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CARES PRF Update

CARES Phase 4 / Rural ARP Consideration

CARES PROVIDER RELIEF FUND (PRF)

Phase 4 and Rural ARP Reconsideration Update
Toyon is pleased to provide this update on the CARES Provider Relief Fund (PRF). Please feel free to contact Fred Fisher at 888.514.9312, fred.fisher@toyonassociates.com with any questions.
 
Providers in receipt of CARES Phase 4 and/or rural payments from the American Rescue Plan (ARP) have until May 2, 2022 to request a payment reconsideration. The reconsideration process is available to any provider looking to correct potential errors in their Phase 4 and/or Rural ARP payment according to HRSA’s methodology. HRSA will only consider correction of any errors; and will not consider changes to its payment methodology or policy in the reconsideration process. To request a Phase 4 and/Rural ARP reconsideration, providers must:
 
1) Review HRSA’s methodology. Providers may also contact HRSA at 866.569.3522 (TTY dial 711) to receive additional information on how Phase 4/Rural ARP payments were determined. 
 
2) Gather the following documents:
a. Payment determination letter from HRSA
b. DocuSign envelope ID for the ARP Rural/Phase 4 application
c. The contact information and Tax ID Number (TIN) included on the original Phase 4/ARP Rural application
d. The reason believed the Phase 4/Rural ARP payment was calculated incorrectly, (related to the PRF Phase 4 and ARP Rural Payment Methodology)
 
3) Complete and submit the PRF Reconsideration Request Form by 11:59:59 pm EST on May 2, 2022. HRSA states not to include any supplemental information or documentation beyond completing the PRF Reconsideration Request Form and uploading your Phase 4/ARP Rural payment determination letter. HRSA will only review your original submitted application and will request any clarifying information directly, as needed.
 
Providers expecting, but not yet in receipt of, CARES Phase 4 and/or Rural ARP payments will have 45 days to apply for reconsideration after receipt of a payment determination notice from HRSA. More information is available at HRSA’s PRF Reconsideration site as well as HRSA’s PRF Reconsideration FAQ site. Please also see Toyon’s updated CARES PRF Presentation (February 4) for information on recent CARES PRF allocations, Period 2 Reporting, and new FAQs issued January 27, 2022.
Posted in: CARES, COVID-19, Rural Health
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Medicare Graduate Medical Education and Organ Acquisition Payment Policy Changes

On Monday December 27, CMS published Federal Register / Vol. 86. No. 245 [CMS–1752–FC3. This Final Rule with comment period includes new teaching slots for graduate medical education, modifications to organ acquisition reimbursement, and postpones potential changes related to Section 1115 waiver days for empirical DSH payments. February 25 is the deadline to submit comments to CMS for the issues (discussed below) whereby CMS is seeking feedback. 

Graduate Medical Education
 
CMS’s changes for graduate medical education new teaching slots are directed by legislation provided in the Consolidated Appropriations Act (CAA), 2021. The CAA provides three new opportunities for teaching hospitals: 1) Additional 1,000 FTE cap slots for indirect medical education (IME) and direct graduate medical education (GME); 2) New opportunities for rural training track programs; and 3) Reset of FTE caps or per-resident reimbursement amounts that were established for hospitals using fewer than one or three FTEs, depending on the base year of the existing teaching cap or per-resident amounts.  More about these respective changes are detailed below. 
 
1)  Additional IME and GME Slots (Section 126 of CAA)
Important Deadline: March 31, 2022 to Apply for Slots in Federal Year 2023
 
CMS finalized rules on the distribution of 1,000 new resident FTE cap slots over five years (200 per year) under Section 126 of the CAA for hospitals looking to establish or expand residency programs. Hospitals may apply for up to five new FTE cap slots by March 31, 2022 for distribution in Federal Year 2023 (March 31 preceding the federal fiscal year is the deadline for each of the applicable five fiscal years). Further instructions and the application for FTE cap slots will be available on the CMS DGME website.
 
The additional cap slots will be distributed to hospitals that are included in the following four categories (with at least 10% of slots going to each category): 
 
  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 that train residents in a program where at least 50 percent of the residents’ training time occurs at site(s) physically located in (a) geographic Health Professional Shortage Area(s) (HPSA).
 
