare, because of this policy, is required to pay the applicable MS-DRG payment rate and up to an additional 65 percent (75 percent for certain antimicrobials) of the cost approved new technology. The new technology add-on payment is not budget neutral and is generally limited to the 2-to 3-year period following the date of the FDA approval or clearance for marketing.
 
For FFY2022, in connection with CMS’s proposal to use FFY2019 instead of FFY2020 data for FFY2022 IPPS rate setting, CMS is proposing a one-year extension of new technology add-on payments for 14 technologies for which the new technology add-on payment would otherwise be discontinued beginning FFY2022.

 
Organ Acquisition Payment Policies
 
There are several changes CMS proposes regarding the regulation of organ acquisition reimbursement. Some of these changes codify existing Medicare organ acquisition payment policies, that are currently in the Provider Reimbursement Manual (PRM).  Other proposed changes codify new organ acquisition payment policies.  Please note these changes are CMS’s response to statutory directives in both the recent 21st Century Cures Act, which expanded Medicare coverage for kidney acquisition costs, as well as the Medicare Modernization Act of 2003. 
 
Use of consistent terminology and Proposed definitions 
According to CMS, to ensure consistent terminology, CMS proposes to add definitions to 42 C.F.R. § 413.400.  This will further define the terms organ, Organ Procurement Organization (OPO), Hospital-Based Organ Procurement Organization (HOPO), transplant hospital (TH), and transplant program (42 C.F.R. 482.70 § 413.400 new subpart L).  CMS also will revise the term freestanding (42 C.F.R. § 413.200(b)), histocompatibility laboratory (42 C.F.R. § 493.1227 and 42 C.F.R. § 413.400, new subpart L), and standard acquisition charge. CMS states clarification of these terms and even the proposed definition for organ that differs from the OPO Conditions for Coverage (CfCs), will “mitigate potential stakeholder confusion.” 
 
Organ Acquisition Costs 
CMS is proposing to add § 413.402(a) to new subpart L that will codify the 12 elements regarding costs incurred in the acquisition of organs (living/cadaveric by hospital or an OPO). This revision applies existing elements of kidney acquisition costs to all organs and includes additional changes applying to kidney acquisition only (costs for registration of a beneficiary for a kidney transplant and costs for registration of a beneficiary for a non-renal transplant).  CMS will also clarify and codify provisions regarding the Standard Acquisition Charges (SACs) for THs/HOPOs. CMS further proposes in this section to limit registration fees to OPTN registration fees based on reasonable cost principles and to codify surgeon fees are “included as kidney acquisition costs only when the kidney excision occurs with a cadaveric donor.”. When a living donor enters the hospital for the actual kidney excision, surgeon fees for excising the kidney are not included as kidney acquisition costs. 
 
Services Not Considered Organ Acquisition Costs 
CMS is proposing to establish rules identifying costs that are non-reimbursable which may be incurred during organ acquisition and transplant, including, but not limited to:  burial and funeral expenses for cadaveric donors, costs associated with transportation of a living or cadaveric donor, costs incurred prior to a potential donor being declared brain dead, fees or in-center payments for donor referrals, costs associated with OPO sponsored seminars where continuing education credits are given, and certain costs incurred for administrator’s duties associated with professional organizations. 
 
Medicare’s Share of Acquisition Costs and Counting of Organs 
CMS is proposing to change their policy in the identification of each donor beneficiary to determine whether the recipient is a Medicare patient.  CMS states this will ensure the TH/OPO organ acquisition costs are more accurately applied to the Medicare program. CMS proposes changes to OPOs and their reporting requirements.   Total usable organs for THs/OPOs will now be included into one of ten subcategories.  CMS states these categories will more accurately explain various situations, including “organs transplanted into non-Medicare beneficiaries.” Organs not transplanted into Medicare patients are accounted to determine Medicare usable organs.  Additionally, CMS further proposes policy changes on organ acquisition charges for kidney-paired exchanges in section k on page 25669 which include the tables below. 
 
Toyon’s Take 
CMS’s proposed changes are in effort to create a more accurate payment of the Medicare program’s share of organ acquisition costs.  CMS plans to use their collection of data from transplant hospitals and organ procurement organizations to calculate their share of costs. 
 
Recommendation: Toyon recommends the industry consider commenting on how this may not only impact current operations of your transplant services but future implications this may have on securing organs for use.  

 
Medicare DSH Uncompensated Care (UC) Payments
 
CMS proposes to decrease Medicare UC DSH payments by $662m, to $7.6bn in FFY2022.  This decrease is primarily due to estimated DSH payments under the “empirical” method[1] – including data from the PHE – in the determination of “Factor 1.”  Specifically, the $167m update[2] in the Factor 1 computation includes data from the PHE (notably discharges and Medicaid enrollment[3]) and is significantly less than prior year updates (e.g., $1.170bn in FFY2021).
 
