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Tag: Transmittal 18

Transmittal 18 – New Cost Reporting Instructions

On December 29, 2022 CMS finalized and published Transmittal 18 Medicare cost reporting instructions here on its website. Transmittal 18 changes are generally effective for cost reporting periods beginning on or after October 1, 2022, unless noted otherwise.

Toyon’s Transmittal 18 update is summarized below in separate articles by the following categories:
I. Worksheet S-10 Uncompensated Care 
II. Medicare Empirical Disproportionate Share (DSH) 
III. Medicare Bad Debt 
IV. COVID-19 Public Health Emergency Updates 
V. Graduate Medical Education 
VI. Organ Acquisition 
VII. Other Notable Changes 
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Transmittal 18 New Cost Reporting Instructions – Section I. Worksheet S-10 Uncompensated Care

Transmittal 18 changes to Worksheet S-10 Uncompensated Care include the following:

A. Changes to Worksheet S-10 Schedules and Reporting
1. Worksheet S-10 Part II – Acute Care Only CMS’s updated cost report instructions require providers to report Uncompensated Care (UC) costs for acute care services only (based on hospital Medicare provider number) on Worksheet S-10, Part II. Worksheet S-10, Part I will still be used to report uncompensated care costs for the entire hospital complex.  2. Exhibit 3B (Charity Care Listing) & Exhibit 3C (Bad Debt Listing) CMS released standardized templates for Charity Care (Exhibit 3B) and Bad Debt (Exhibit 3C). Notably, these exhibits: 

  • Require separate exhibits for each Medicare Provider (by CMS Certification Number, CCN) that is a part of the Hospital Complex. 
  • Will be utilized by the MACs to check against values in the filed cost report (e.g., the sum of bad debt in the Exhibit must equal total bad debt reported on WS S-10 of the Cost Report). 

3. Factor 3 Updates CMS clarifies the determination of Factor 3 (percentage of UC DSH payments) on Worksheet E Part A Line 35.01. Transmittal 18 updates the Factor 3 calculation for FFY 2023 and forward, as UC DSH payments changed in these years to be based on an average of UC costs from multiple cost reports. CMS also includes information on the calculation of Factor 3 for newly qualifying DSH hospitals.    Toyon’s take: Medicare has not commented whether it will use “acute care” only UC costs on Worksheet S-10, Part II to determine future years of reimbursement. Toyon expects Medicare to evaluate shifts in payment before changing underlying UC cost data. In a recent analysis by Toyon, providers with more than 16% of subacute population (using days as a proxy) received a decrease in UC DSH payments under an “acute care” only method of allocating UC DSH reimbursement.  The new Worksheet S-10 UC cost exhibits are a departure from the templates many MACs utilize during current Worksheet S-10 audits. Furthermore, the industry awaits if the Office of Management and Budget (OMB) will again issue responses to provider comments with further insight on the Exhibits.   Transmittal 18 cost report instructions were proposed in November 2020 and again in June 2022. OMB released responses to comments on the November 2020 proposed instructions here on its website. OMB’s response to the initial Transmittal 18 proposed instructions includes language not specified in CMS’s final Transmittal 18 release. Certain language in OMB’s initial response requires clarification. For instance, OMB’s initial response stated:  “The proposed Exhibit 3C (Bad Debt) listing is not required for an acceptable cost report submission; however, a hospital that receives uncompensated care payments must support the total hospital bad debts claimed on Worksheet S-10. Submission of Exhibit 3C will help reduce requests from Medicare auditors asking the hospital for supporting documentation when reviewing the Worksheet S-10”; and  “We revised the instructions for the “Write Off Date” column to report multiple write-off dates within the cost reporting period of the Worksheet S-10 that the listing supports by entering each date as MM/DD/YYYY separated by a semi-colon.”  Toyon is awaiting further clarification from CMS and the OMB for further insight on specifics reporting charity and bad debt in Exhibits 3B and 3C, respectfully.  B. Updated Definitions and Clarifications Transmittal 18 includes clarifications on medically necessary healthcare (UC costs must be “medically necessary”), non-covered and denied charges as charity care, inferred contractual charges as charity care, contractual allowances (not allowable as UC cost), and courtesy allowances (not allowable as UC cost). Transmittal 18 also includes clarifications that charity care is per a hospital’s written financial assistance policy, and emphasizes the exclusion of charges associated with HRSA Uninsured COVID-19 payments from UC cost.   Toyon’s take: It is recommended providers evaluate their financial assistance policies to determine if they address CMS’s updated definitions and clarifications. Providers should also prepare for a dialog with CMS and its auditors on what constitutes medical necessity for charity care. Medical necessity is a clinical issue, and now CMS may be relying on its financial auditors to determine what is allowable as UC cost. For further information, please contact Liam Corrigan-Carias at 888.514.9312

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Transmittal 18 New Cost Reporting Instructions – Section II. Medicare Empirical Disproportionate Share (DSH)

Transmittal 18 changes to Medicare Empirical Disproportionate Share (DSH) include the following:
A. Changes to Medicare DSH Schedules and Reporting 
Exhibit 3A – Medicaid Eligible Days for a DSH Eligible Hospital
CMS finalized and released the required template hospitals must use to report their DSH eligible days. The exhibit includes 18 columns to be populated when preparing the DSH eligible days patient listing. For hospitals reporting Medicaid days on Worksheet S-2, Part I, line 24 or 25, a separate exhibit is required for each CCN.   
Toyon’s take: The issuance of Exhibit 3A does not impact or change the structure of the DSH payment. The expectation is that all hospitals across the country will report and file their DSH patient listing in a standard format, allowing the MACs to better standardize their review process. Hospitals will continue to report their Medicaid DSH days under the six different columns on Worksheet S-2, Part I, line 24 or 25. DSH hospitals will submit Exhibit 3A with the Medicare cost report. 
B. Updated Definitions and Clarifications 
DSH Medicaid Eligible Days 
CMS updated the definitions for the reporting of DSH Medicaid eligible and 1115 Waiver days between in-state, out-of-state, HMO and other (Worksheet S-2, Part I, Lines 24 and 25). Worksheet S-2 Line 24 is to report IPPS acute Medicaid days. Line 25 is to report IRF Medicaid days.  
Toyon’s take:  CMS’s updated definitions are intended to assist hospitals with categorizing Medicaid-eligible patients.   
For further information, please contact Dylan Chinea at 888.514.9312 or
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