HPSA scores will be a key criterion for all four categories, not just category four. Hospitals can find information about the HPSA or HPSAs associated with their training program locations using the HRSA search tool at: https://data.hrsa.gov/tools/shortage-area/by-address.  CMS will prioritize applications by descending HPSA score. When hospitals have the same HPSA score, applications are next prioritized for hospitals with fewer than 250 beds. CMS is seeking comment on the dependence of geographic HPSA residents on health services provided outside of their HPSA, and a feasible alternative for potential use in future rulemaking.
 
 
2)   Rural Training Track Programs (Section 127 of CAA)
      Beginning Federal Year 2023
 
For cost reporting periods beginning on or after October 1, 2022, non-rural hospitals (“primary clinical sites”) and their rural hospital partners (“rural hospital participation sites”) with “rural track” residency programs may receive resident FTE cap slots. This FTE adjustment is intended to provide flexibility for both rural and urban hospitals focusing on additional physicians in rural markets. In its Final Rule, CMS codified four changes to the rural training track (“RTT”) program rules, as follows:
 
  1. Each time an RTT program begins or is expanded between an urban and rural hospital, both may receive an adjustment to the FTE resident limit, regardless of whether the RTT program meets the newness criteria for Medicare payment purposes. Eligible expanded programs include new tracks (rural participating sites) added to an existing rural track program, but exclude expansion of existing tracks at an existing rural participating site.  
  2. Urban hospitals with existing RTT caps can receive RTT cap adjustments for additional qualifying RTT programs. Rural hospitals would also receive an RTT cap increase. 
  3. The requirement that a new rural track must be ‘‘separately accredited” is nullified, provided that the program in its entirety is accredited by the ACGME, and at least 50% of the RTP (“rural track program”) residents’ time is spent in rural areas. If these conditions are met, then it may qualify as an RTT and both hospitals (urban and rural) will receive RTT caps. 
  4. RTT program residents will not be included in the hospital’s 3-year rolling average resident cap calculation or subject to the IRB ratio during the build-up period. 
 
3)    Hospitals Qualifying to Reset Their PRAs and/or FTE Resident Caps (Section 131 of CAA)
Important Deadline: July 1, 2022 to Correct Medical Education FTE Counts in
CMS’s New (Upcoming) Public Use File
 
Certain hospitals with low or $0 per resident amounts (PRAs) may reset and establish new PRAs if the hospital trains more than the threshold number of resident(s) in a cost reporting period beginning on or after December 27, 2020 and before December 26, 2025. Certain hospitals with low caps may be eligible for revised FTE caps, if the hospital starts a brand-new program after December 27, 2020. 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 fewer than 3.0 FTEs in a cost reporting period beginning on or after October 1, 1997 and before December 27, 2020.  
 
CMS will post a public use file here on its website containing an extract of the HCRIS cost report worksheets on which the FTE counts, caps, and PRAs, if any, would have been reported, starting with cost reports beginning in 1995. If a hospital wishes to receive a PRA or cap determination from its MAC for a possible reset of an open or reopenable cost report, the hospital must first check the posted public use file. CMS is seeking comment on treatment of PRAs or FTE caps from cost reports beyond the 3-year reopening period that do not agree with data in the forthcoming public use file.
 
Providers have a one-time deadline of July 1, 2022 to request MAC reconsideration if the provider is a Category B hospital, has an open or reopenable cost report, and believes its PRA in CMS’s public use file is incomplete or incorrect (i.e., FTEs are actually based on not more than 3.0 FTEs, or its IME and/or DGME FTE caps were based on not more than 3.0 FTEs). 
 
Providers qualifying to reset their PRA will establish the replacement PRA resulting from the lower of:
 
  • The hospital’s actual cost per resident incurred in connection with the GME program(s) based on the cost and resident data from the hospital’s replacement base year cost reporting period; and

  • The updated weighted mean value of per resident amounts of all hospitals located in the same geographic wage area, calculated using all per resident amounts (including primary care and obstetrics and gynecology and nonprimary care) and FTE resident counts from the most recently settled cost reports of those teaching hospitals[1].
 