[1] In the Factor 1 calculation, CMS first determines Medicare DSH payments in the absence of UC DSH payments under the ACA (section 1886(r)(1) of the Act). Data from the Office of the Actuary’s January 2021 Medicare DSH estimates, based on data from the September 2020 update of the Medicare Hospital Cost Report Information System (HCRIS) and the FFY2021 IPPS/LTCH PPS final rule IPPS Impact File.
[2] Updates include Market Basket (Update Factor component), ACA Payment Reductions (Update Factor component), Multifactor Productivity Adjustment (Update Factor component), Documentation and Coding (Update Factor component), Discharge Factor, Case-Mix Index Factor, and an Other Factor. 
[3] The FFY2022 IPPS Proposed Rule updates include COVID-19 PHE Data, as follows:
“Discharge Updates for changes in the number of Medicare fee-for-service (FFS) inpatient hospital discharges. The figures for FFY 2019 and FFY2020 are based on Medicare claims data…The discharge figure for FFY2021 is based on preliminary data. The discharge figure for FFY2022 is an assumption based on recent trends recovering back to the long-term trend and assumptions related to how many beneficiaries will be enrolled in Medicare Advantage (MA) plans. The discharge figures for FFY2020 to FFY2022 reflect the estimated impact of the COVID-19 pandemic. The case-mix column shows the estimated change in case-mix (from 2018) for IPPS hospitals.
The case-mix figures for FFY2019 and FFY2020 are based on actual data adjusted by a completion factor. The case-mix figure for FFY2021 is based on preliminary data. The case-mix factor figures for FFY2020 and FFY2021 have been adjusted for the estimated impact of the COVID-19 pandemic. The FFY\2022 increase is an estimate based on the recommendation of the 2010 2011 Medicare Technical Review Panel. 
The “Other” update shows the increase in other factors that contribute to the Medicare DSH estimates…In addition, the “Other” column includes a factor for the Medicaid expansion due to the Affordable Care Act…The ‘‘Other’’ column also includes the estimated impacts on Medicaid enrollment from the COVID-19 pandemic. We note that, based on the most recent available data, it is estimated that Medicaid enrollment increased by 2.9 percent in FFY2020 and will increase by an additional 1.2 percent in FFY\2021.”

 
In the Factor 3 distribution of each DSH hospital’s UC DSH allotment, CMS proposes one significant change, accounting for COVID-19, only using an average of two years discharge data (FFY2018 and FFY2019), rather than a three-year average that would include data from FFY2018, FFY2019, and FFY2020. CMS also proposes new trims to exclude rare cases hospitals do not have audited FFY2018 Worksheet S-10 data and are not currently projected to be DSH eligible. 
 
Hospitals have 60 days from the date of public display of the FFY2022 IPPS/LTCH PPS proposed rule in the Federal Register (no later than 5 p.m. EDT on June 28, 2021) for comments. Related to proposed FFY2022 UC DSH payments, comments may be directed to Section3133DSH@cms.hhs.gov for issues concerning:
 
Toyon is in the process updating our national analysis to assist our clients with the evaluation of FFY2018 used for FFY2022 UC DSH payments. We will be providing this analysis over the coming weeks.
 
Toyon’s Take
Inclusion of certain PHE data
The proposed inclusion of discharges and Medicaid enrollment data from the PHE in the “Factor 1” calculation significantly lowers FFY2022 UC DSH payments. Toyon estimates at least an additional $1 billion in FFY2022 funding if CMS used the same discharge and other factor update in FFY2022 as it did in 2021. 
 
Recommendation: Toyon recommends the industry consider commenting to freezing data prior to the PHE, allowing more time to evaluate national Medicare Uncompensated Care funding considering on-going COVID-19 healthcare issues. 
 
Notably, in the FFY2022 IPPS Propose Rule, CMS notes in developing Medicaid expansion estimates, the Agency’s actuaries “assumed new Medicaid enrollees are healthier than the average Medicaid recipient and, therefore, use fewer hospital services”. Specifically, CMS cites the Office of the Actuary assumed per capita spending for Medicaid expansion beneficiaries at 78 percent of the average per capita expenditures for a pre-expansion Medicaid beneficiary. CMS further notes this same assumption was used for the new Medicaid beneficiaries who enrolled in 2020 and thereafter due to the COVID–19 pandemic.
 
New S-10 Cost Reporting Instructions for FFY2021 Cost Reports
Through the Paper Reduction Act (PRA), CMS proposed new cost report instructions in the November 10, 2020 Federal Register (85 FR 71653) at https://www.govinfo.gov/content/pkg/FR-2020-11-10/pdf/FR-2020-11-10.pdf.  Notable proposed changes to worksheet S-10 UC cost are discussed in further detail on Toyon’s website at:
 
https://www.toyonassociates.com/2021/03/18/uncompensated-care-dsh/. This article was used as part of Toyon’s contribution to the American Health Lawyers 2021 Institute on Medicare and Medicaid Payment issues. Notable proposed changes to S-10 UC reporting include:
 
  • Shift to Short Term Hospital Services Only
  • Split between patient coinsurance, copayment deductibles vs. other patient liabilities
  • Clarification on the reporting of Implicit Price Concessions and Inferred Contractual Relationships
  • New Reporting Tables for Charity Care and Bad Debt Information 
In the FFY2022 IPPS Proposed Rule, CMS thanks stakeholders for their comments on the PRA package and states the Agency will respond to industry comments in a separate Federal Register document. 
 
Recommendation: Toyon recommends CMS postpones its proposed instructions allow providers more time to adapt to the operational changes and prepare for the impact of these changes. 
 
