The New DSH Formula and Other
Recent Reimbursement Legal
Developments
Indiana HFMA Summer Institute
August 1, 2013
Keith D. Barber
Elizabeth A. Elias
Hall, Render, Killian, Heath & Lyman, P.C.
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Topics for Today’s Discussion
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The legal theory of Equitable Tolling reaches the Supreme Ct.
Recent PRRB Rule Changes
DSH Primer and recent issues impacting DSH reimbursement
The Proposed new DSH Rules and Formulas
Other Appeal Issues
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Supreme Court Decision: Sebelius v.
Auburn Reg Med Ctr.
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Rare Supreme Court Decision on Medicare Reimbursement
Decided January 22, 2013
Equitable Tolling for PRRB DSH Appeals of Baystate/SSI Issue
Equitable Tolling Rarely Applied Doctrine for Exceptional
Circumstances
• Court Ruled 9-0 Against Hospitals
• 180 Day PRRB Filing Deadline From NPR is Effectively Absolute
• Does Not Affect Hall Render Appeals
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PRRB Rule Updates
• New PRRB Rules effective March 1, 2013
• http://www.cms.gov/Regulations-and-Guidance/ReviewBoards/PRRBReview/Downloads/PRRBRules_03_01_2013.pdf
• Now, increasingly harder to file cost report appeals
• More documentation is required with each filing (NPRs, Audit
adjustments, etc.)
• PRRB is strict with jurisdictional rules.
• It is imperative that hospitals protest appeal items at Line 30,
of Wkst E Part A when they file the cost report.
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Background of Current DSH
Appeals: The History of DSH
• Established to Compensate for Rigid Effects of IPPS
• Hospitals Made Case to Congress Which Directed CMS to
Develop DSH Criteria
• Secretary of HHS Resisted Implementation
• Courts: “Historic Hostility to DSH Program.”
• Congress Imposed DSH Formula
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Background of Current DSH
Disputes: The DSH Formula
Medicare Fraction
Medicare SSI Days
Total Medicare Days
Medicaid Fraction
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Medicaid Days
Total Patient Days
• CMS Attempts to Deflate the Numerators and Deflate the Denominators
• Moving Days From Medicare to Medicaid Fraction
• Baystate and the SSI Issue and the Data Match Issue
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= DPP
Background of Current DSH
Disputes: Myriad Issues
• Current DSH Appeals Are Not One Issue; they are Many Issues
• Distinct DSH Issues Must Be Separately Identified and Appealed
to the PRRB
• PRRB Very Particular Regarding Segregating DSH Issues
• Revised NPRs Can Only Reopen for Issue Revised
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Background of DSH Disputes:
Sample Issues
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SSI Data Match/Revised NPRs
Dual Eligible Days (which fraction issue)
Tri-Eligible Days (Eligible for SSI, Medicare and Medicaid)
Medicare Advantage Days
Labor and Delivery Days
Observation Days
100 Bed Threshold Cases
§1115 Waiver Days
Medicaid Eligible Days
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DSH Cases In Court: Medicaid Eligible Days
• Norwalk Hosp Assn. v. Sebelius, Case No. 3:12-cv-01065 (still
pending)
• Hospital filed appeal to seek inclusion of Medicaid eligible
days it found to be subsequently eligible for Medicaid. It had a
DSH adjustment but not for the days it sought to add.
• PRRB said the hospital could add those days to DSH, but the
CMS Administrator reversed. Hospital went to federal court.
• Take-away: Need to protest all potentially Medicaid-eligible
days, even if you’re not sure of eligibility at the time you file
your appeals.
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DSH Cases In Court: Dual Eligible
Days Issue
• Issue of which fraction to count patients dually eligible for
Medicare and Medicaid but for which Medicare benefits
exhausted
• We believe the recent cases are distinct and should not affect
Hall Render “Tri-Eligible” Cases
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DSH Cases In Court: Dual Eligible
Days Issue
There have been a series of Adverse Dual Eligible Court Decisions
this year:
• Memorial Hospital at Gulfport v. Sebelius, 2012 WL 6054763
(5th Cir.)
• Catholic Health Initiatives v. Sebelius, Case No. 12-5092 (D.C.
Cir.)
• Metropolitan Hospital v. Sebelius, Case No. 11-2465 (6th Cir.)
All argue for the inclusion of dual eligible days in the
numerator of the Medicaid fraction.
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DSH Cases In Court: Medicare
Advantage Days Issues
• Favorable D.C. District Court Decision in Allina v. Sebelius,
November 2012
• Well-reasoned decision criticized secretary’s retroactive
rulemaking
• CMS has appealed, briefs being exchanged
• FI letters in NPRs suggest reopening if Allina is ultimately
favorable to providers, but don’t trust it. Continue to
preserve your appeal rights for this issue
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DSH Cases: Where is This Going?