Please contact Tom Hubner with questions at 888.514.9312, or tom.hubner@toyonassociates.com.
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[1] If there are fewer than three existing teaching hospitals with per resident amounts that can be used to calculate the weighted mean value per resident amount, for base periods beginning on or after October 1, 1997, the per resident amount equals the updated weighted mean value of per resident amounts of all hospitals located in the same census region.
Organ Acquisition Payment Policy
 
CMS finalized their policy regarding Medicare-certified transplant hospitals and non-transplant hospitals’ charges for services to cadaveric donors. CMS also codified and clarified organ acquisition policies, including definitions, acquisition charges, coverage of living donor complications by the Medicare program, Medicare as a secondary payor for organ acquisitions, and paired donations for kidney transplants. The CMS proposal for both organ counting policy and research facility organ counting will be considered in future rulemaking.
 
The Federal Year 2022 IPPS Proposed Rule contained Section X. of the preamble which included proposed changes pertaining to Medicare’s share of organ acquisition costs for organs transplanted into Medicare beneficiaries and the charges for services provided to cadaveric organ donors by donor community hospitals and transplants hospitals. Listed below are the rules codified by CMS. 
 
Change to Organ Acquisition Policy: CMS finalized the codification and compilation of Medicare organ acquisition policies under a new 42 CFR Part 413 subpart L, which was mentioned in the proposed rule. This new section will include changes to policies and creation of new policies from the Medicare Modernization Act (Pub. L. 108-173) and the 21st Century Cures Act (Pub. L. 114-255). CMS recognizes the need for a more coordinated approach across all organ types (kidney, liver, heart, lung, pancreas, or intestine)[2]. 
 
Clarifying Definitions: CMS will define the term in the new section (42 CFR §413.400) “organ” for Medicare purposes and will exclude organs procured for research. The definition of organ for Medicare payment purposes differs from the definition set forth in 42 CFR §486.302 for Organ Procurement Organizations (OPOs). For Medicare payment purposes, an organ procured for research is not counted as a Medicare organ in Medicare’s share of organ acquisition costs, except where explicitly required by law.
 
Additional clarification to existing definitions of OPO, hospital-based OPO (HOPO), independent OPO (IOPO), transplant hospital/HOPO (TH/HOPO), and histocompatibility laboratory are added to 42 CFR §413.400.
 
Organ Acquisition Costs: New Section L will include CFR 42 §413.402(a) specifying costs which are incurred in the acquisition of organs from a living donor or a cadaver by either the hospital or OPO are considered organ acquisition costs. Also, CFR 42 §413.402(b) will codify the 12 elements regarding costs incurred in the acquisition of organs (living/cadaveric by hospital or an OPO) and apply the existing elements of kidney acquisition costs to all organs and include additional revisions that would apply to kidney acquisition only.
 
Standard Acquisition Charges: CMS also codifies current Medicare policies on Standard Acquisition Charges (SACs) for THs, HOPOs, and IOPOs (CFR 42 §413.404). SACs are amounts that represent the estimated costs that a TH and/or OPO expect to incur during the acquisition of the organ. It is generally the average rather than the actual organ acquisition costs.
 
Accurate Organ Count (No Current Changes; Medicare and Non-Medicare): CMS, in their proposed rule, suggested revisions to the overall counting of organs used to determine Medicare’s share of organ acquisition costs. CMS planned to follow through with one of two solutions, withdraw the proposal or finalize the proposal but with a delay during the transition period. CMS is not applying changes to organ counting, as further analysis is needed to understand the concerns of all parties. CMS notes changes to organ counting may bear costs that apply to non-Medicare patients. 
 
Please contact Scott Besler with questions at 888.514.9312, or scott.besler@toyonassociates.com.
 
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[2] Currently, Medicare reimburses Transplant Hospitals (THs) for organ acquisition costs, the transplant surgery, inpatient, and post-transplant costs for the Medicare recipients, but through different payment systems. Medicare Part A pays for hospital costs of a transplant surgery and certain follow-up care through a DRG payment, and the organ acquisition costs associated with a transplant on a reasonable cost basis. Medicare B pays for the physician and other services related to the procedure.
 
 Section 1115 Demonstration Waiver Days for Empirical DSH Payments
 
CMS is not currently addressing proposed revisions on the treatment of Section 1115 waiver days for purposes of the DSH adjustment. In the Federal Year 2022 IPPS Proposed Rule, CMS proposed that Section 1115 waiver days can only be claimed in the Medicaid fraction if the patient directly receives inpatient hospital insurance coverage under an approved waiver. This excludes from the Medicaid fraction patient days for which hospitals received a payment from a UC pool.  CMS expects to revisit the issue of Section 1115 waiver days in future rulemaking, and encourages stakeholders to review the future proposal and to submit their comments at that time.
 