FFY2018 UC Cost and Source HCRIS Data
CMS used HCRIS data through February 19, 2021 for FFY2022 UC DSH payments in the FFY2022 IPPS Proposed Rule. The Agency notes its intention to use the March 2021 HCRIS for the FFY2022 final rule and the respective March updates for all future final rules. CMS also states it may consider the use of more recent data that may become available after March 2021, but prior to the development of the final rule, if appropriate, for purposes of calculating the final Factor 3 for the FFY2022 IPPS/LTCH PPS final rule.
 
Recommendation: Toyon recommends all hospitals verify audited FFY2018 S-10 UC cost is reflected in the FFY2022 IPPS Proposed Rule. 
 
If not reflected in the FFY2022 IPPS Proposed Rule, it is recommended hospitals contact CMS to verify the agreed-upon FFY2018 UC cost audit amounts from WS S-10 will be used in the development of the FFY2022 IPPS Final Rule. Toyon will be assisting our clients with this exercise, and please contact Fred Fisher at fred.fisher@toyonassociates.com with any questions concerning S-10 uncompensated care for your hospital(s).
 
Empirical DSH – Section 1115 Waiver Days
The FFY 2022 Proposed Rule states Section 1115 days may be counted in the numerator of the Medicaid fraction only if the patient is eligible for inpatient hospital services under an approved State Medicaid plan that includes coverage for inpatient hospital care on that day or directly receives inpatient hospital insurance coverage on that day under a Section 1115 waiver.  This excludes patient days for which hospitals receive payment from an uncompensated care pool.  
 
Toyon’s Take
This proposal contradicts recent court rulings and providers should expect waiver days to be closely reviewed during audit. Toyon recommends claiming these patients as a separate population on their own tab to reduce audit risk as any findings would be limited to similar patients. 
 
Medicare Bad Debt
The FFY 2022 Proposed Rule requires State Medicaid programs to accept enrollment of all Medicare-enrolled providers and suppliers (even if the provider or supplier is not recognized as eligible to enroll but meets all Federal Medicaid enrollment requirements) for purposes of processing Medicare-Medicaid dual eligible claims for cost-sharing liability. State Medicaid programs must be in compliance for dates of service beginning January 1, 2023. 
 
Toyon’s Take
The “must bill” policy is still in place. This proposal should create additional opportunity for providers to claim Medicare bad debt on the cost report. CMS hopes this proposal leads to a reduction in the number of future bad debt appeals.   
 
For questions regarding DSH and Medicare Bad Debt, contact Dylan.Chinea@toyonassociates.com.

 
Other Rules, Transmittals, and Articles Recently Published
 
Inpatient Psych Facility PPS FFY2022 Proposed Rule [CMS-1750-P]
(Display Copy available 4/7/2021; FR Publish Date 4/13/2021)
  • Per diem base rate increase from $815.22 to $833.50.
  • Total estimated payments to IPFs are estimated to increase by 2.3% or $90 million in FFY2022 relative to IPF payments in FFY2021.
  • For FFY2022, CMS is proposing to update the IPF PPS payment rates by 2.1% based on the proposed IPF market basket update of 2.3%, less a 0.2 percentage point productivity adjustment.
 
Inpatient Rehab Facility PPS FFY2022 Proposed Rule [CMS-1748-P]
(Display Copy available 4/7/2021; FR Publish Date 4/12/2021)
  • Standard payment conversion factor increase from $16,856 to $17,273.
  • CMS is proposing the adoption of the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) Measure to require IRFs to report COVID-19 HCP vaccinations in their facilities.
 
Long-Term Care Hospital PPS Proposed Rule [CMS-1752-P]
(Display Copy available here 4/27/2021; FR Publish Date 5/11/2021) – Published as part of the IPPS Acute Care Hospital Proposed Rule
  • LTCH-PPS payments expected to increase by 1.4% or $52M.
  • LTCH PPS payments for FFY2022 for discharges paid the site neutral payment rate are expected to increase by 3 percent. CMS estimates that discharges paid the site neutral payment rate will represent approximately 25 percent of all LTCH cases and 10 percent of all LTCH PPS payments in FFY2022.
 
Skilled Nursing Facility FFY2021 PPS Proposed Rule [CMS-1746-P]
(Display Copy available 4/8/2021; FR Publish Date 4/15/2021)
  • Increase in unadjusted Federal per diem rates of 1.3%
  • CMS is proposing to rebase and revise the SNF market basket to improve payment accuracy under the SNF PPS by proposing to use a 2018-based SNF market basket to update the PPS payment rates, instead of the 2014-based SNF market basket.

 
Should you have further questions about these changes and wish to discuss them, please contact the scott.besler@toyonassociates.com.
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FFY2021 Medicare IPPS Proposed Rule & Other Recently Published Rules

IPPS Proposed Rule – FFY2021

CMS-1735-P drafted on 5/11/2020; Published in the Federal Register on 5/29/2020

On May 11, 2020, the Centers for Medicare & Medicaid Services (CMS) proposed a rule that focuses the agency’s efforts on a singular objective:  transforming the healthcare delivery system through competition and innovation to provide patients with better value and results.  The proposed rule updates Medicare payment policies and rates for hospitals under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS), effective for discharges on or after October 1, 2020.

The policies in the IPPS and LTCH PPS proposed rule would bring significant changes to MS-DRG weights, along with associated cost report changes, as well as tightening of Medicare bad debt policies, standardization of data collection periods for quality programs, and easing of GME program closure policies.

Overall, the proposed rule is projected to result in an estimated increase of $2.0B (or 1.6%) in payments to providers, with smaller increases for urban, Medicare-dependent hospitals and larger increases for Mid-Atlantic and Pacific region hospitals.