• Different Issues Likely Produce Different Results; Will Win
Some and Lose Some
• Different Issues On Different Timelines; Some Comparatively
Quick, Others Will Take Time
• Continue to Preserve Your Appeal Rights
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The New DSH Rules
• Effective FFY 2014 (October 1, 2013)
• All Variables in the DSH are expressly “estimates,” and “proxy”
measures are allowed.
• Contrasts prior statutorily defined variables and Baystate’s
repudiation of estimates not using the “best available data.”
• Administrative and judicial review generally barred
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New DSH Rules: The Basic Calculation
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Empirically justified DSH Payments
 25% of payments under old DSH formula
 May be subject to judicial/administrative review
• Payment for uncompensated care (only if get EJ-DSH)
 Factor 1: 75% of DSH payments to all hospitals if formula had
not been changed
 Factor 2: 1-% change in uninsured from 2013 (18%)
 Factor 3: Hospitals uncompensated care cost ÷ UCC for all
hospitals nationwide
• First two factors set an uncompensated care pool and third
allocates it among hospitals making this part of the DSH calculation
revenue neutral
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New DSH Rules: 2014 Calculations
• Empirically justified DSH payments
 CMS estimates would have been $12.338 billion with no
rule change
 Estimate $12.338 x .25 = $3.085 paid under old formula
• Uncompensated care pool
 Factor 1: $12.338 billion x .75 = $9.2536 billion
 Factor 2: 0.888 x 9.2535 billion=$8.217 billion
uncompensated care pool
Step 1: (.16-.18)/18=0.112
Step 2: 1-0.112=0.888
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New DSH Rules: Factor 3 Conversation
to Low Compensation Insured Proxies
• Statute says hospitals share of uncompensated care
• Considered using charity care and bad debts data from lines
23 and 29 of S-10
• But CMS says these S-10 elements are new and unreliable
• May use in later years but not in 2014
• In 2014 will use low compensated care proxies from old DSH
formula
 Medicaid Patient Days
 Medicare SSI Days
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Accordingly, CMS Proposes to
Convert Factor 3 From This:
Uncompensated care costs for the hospital
Uncompensated care costs for all DSH hospitals
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As Measured By:
Charity care + bad debt costs for the hospital
Charity care + bad debt costs for all hospitals
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To This:
Medicaid patient days + Medicare SSI days for the hospital
Medicaid patient days + Medicare SSI days for all hospitals
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New DSH Rules: Winner and
Losers by Factor 3 Reformation
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The allocation under Factor 3 is a zero sum game
Losers: Hospitals with high bad debts and high charity care
Winners: Hospitals with more Medicaid patients
Losers: Hospitals in states that refuse to participate in
Medicaid expansion
 Will have less Medicaid, and
 Presumably more charity care
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New DSH Rules: Can They Do
That?
• Statute allows the use of proxies when proxy data is better
– Presumably this is not “best available data”
• Is this the end of administrative and judicial appeals
concerning DSH?
– New DSH is supposed to be revenue neutral, so if one
hospital is somehow able to appeal, in theory it robs DSH
from other hospitals
• “There shall be no administrative or judicial review of ….Any
estimate of the Secretary for purposes of determining the
factors.”
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Other Appeal Issues: Rural Floor
BNA-2
• Same issue most hospitals settled and received payments for
last year
• Made possible by delayed NPRs
• Government delaying negotiations to wrap up “splinter
group” hospitals
• Any settlement will likely be next year
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Other Appeal Issues: Rural Floor
BNA-2 Jurisdictional Issue
• In March, PRRB dismissed non-Hall Render appeal over failure
to include BNA as a protested item
• None of our appeals have been so challenged yet
• Prepared argument that 2008 protest requirement applies
only to claimed costs
• Other law firm has appealed PRRB’s decision
• CMS could have used this argument for many hospitals in
BNA-1 and did not
• Remains viable issue and all eligible hospitals should enroll
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Other Appeal Issues: Pension Costs
• Wage index issue re: CMS retroactive rulemaking for
treatment of pension costs
• Related case (from other firm): PRRB decision in March mostly
did not rule on substantive issue stating it was bound by
Medicare regulations
• Our hearing in June 2012, still no decision; expect similar one
• We believe the record is favorable for Federal Court review
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Other Appeal Issues: Low Volume
Adjustment (LVA)
• The plain language of the statute requires LVA eligibility to be
determined based upon a hospital's discharge volume during
the respective FFY
• Instead, CMS is using old data files.
• With expanded eligibility (up to 1600 discharges and 15 miles
from nearest PPS hospitals), some hospitals may be missing
out on LVA due to CMS’s use of outdated discharge files
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Questions?????
Keith Barber
kbarber@hallrender.com
(317) 977-1428
Liz Elias
eelias@hallrender.com
317-977-1468
1435311
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