Please contact Dylan Chinea with questions at 888.514.9312, ext. 3121, or dylan.chinea@toyonassociates.com
Posted in: CMS, DSH, Education, Federal Register, GME/IME, IPPS, Medicare, Organ Acquisition
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Medicare Hospital Inpatient Prospective Payment System (IPPS) Federal Fiscal Year (FFY) 2022 Final Rule

CMS-1752-F drafted on 8/2/2021; Published in the Federal Register on 8/13/2021

 
On August 2, 2021, the Centers for Medicare & Medicaid Services (CMS) issued the final rule for Federal Fiscal Year (FFY) 2022 Inpatient Prospective Payment System (IPPS). The Final 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. Its polices will assist in supporting a hospital’s readiness to respond to future public health threats and develop the health care workforce in rural and underserved communities. The Final Rule revises 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 Final Rule updates Medicare payment policies and rates for hospitals under the IPPS and the Long-Term Care Hospital (LTCH) PPS effective for discharges on or after October 1, 2021 (FFY 2022).
 
CMS received greater than 6,500 public comments to the FFY 2022 Proposed Rule. These comments related to empirical disproportionate share hospital (DSH) payments, organ acquisition costs, and the provision of the Consolidated Appropriations Act (CAA) 2021, related to payments to hospitals for direct graduate medical education (GME) and indirect medical education (IME) costs, will be addressed in subsequent parts. 
 
CMS, in this Final Rule, establishes new requirements and revises 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, LTCH Quality Reporting Program, PPS-Exempt Cancer Hospital Reporting (PCHQR) Program, and the Medicare Promoting Interoperability Program
 
CMS uses FY 2019 data where “FY 2020 data is significantly impacted by the COVID-19 PHE” in FFY 2022 rate setting. For instance, CMS uses FY 2019 MedPAR claims data in its MS-DRG classification analysis, and FY 18/19 HCRIS cost report data in determining FY 2022 IPPS MS-DRG relative weights. Throughout the Final Rule, CMS “clearly identifies” where and how the Agency uses alternative data (as compared to more recent data from 2020 CMS would ordinarily use for rate setting).
 
Overall, the Final Rule will result in an estimated increase of $2.3bn in payments to providers. Included in that amount is a reduction of approximately $1.4bn in Medicare DSH and Uncompensated Care (UC) payments. Increases to hospital payments before the DSH and UC reduction for FFY 2022 is $3.7bn (3.1 percent). 
 

Rural Redesignation Update

 
CMS had issued an Interim Final Rule with Comment (IFC) amending current regulations at § 412.230. This amendment allows 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). 
 

Medicare IPPS Base Rates

 
CMS is finalizing a base rate net increase of 2.7% for hospitals, after budget neutrality, for hospitals that comply with the CMS quality reporting program (QRP). There is also a 1.4% increase in the federal capital rate. As it has done in prior years, CMS will reduce payments to those hospitals which do not meet IQR or EHR requirements.
 
 
 
 
Click here for the full base rate calculation table and comparison to prior year.
 

Repeal of Market-based Data Collection, MS-DRG Relative Weight Policy

 
CMS is finalizing its proposal 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 January 1, 2021.
 
CMS is going to repeal, the market-based MS-DRG relative weight methodology, slated to be effective for FFY2024, that would have used these data to set relative Medicare payment rates for hospital procedures. Rather, CMS, in the FFY 2022 Final Rule, states that they will 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 has approved 19 technologies that applied for new technology add-on payments for FFY 2022. This amount includes 9 technologies under the alternative pathway for new medical devices that are part of the FDA Breakthrough Devices Program and 2 that received the FDA Qualified Infectious Disease Product (QIDP) designation. In addition, CMS approved (conditionally) one technology, designated as a QIDP that met the criteria but had not received FDA approval. The remaining seven of these 19 new technologies were submitted under the traditional new technology add-on payment criteria and approved. 
 
CMS will also continue new technology add-on payments for 23 technologies which are currently receiving the add-on payment. Ten of these remain within their newness period and for the remaining 13, CMS will use its exemptions and adjustment authority, for one year, under section 1886(d)(5)(I) of the Act due to the “unique circumstances” for FFY 2022 rate-setting due to the COVID-19 PHE.
 