Comments must be sent to CMS no later than 5pm EDT on July 10, 2010 at the applicable address provided in each section of the Proposed Rule or submitted electronically at http://www.regulations.gov.  When commenting, please refer to file code CMS-1735-P.


Medicare IPPS Base Rates

CMS is proposing a base rate increase of 3.2% for hospitals, mostly driven by a market basket increase of 3.0% and the reversal of the MACRA coding adjustment of 0.5%.  A new budget-neutrality factor adjustment was introduced this year to account for the change in Allogeneic Stem Cell Acquisition reimbursement to cost-based.

Click here for the full base rate calculation table and comparison to prior year.


MS-DRG v38 Changes

CMS has proposed their annual recalibration of the MS-DRG weights for FFY2021.  Transplants and one extensive burn DRG (927) have once again received the largest increases, while other heart assist devices and intracranial vascular procedures with hemorrhages have experienced significant reductions in weighting.  A listing of the largest changes in weighting between MS-DRGs v37 and v38 are noted below:

Click here for a table of the MS-DRG v37 to v38 comparison.

In addition, CMS has proposed the following new DRGs for FFY2021, some of which were further subdivisions of previous DRGs:

Note:  New MS-DRGs 521 and 522 will both be subject to the special transfer payment adjustment.

The proposed fixed-loss outlier threshold for FFY2021 is $30,006.


Proposed Market-Based MS-DRG Weights Beginning in FFY2024

In an effort to reduce the cost of healthcare, CMS has proposed a radical shift in how it hopes to compute the weighting for MS-DRGs in FFY2024 and beyond.  CMS believes that by moving from the cost-based DRG weight methodology that was introduced in FFY2007 to the proposed weighting methodology that would reflect the relative market value for inpatient services, it can reduce its reliance on hospital chargemasters for determining DRG reimbursement.

Building on the Hospital Price Transparency Rule (84 FR 65538, 11/27/2019), CMS believes that hospitals will be able to calculate median payer-specific negotiated charges for each MS-DRG, as they will already be required to gather and publish much of this data.  CMS recognizes that this cost report data would become publicly accessible, but because only the de-identified median values would be reported, any proprietary information would not be exposed.

CMS has proposed to begin gathering this data from hospitals by making changes to the Medicare cost report forms for cost reporting periods ending on or after January 1, 2021.  Hospitals will be required to tabulate and report for each MS-DRG the median payer-specific negotiated charges for all Medicare Advantage payers and for all combined third-party payers.  The required cost reporting changes will be proposed in more detail in the Information Collection Request approved under OMB No. 0938-0050.

CMS is seeking comment on this proposed weighting change and its relative burden of calculating, as well as other issues that may address payers that don’t pay under MS-DRGs and whether or not a transition period to these new market-based MS-DRGs should be provided.  Hospitals that do not negotiate payment rates, such as federally-owned facilities, Indian Health Service facilities, Critical Access Hospitals (CAHs), and hospitals located in Maryland, would be exempted from this proposed data collection.


Cost-based Reimbursement for Allogeneic Hematopoietic Stem Cell Acquisition Costs

CMS is proposing to begin reimbursing on a reasonable cost basis the acquisition costs associated with allogeneic hematopoietic stem cell transplants (i.e., when stem cells are obtained from a donor rather than the recipient).  Currently, these costs are included within the MD-DRG payment.  The proposed cost reimbursement will be similar to the methodology in which the acquisition costs for solid organs are reimbursed.  Providers will be billed and paid for these costs on an interim payment basis as a “pass-through” item.

Effective for cost reporting periods beginning on or after October 1, 2020, hospitals that provide these services will need to begin following these procedures:

  1. Gather and report acquisition costs on Line 77 of the Medicare cost report
    • (Note: This has been a requirement for services rendered on or after January 1, 2017.)
    • Acquisition costs include registry fees, tissue typing, donor evaluation, costs associated with the collection procedure, post-procedure evaluation of the donor, and the preparation and processing of stem cells
    • Overhead allocations associated with these costs will also be allowed. CMS is developing a worksheet similar to Worksheet D-4 to allow providers to capture these costs, as well as to report charges by routine and ancillary cost centers.
  2. Formulate a standard acquisition charge, and include this charge on the inpatient hospital bill for the MS-DRG using Revenue Code 815
  3. Tabulate the hospital’s Medicare share of costs by developing a ratio of the number of allogeneic hematopoietic stem cell transplants furnished to Medicare beneficiaries to the total number of those same procedures furnished to all patients

Toyon’s Take:  Because these amounts will now be reimbursed on a reasonable cost basis, it is important that hospitals verify that they are properly capturing all of these costs and statistics in order to ensure adequate reimbursement. 

For additional information or assistance with calculating these amounts, please contact Robert Howey at robert.howey@toyonassociates.com.


Clarification of Long-Standing Medicare Bad Debt Policies

In an effort to clarify the rules related to the demonstration of a reasonable collection effort, CMS is clarifying the policies related to claiming Medicare Bad Debts:

  • Similar Collection Efforts: CMS is stressing that the reasonable collection effort required for a non-indigent Medicare beneficiary must be similar to the effort made by the provider and/or collection agency acting on the provider’s behalf, puts forth to collect comparable amounts from non-Medicare patients.  The hospital needs to have a consistent collection policy for all payers.  Hospitals should be prepared for the MAC to sample and review both Medicare and non-Medicare patients during audits.
  • Timely Beneficiary Bills: A provider must issue a bill to the beneficiary or party responsible for the beneficiary’s personal financial obligations on or before 120 days after
    1. The date of the Medicare remittance advice; OR
    2. The date of the remittance advice from the beneficiary’s secondary payer, if any, whichever is latest

(Note:  Reasonable collection efforts include subsequent billings, collection letters and telephone calls, or personal contacts constituting a genuine collection effort.)

  • Determining Uncollectibility: A provider must make reasonable and customary attempts to collect a bill for at least 120 days from (and including) the date the first bill is mailed to the beneficiary.  If the debt remains unpaid on the 121st day from the date the first bill is mailed, the provider can cease collection efforts and write off the unpaid balance.  If a partial payment is received within the 120-day collection effort period, the 120-day time period resets on the date the partial payment is received.  The hospital must continue to bill the beneficiary for 120 days.
  • QMB Liability: For Qualified Medicare Beneficiaries (QMB), the State Medicaid program must be billed.  If the State does not provide a Medicaid RA, CMS is considering adopting a policy that the provider could obtain and submit to its MAC some form of alternative documentation to evidence a State’s Medicare cost-sharing liability (or absence thereof).  CMS welcomes suggestions from stakeholders regarding the best alternative documentation to the Medicaid RA that a provider could obtain and submit.
  • Write-Off Procedures: All Medicare bad debt, including Medicare/Medicaid crossover claims, must not be written off to a contractual allowance account but must be charged to an expense account for uncollectible accounts (e.g., bad debt or implicit price concession).  This would be effective for cost reports beginning on or after October 1, 2020.  CMS had previously stated that this would be effective for cost reports beginning on or after October 1, 2019, so it appears that providers will be granted additional time to implement these internal procedures.
  • Presumptive Charity: CMS is also proposing clarification to the definition of presumptive charity.  For a hospital to define an indigent non-dual eligible beneficiary, the provider must apply its customary methods under the following requirements:
    1. The beneficiary’s indigence must be determined by the provider;
    2. The provider must take into account a beneficiary’s total resources, which include but are not limited to, an analysis of assets (i.e., only those convertible to cash and unnecessary for daily living), liabilities, and income and expenses (Note: Extenuating circumstances affecting the determination of the beneficiary’s indigence must also be considered.); AND
    3. The provider must determine that no source other than the beneficiary would be legally responsible for the beneficiary’s medical bill (e.g., legal guardian).

Toyon’s Take: The provider must maintain and be ready to provide documentation describing the method by which indigence was determined.  Once indigence is determined and there has been no improvement in the beneficiary’s status, the bad debt may be deemed uncollectible without applying a collection effort.  Providers should review their Financial Assistance Policy, and if presumptive charity is being used as a method to determine indigence, we recommend sending a comment to ensure that CMS will allow this as a reasonable method in determining indigence.

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


Changes to Wage Index

Based on the CMS proposed changes for FFY2021, the occupational-mix adjusted national average hourly wage is estimated to be $45.07, representing an increase of 2.10% from the prior year.

CMS proposed and finalized a policy in FFY2020 to reduce wage index high-to-low disparities by increasing the values for low wage index hospitals below the 25th percentile (or a WIF of 0.8420 in FFY2021). In FFY2020, CMS anticipated that it would continue this policy for at least four years, acknowledging that providers in these lower-quartile states would improve employee compensation within four years as a result of the higher wage index. Accordingly, CMS is proposing to continue this policy in FFY2021. Consistent with the finalized policy in FFY2020, in FFY2021 CMS will “fund” this policy by applying a uniform budget neutrality adjustment. The proposed low wage index hospital policy budget neutrality factor is 0.998241 (compared to 0.997987 in FFY2020).

In FFY2020, CMS also proposed and finalized a change to the rural floor calculation by removing urban-to-rural reclassifications from the statewide rural floor. CMS is proposing to continue this policy in FFY2021 so that state rural floors would be calculated without including the wage data of urban hospitals that have reclassified as rural.

As a result of the policy changes noted above, CMS finalized a cap of 5% on the decrease of any hospital’s wage index from FFY2019 to FFY2020. While this cap was set to expire in FFY2020, CMS is proposing to continue to apply this cap in FFY2021 and apply a budget neutrality adjustment for this proposed transition policy in the same manner as FFY2020. The reason for the cap in FFY2021 is a result of the Office of Budget & Management (OMB) updates noted below.

CMS Proposed Changes to Core-Based Statistical Areas (CBSAs)

The wage index is calculated and assigned to hospitals on the basis of the labor market in which the hospital is located, based on OMB-established CBSAs. The current OMB delineations are based on OMB Bulletin No. 13-01 issued on February 28, 2013, which revised a number of CBSAs starting with FFY2015 due to changes in 2010 Census data. Normally, Census data only impacts CBSA delineations every 10 years; however, OMB Bulletin No. 18-04 issued on September 14, 2018, contained material changes to the OMB statistical area delineations. Specifically, under these revised OMB delineations, new CBSAs would be created, urban counties would become rural counties, rural continues would become urban counties, and some existing CBSAs would be split apart. In addition, the revised OMB delineations affect various hospital reclassifications, the out-migration adjustment (accounting for employee commuting patterns), and the treatment of hospitals located in certain rural counties known as “Lugar” hospitals.