In total there will be 42 new technologies that will be eligible to receive add-on payments for FFY 2022. CMS estimates these payments to be $1.5bn, which is a 77% increase over FFY 2021 spending.
 
Toyon’s Take
CMS allowing the exemption on the 13 technologies and remain on the NCTAP list will provide additional relief to hospitals at a time when many still desperately need support. Hospitals will continue to have the flexibility awarded by CMS to continue to manage the care for these patients past the PHE. Providing care without these exemptions may have led to disincentives when using these new technologies. Hospitals need to ensure they are capturing these amounts in their claims.
 
Please contact Scott Besler at Scott.Besler@toyonassociates.com with NCTAP reimbursement questions.
 

Finalized Changes to Wage Index

 
Based on the CMS finalized rates for FFY 2022, the occupational mix-adjusted national average hourly wage is estimated to be $46.47, representing an increase of 2.74% 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, which for FFY 2022 was finalized at a Wage Index Factor (WIF) of 0.8437. Consistent with the finalized policy in FFY 2020 and 2021, in FFY 2022 CMS will “fund” this policy by applying a uniform budget neutrality adjustment. The finalized low wage index hospital policy budget neutrality factor is 0.998035 (compared to 0.997970 in FFY 2021).
 
Also, in FFY 2020, CMS proposed and finalized a change to the rural floor calculation by removing urban-to-rural reclassifications from the statewide rural floor. CMS finalized its proposal to continue this policy in FFY 2022 (as it did in FFY 2021) so that state rural floors would be calculated without including the wage data of urban hospitals that have reclassified as rural.
 
Lastly, in FFY 2021, 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 finalized its proposal in FFY 2022 to continue to use the OMB delineations adopted beginning with FFY 2015 and updated most recently in OMB Bulletin No. 18-04.
 
As a result of the policy changes noted above, in FFY 2020 and FFY 2021 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 FFY 2021, 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 CMS proposed to not include a transition policy in FFY 2022, CMS finalized an extension of the transition policy for FFY 2022. Specifically, for hospitals that received the transition in FFY 2021, CMS is continuing a wage index transition for FFY 2022 where it will apply a 5% cap on any decrease in a hospital’s WIF compared to its WIF for FFY 2021. In accordance with CMS, the transition policy is intended to mitigate significant negative impacts of, and provide additional time for hospitals to adapt to, CMS policy changes described above, specifically the revised OMB delineations. CMS finalized this transition policy on a budget-neutral basis consistent with FFY 2021. The finalized wage index transition budget neutrality factor for FFY 2022 is 0.99987.
 
Click here for a comparison of current and prior WIFs for each hospital as well as a comparison to the Proposed Rule. In addition, CMS Table 2 includes the bottom quartile wage index adjustment as well as where the transition policy cap of 5% applied.
 
Toyon’s Take
Please refer to our FFY 2022 Proposed Rule brief for further discussion on the continuation of the policy changes implemented by CMS as proposed and finalized to continue in FFY 2022. The FFY 2022 Final Rule update relates to the transition policy extension that was not otherwise extended in the Proposed Rule. Despite its good intentions, the extension of the wage index transition policy came with a limitation applied. By limiting the transition cap of 5% to only those hospitals that received it in FFY 2021, the number of hospitals that benefit from the transition cap is minimal (less than 30 hospitals across the country compared to well over 100 in FFY 2021). This is primarily a result of the inclusion of the imputed rural floor for “all-urban” States in FFY 2022. For instance, hospitals in the New Jersey market that were significantly impacted by the revised OMB delineations were “protected” in its wage index reduction to the inclusion of the FFY 2022 imputed rural floor for New Jersey hospitals. See further discussion below on the imputed rural floor for “all-urban” States. On the contrary, with a uniform budget neutrality factor of 0.99987 reducing standardized rates by less than 0.02%, the impact to hospitals not receiving the wage index transition cap is negligible.
 
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 FFY 2019, FFY 2020, and FFY 2021 wage indexes. For FFY 2022, a new measurement of the occupational mix was required using data from CY 2019. CMS finalized its proposal to utilize this data using the same methodology as prior years to calculate an occupational mix adjustment factor. The final unadjusted national average hourly wage is $46.52 compared to the occupational-mix adjusted national average hourly wage of $46.47.
 
Reincarnation of the Imputed Rural Floor in “All-Urban” States
In FFY 2005, CMS adopted an imputed rural floor policy as a temporary 3-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 FFY 2005, 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 is finalizing permanent reinstatement of 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 FFY 2018. Unlike FFY 2018 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 indexes.
 