CMS is proposing to incorporate the revised OMB delineations from OMB Bulletin No. 18-04 in FFY2021 to “increase the integrity of the IPPS wage index system by creating a more accurate representation of geographic variations in wage levels.”

The proposed changes to current CBSA designations due the revised OMB delineations include the following:

  1. Urban counties that would become rural
  2. Rural counties that would become urban
  3. Urban counties that would move to a different urban CBSA

Click here for tables listing the proposed changes to the counties noted in #1 – 3 above.

As mentioned above, and to mitigate any potential impact to a CBSA’s wage index due to the revised OMB delineations, CMS is proposing a transition policy to apply a 5% cap on any decrease to a hospital’s proposed FFY2021 wage index from the hospital’s final wage index from FFY2020. This policy would be made budget neutral consistent with the last fiscal period in which revised OMB delineations were applied (FFY2015). The proposed budget neutrality as a result of this transition policy is 0.998580.

Click here for a comparison of current and prior WIFs for each hospital, which includes the proposed transition policy cap of 5%.

Toyon’s Take:  The transition policy as proposed by CMS to apply the revised OMB delineations is appropriate and consistent with past year’s where CMS had to apply similar revisions to the CBSA designations. The impact to urban hospitals as a result of the revised OMB delineations is minimal with the exception of hospitals in the Northeast, primarily New York-New Jersey, as a number of counties were redefined to new CBSA designations and “moved out” of New York City which historically has produced a higher wage index for such hospitals. The impact to these hospitals specifically will be mitigated in FFY2021 as proposed due to the transition policy; however, beyond FFY2021 the impact could be significant. Hospitals in these areas need to pay close attention to their wage index filings and consider any reclassification opportunities, and also, if a hospital in these areas has an existing MGCRB reclassification, it should review the reassignment policy as proposed by CMS to ensure the hospital is reclassified to the expected geographic area.

Other Proposed Changes Impacting Wage Index

  • CMS acknowledges an increase in the number of wage index appeals relating to MACs’ disallowance of wages and hours that hospitals believe are associated with Part A administrative physician time but which the MACs believe are not properly documented as such, or are associated with Part B billable activities, which would not be allowable for wage index reporting.
    • While CMS does not propose any changes to how hospitals are to document Part A administrative physician time, it provides clarification and specific instructions as stated in the PRM.
  • CMS is proposing changes to existing regulations to allow MGCRB appeals to be submitted electronically, by fax, or by other electronic means.
  • Applications to the MGCRB for FFY2022 reclassifications, as well as cancellations and terminations, are due by September 3, 2020. All applications and supporting documents must be submitted via the Office of Hearings Case and Document Management System (OH CDMS) consistent with FFY2021 applications.
  • A new measurement of occupational mix is required for FFY2022. The Calendar Year (CY) 2019 Occupational Mix Survey was originally due July 1, 2020 via email attachment or overnight delivery to hospitals’ MACs; however, CMS is granting an extension until August 3, 2020 for hospitals nationwide. Refer to the final CY 2019 Occupational Mix Survey Hospital Reporting Form available on the CMS website at: https://www.cms.gov/medicaremedicare-fee-service-paymentacuteinpatientppswage-index-files/2019-occupational-mix-survey-hospital-reporting-form-cms-10079-wage-index-beginning-fy-2022

For additional information regarding wage index changes or updates, please contact Ryan Sader at ryan.sader@toyonassociates.com.


UC DSH Payments

CMS is proposing a decrease to Medicare UC DSH payments by $534M (or 6.4%), to $7.8B in FFY2021.  This decrease is driven by a $1.2B decrease in CMS’s estimation of national DSH payments for FFY2021, as compared to FFY2020.  National DSH payments are calculated under the former “empirical” method without accounting for changes from the ACA (i.e., Medicare UC DSH) in the determination of Factor 1 for UC DSH payments.

CMS has four significant proposals for UC DSH in FFY2021:

  • The most recent available single year of audited W/S S-10 will be used for Medicare DSH UC payments for all subsequent fiscal years. CMS proposed to add a new paragraph regarding this change under 42 CFR 412.106, “Special Treatment: Hospitals that serve a disproportionate share of low-income patients.”
  • Hospital UC DSH payments (Factor 3) are determined from one base-year of W/S S-10 UC costs from FFY2017 cost reports
  • To avoid the duplication of UC costs, hospitals acquired under a merger partway through the surviving hospital’s cost reporting period will not have their respective W/S S-10 UC cost data annualized
  • The trim methodology for all-inclusive rate providers (AIRP) will be modified. CMS proposes to recalculate UC costs for AIRPs, with UC costs greater than 50% of total operating costs, by applying a cost-to-charge ratio from the most recent available prior year cost report whereby UC costs are not greater than 50% of total operating costs.

Toyon is in the process of updating our national analysis to assist our clients with the evaluation of FFY2017 data used for FFY2021 UC DSH payments.  We will be providing this analysis over the coming weeks.

Toyon’s Take:  CMS’s projection of the uninsured population for Factor 2 includes insurance enrollment estimates through 2018.  Given the extraordinary events of COVID-19, projecting national uninsured rates may necessitate a more recent consideration of the timeliness of these estimates.