While not in the Proposed Rule, CMS finalized the imputed rural floor adjustment into the rate-setting, calculation of the wage index and tables of the Final Rule in a non-budget neutral manner. CMS Table 2 (link above) includes the imputed rural floor WIFs for those hospitals that received it in Connecticut, Rhode Island, Delaware, New Jersey, and Washington D.C. (Note: Puerto Rico hospitals are also subject to an imputed rural floor, but no hospitals received the imputed rural floor in FFY 2022.)
 
Other Proposed Changes Impacting Wage Index
  • CMS proposed 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 manipulate a State’s rural wage index, which is “detrimental to the stability and accuracy of the Medicare wage index system”. The proposed two changes are described below.
    • First, CMS proposed that requests to cancel rural reclassifications be submitted to the CMS Regional Office no earlier than one calendar year after the date when the reclassification became effective, and
    • Second, CMS proposed 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.
 
CMS finalized its proposed policy for the cancellation of rural reclassifications to be effective until no earlier than one calendar year after the date when the reclassification became effective, which will be reflected in the corresponding regulation – CFR §412.103(g)(4). However, CMS delayed the proposal to require cancellation requests to be effective in the Federal Fiscal Year that begins in the calendar year after the calendar year in which the request was submitted. CMS stated that it will delay this proposal to revise it further in order to assure the policy effectively targets the form of wage index manipulation it intends to deter.
 
  • For all IPPS hospitals whose wage indexes are greater than 1.000, CMS finalized its proposal in FFY 2022 to apply the wage index to the proposed labor-related share of 67.6% of the national standardized amount, compared to 68.3% in FFY 2021.
 
Please contact Ryan Sader at Ryan.Sader@toyonassociates.com with any wage index questions.
 

Finalized Changes to Uncompensated Care DSH

 
CMS proposes to decrease Medicare UC DSH payments by $1.1bn, to $7.2bn in FFY 2022.  This decrease is primarily due to estimated FFY 2022 DSH payments under the “empirical” method[1] – including data from the PHE – in the determination of “Factor 1”.  Specifically, the $103m update[2] in the Factor 1 computation includes update factors inclusive of data from the PHE (notably discharges and Medicaid enrollment) and is significantly less than prior year updates (e.g., $1.170bn in FFY 2021).
 
[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 March 31, 2021 update of the Medicare Hospital Cost Report Information System (HCRIS) and the FY 2021 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.  
 
Furthermore, CMS decreased Final FFY 2022 Medicare UC DSH payments by $436m as compared to the $7.6bn in the FFY 2022 Proposed Rule.  This decline is driven by a decrease in CMS’ estimated uninsured patients for FFY 2022 (“Factor 2”). CMS highlights the uninsured projection has decreased due to a “faster-than-anticipated employment growth, an improving economic outlook based on a consensus of the Blue-Chip forecasters, and substantial recent and anticipated, temporary increases in Medicaid enrollment”.
 
 
CMS finalized one significant change for FFY 2022 only using an average of two years discharge data (FY 2018 and FY 2019), rather than a three-year average that would include data from the PHE (FY 2018, FY 2019, and FY 2020). CMS also finalized new trims to exclude rare cases hospitals do not have audited FY 2018 Worksheet S-10 data and are not currently projected to be DSH eligible.  
 
Toyon’s Take
Decreasing UC DSH Payments
 
CMS’ use of discharges and Medicaid enrollment data from the PHE (“Factor 1”), combined with a projection of decreasing uninsured population (“Factor 2”), significantly lowers hospital FFY 2022 UC DSH payments.  The amount of UC costs incurred by DSH hospitals has increased each year (e.g., $1.2 billion, or 3.6%, from FFY 2021 to FFY 2022), however, the UC DSH pool is decreasing. For instance, in FFY 2021 hospitals received 25% of UC costs from FY 2017 cost reports. In FFY 2022, hospitals are receiving lower reimbursement at 21% of UC costs from FY 2018 cost reports. A hospital’s UC cost had to increase 20% from FY 2017 to FY 2018 just to break even in FFY 2022 and maintain UC DSH payments at FFY 2021 levels. 
 