CMS’s proposal to use a single year of UC cost as the basis of UC DSH payments (Factor 3) is a significant change to the UC DSH reimbursement system.  Including this year’s audit of FFY2018 data (likely to be used for FFY2022 UC DSH payments), CMS and its MACs audited UC cost from W/S S-10 the last three years.

It is anticipated these audits will be an annual cycle of reported UC cost on the Medicare cost report.  The UC cost audits are also aligned when hospitals are preparing UC DSH listings on current year cost reports.  While annual audits are in place, Toyon recommends hospitals report current year UC DSH listings with the intent of amending these listings before or during the W/S S-10 audit. Moreover, from our work with MACs, it is Toyon’s understanding amended cost reports are NOT required to revise UC costs (rather this data is being documented independently resulting from the MAC audit schedules into the CMS HCRIS database).  

CMS’s use of FFY2017 data for FFY2021 payments also indicates the Agency’s decision to bypass the use of UC cost data from FFY2016.  As providers submit UC DSH listings for FFY2018 and subsequent years, Toyon recommends hospitals consider the appropriateness of reporting reversals related to FFY2016 UC cost write-offs.  In other words, it may not be appropriate to remove cost that CMS did not use in the development of UC DSH payments.

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 fred.fisher@toyonassociates.com.


High Percentage ESRD Discharge Hospitals

As noted previously, CMS proposed three new MS-DRGs for kidney transplant services with hemodialysis (MS-DRG 019, 650, and 651).  Accordingly, CMS has proposed to add these three MS-DRGs to the list of excluded MS-DRGs set forth in 42 CFR 412.104(a) when tabulating the additional payment for hospitals that have a higher percentage of Medicare ESRD beneficiaries.  In addition, CMS will be removing from the list of excluded MS-DRGs two DRGs that are no longer applicable.

An updated table of the excluded MS-DRGs is shown below:


Graduate Medical Education Changes for Residents in Closed Programs

To address concerns from stakeholders that their policy for allowing hospitals to seamlessly absorb displaced medical residents from closed programs is too restrictive, CMS is proposing to ease the current policy to match actual industry practice more closely.  The current CMS policy is that the definition of a displaced resident is one that is physically present at the hospital training on the day prior to or the day of the hospital or program closure.

In reality, residents begin their searches and programs begin accepting those residents soon after announcements are made that the hospital or program will be closing.  This allows residents to transfer to their new programs at a mutually convenient time with minimal disruption to their training.

CMS is proposing that the key day would now be the day that the closure was publicly announced (e.g., via a press release or formal notice to the ACGME), rather than the actual day of closure.  CMS is also proposing that the definition of a displaced resident be expanded to include individuals who have matched with the closed program but have not yet started training.  The revised definition of displaced residents is summarized in the table below:

These proposed changes would apply to the FTE cap transfer for displaced residents as well.  It is unclear when CMS intends this new policy to be effective, but presumably it would be effective immediately.

As an additional effort to reduce the amount of personally identifiable information (PII) in resident cap transfer agreements, CMS is also proposing to no longer require the full social security number of each resident but rather only the reporting of the last four digits.

For additional information, please contact Tom Hubner at tom.hubner@toyonassociates.com.


Rate Updates for Sole Community Hospitals (SCH) and Medicare-Dependent Hospitals (MDH)

CMS is proposing that the hospital-specific rates for SCHs and MDHs be updated by the following percentages, depending on the hospital’s ability to meet the different qualifying criteria:


Rural Referral Center (RRC) Annual Qualifying Data

Hospitals have different options to meet the RRC criteria set forth at 42 CFR 412.96.  For those that do not qualify under the 275-bed rule, other optional factors must be met.  Some of those factors are updated annually by CMS and include the following proposed amounts:


PRRB Procedural Flexibility

Since mid-2018, providers have been able to file appeal documents electronically with the Office of Hearings Case and Document Management System (OH CDMS).  Over 65 percent of all new appeals are now filed electronically, and CMS is proposing the following changes to enhance these numbers and reduce the administrative burden on the PRRB.

Proposed Changes:

  • “Date of Receipt” to be changed to mean date of electronic delivery for applicable documents
    • PRRB will continue to apply to receipts the presumed 5 days after the date of issuance
  • “In writing or written” defined to mean either hard copy or electronic submission
  • No earlier than FFY2021, the PRRB may update the Board instructions to require that all new submissions for new and pending appeals be filed electronically using OH CDMS
  • Subpoenas must now be sent via certified mail to ensure accordance with existing laws

For additional information, please contact Karen Kim at karen.kim@toyonassociates.com.


Changes to Quality Programs

While CMS is proposing several changes to the hospital quality reporting and payment programs, none of these changes represent significant structural or procedural changes to the programs.

Hospital Inpatient Quality Reporting (IQR)

CMS is proposing to progressively increase, over a 3-year period, the number of quarters for which hospitals are required to report eCQM data, from the current requirement of one self-selected quarter of data to four quarters of data.

In addition, CMS has proposed reducing the number of hospitals selected for validation from up to 800 to up to 400 hospitals.

Furthermore, CMS is proposing to require the use of electronic file submissions via a CMS-approved secure file transmission process for chart abstracted measure validation.  This proposal would nullify the existing submission of paper copies of medical records or copies on digital portable media, such as CDs, DVDs, or flash drives.