New Proposed WS S-10 Reporting Instructions
 
As commenters provided CMS suggestions for recording UC costs on Worksheet S-10, CMS highlights that it will respond in a separate impending Federal Register. CMS’ comments will relate to proposed cost report instructions per the November 10, 2020, Federal Register (85 FR 71653). Please feel free to read Toyon’s article on CMS’ proposed S-10 instructions. 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:
 
  • Charity Care and Uninsured Discounts for “Medically Necessary” services only
  • 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  
 
Please contact Fred Fisher at Fred.Fisher@toyonassociates.comwith any UC DSH questions.
 
There were 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).
 
CMS noted that the FY 2022 IPPS/LTCH PPS proposed rule included our proposals related to the implementation of the provisions of the Consolidated Appropriations Act (CAA) of 2021 related to payments to hospitals for direct graduate medical education (GME) and indirect medical education (IME) costs.
 
Please refer to the proposed rule (86 FR 25502 through 25524) as well as our summary released May 14, 2021, which can be found on this link, for additional background information on these proposals. Due to the number and nature of the comments that we received on the implementation of sections 126, 127 and 131 of the CAA of 2021 relating to payments to hospitals for direct GME and IME costs, we will address public comments associated with these issues in future rulemaking.
 
Please contact Tom.Hubner@toyonassociates.com with IME/GME questions.
 

Organ Acquisition Payment Policies

 
There were several changes in CMS’ FFY 2022 IPPS/LTCH PPS Proposed Rule 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. 
 
CMS mentions that the FFY 2022 IPPS/LTCH PPS Proposed Rule included their proposals related to the organ acquisition payment policy for transplant hospitals, donor community hospitals, and organ procurement organizations.
 
Please refer to the Proposed Rule (86 FR 25656 through 25676), as well as our summary released May 14, 2021, which can be found on this link, for additional background information on these proposals. Due to the number and nature of the comments that we received on the organ acquisition payment policy proposals we will address public comments associated with these issues in future rulemaking.
 
Toyon’s Take
CMS’s delay in applying its proposed changes will now allow the donor community to collaborate within its groups as well as with CMS and its leaders to formulate a plan which can allow for an agreement on collection of data from transplant hospitals and organ procurement organizations to calculate their share of costs.
 
Recommendation: Toyon recommends the industry continue to review and monitor the potential impact these regulations will have on their facility.
 
Please contact Scott Besler at Scott.Besler@toyonassociates.com with Organ Acquisition reimbursement questions.
 

FFY 2022 Value-Based Purchasing (VBP) Program, Hospital Readmission Reduction (HRR), and Hospital Acquired Conditions (HAC) Update

 
CMS will provide all hospitals with a neutral score for FFY 2022 VBP adjustment. This is a result of many measures impacted but the PHE. CMS also will finalize its measure suppression policy for certain measures in the Readmissions and Hospital-acquired Conditions (HAC) Reduction programs impacted by the PHE. Please note that the hospitals will be scored for their FFY 2022 Readmissions and HAC Reduction programs using the remaining measures.
 
Please contact Scott Besler at Scott.Besler@toyonassociates.com with questions.  
 

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.
 
CMS will continue to review the large number of comments on the proposed revision to the regulation relating to the treatment of section 1115 waiver days for purposes of the DSH adjustment. Due to the number and nature of the comments that CMS received in the FFY 2022 IPPS/LTCH PPS Proposed Rule, they intend to address the public comments in a separate document. 
 
Toyon’s Take
This has not been finalized and Toyon will continue to monitor any updates issued by CMS.
 
Please contact Dylan Chinea at Dylan.Chinea@toyonassociates.com with empirical DSH questions.
 

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 comply for dates of service beginning January 1, 2023.
 
Toyon’s Take
The “must bill” policy is still in place. This should create additional opportunity for providers to claim Medicare bad debt on the cost report. CMS is hopeful this policy will result in a reduction in the number of future bad debt appeals.  
 
For questions regarding DSH and Medicare Bad Debt, contact Dylan.Chinea@toyonassociates.com.
 

Should you have further questions about these changes and wish to discuss them, please contact the scott.besler@toyonassociates.com.

 

Posted in: CARES, CMS, CMS Admin, Cost Reports, COVID-19, DSH, Education, Federal Register, GME/IME, Industry News, IP Psych PPS, IP Rehab PPS, IPPS, Mcare DSH, Medicare, PRRB, PRRB, S-10, SNF PPS, UCRS, Wage Index
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