Hospital Value Based Purchasing (HVBP)

CMS is not proposing to add or remove any measures for the FY2023 and FY2024 program years. 

Hospital Readmission Reduction (HRR)

CMS is not proposing to remove or adopt any additional measures at this time.  However, in an effort to simplify rulemaking, CMS is proposing the automatic adoption of applicable periods beginning with the FFY2023 program year.  The period of data collection will become a rolling three-year period applicable to the FFY payments two years after the applicable period ends, as noted below:

Hospital Acquired Conditions (HAC)

Similar to the HRR program, CMS is proposing the automatic adoption of applicable periods beginning with the FFY2023 program year, as noted below:


Other Rules, Transmittals, and Articles Recently Published

Inpatient Psych Facility PPS FFY2021 Proposed Rule [CMS-1731-P]

(Display Copy available 4/10/2020; FR Publish Date 4/14/2020)

Fact Sheet Link

Federal Register Link

  • Per diem base rate increase from $798.55 to $817.59.
  • Will apply the most recent CBSA delineations and will have a 2-year transition for all providers negatively impacted by WIF changes.

 

Inpatient Rehab Facility PPS FFY2021 Proposed Rule [CMS-1729-P]

(Display Copy available 4/19/2020; FR Publish Date 4/21/2020)

Fact Sheet Link

Federal Register Link

  • Standard payment conversion factor increase from $16,489 to $16,847.
  • Will apply the most recent CBSA delineations and will have a 2-year transition for all providers negatively impacted by WIF changes.

Long-Term Care Hospital PPS Proposed Rule [CMS-1735-P]

(Display Copy available here 5/11/2020; FR Publish Date 5/29/2020) – 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 $36M.
  • Payments for cases that will complete the statutory transition to the lower payment rates under the dual rate system are expected to decrease by approximately 20%. This accounts for the LTCH site neutral payment rate cases that will no longer be paid a blended payment rate with the end of the statutory transition period, which represent 25% of all LTCH cases.

 

Skilled Nursing Facility FFY2021 PPS Proposed Rule [CMS-1737-P]

(Display Copy available 4/10/2020; FR Publish Date 4/15/2020)

Fact Sheet Link

Federal Register Link

  • Increase in unadjusted Federal per diem rates of 2.3%
  • Proposal to update the SNF VBP program and to change code mappings for case-mix groups

 

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IMPORTANT COVID-19 FUNDING UPDATE | MAY 22, 2020

 

 
  • This Sunday, May 24, is the deadline for attesting to CARES provider relief payments received on April 10.
 

Toyon’s COVID-19 Funding Resources (updated for interactive national modeling of funding)
Toyon University’s COVID-19 Funding and Documentation Presentation

 
  • Wednesday, June 3, is the deadline to submit COVID-19 expenses for
    additional provider relief funding. Providers may be eligible for payments
    from the remaining
    funds through targeted distributions.
     
  • Toyon estimates $27.6
    billion in unallocated
    funding.
 

Toyon is pleased to provide this update on developing details from the CARES Act Public Health and Social Services Emergency Fund (PHSSEF). For more information, or to contact any of our team members, please feel free to check Toyon’s website.

Important Deadlines: May 24 and June 3
This Sunday, May 24 is the deadline for providers receiving CARES PHSSEF payments on April 10 to attest the terms and conditions (T&C)

Providers that do not attest to the T&C and retain the funds past 45 days will retain payments and be included in HHS’s public release of providers and payments. In HHS’s updated FAQs, the agency states:

“Generally, HHS does not intend to recoup funds as long as a provider’s lost revenue and increased expenses exceed the amount of Provider Relief funding a provider has received.”

Providers must also submit revenue detail by June 3 to receive additional funding from the PHSSEF Distribution.
Please visit Toyon University’s COVID-19 Funding and Documentation Presentation for a discussion on submitting expenses and revenue loss. In HHS’s updated FAQs, HHS indicates this information may be used for other funds, such as the High Impact Fund. HHS states:

“Providers should update their capacity and COVID-19 census data to ensure that HHS can make timely payments in the event that the provider becomes a high-impact provider. Providers can continue to update their information through the same method they used previously.”

Also, providers are required to accept HHS’s T&C and submit revenue information to be considered for additional relief payments.

Toyon’s estimation of unallocated funds (to eligible hospitals) from the CARES Act PHSSEF is below. It is noted some of this funding will be used as part of provider relief funding for skilled nursing facilities (SNF) and HRSA’s Uninsured Program.

$50,000 Payments to RHCs for COVID-19 testing | expenses
Also included in HHS’s provider relief funding update is a distribution of $225 million to RHCs for COVID-19 testing. Payments are based on the number of certified clinic sites. HHS also released RHC T&Cs here. 

Provider relief for Skilled Nursing Facilities
As part of the CARES provider relief funding, HHS is distributing $50,000 to each SNF plus a variable distribution between $2000 per bed for smaller SNFs (5 and 25
beds) and $1,8000 per bed for larger SNFs (more than 200 beds). HHS also released SNF T&Cs here.


Thank you

Toyon is committed to apprising providers with important reimbursement updates and will keep you updated with the latest on UC DSH and COVID-19 funding and documentation.  Please feel free to visit Toyon’s COVID-19 Resources for updates on hospital funding estimates, recommendations on documenting cost and revenue losses associated with this public health emergency. Toyon’s website provides information on how to contact Toyon’s team members.   

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