The More Things Change
the Less We Get Paid
Medicare Hospital Reimbursement Update
2013 Spring Conference
May 17, 2013
Medicare Hospital Reimbursement Update
• Recent and potential future legislative actions
• FY 2014 IPPS Proposed Rule:
– Medicare DSH Revisions
– Everything else
2
Recent and Potential Future
Legislative Actions
3
Medicare Hospital Reimbursement Update
• American Taxpayer Relief Act of 2012 (aka the Fiscal Cliff
deal)
– “Doc fix” to the Medicare physician fee schedule until 1/1/14
– Hospitals helped pay for the “doc fix”
• CMS to reduce inpatient PPS payments by a total of $11+
billion during FY 2014 - 2017
– Intended to recoup alleged overpayments related to MSDRGs from FY 2008-2013
• Additional $4+ billion in cuts to Medicaid DSH on top of cuts
already coming from PPACA
4
Medicare Hospital Reimbursement Update
• ATRA (cont.)
– Some relief for certain rural hospitals
• Hospital low-volume payment adjustment provisions
extended one year through 9/30/13
• Medicare Dependent Hospital (MDH) status extended
through 9/30/13
– Certain previous MDHs must re-apply
» Hospitals that elected Sole Community Hospital
(SCH) status
» Hospitals that gave up rural status
– All other previous MDHs automatically reinstated
retroactive to 10/1/12
5
Medicare Hospital Reimbursement Update
• ATRA (cont.)
– Some relief for certain rural hospitals
• MDH and low-volume payments retroactive to 10/1/12
– Contractors were able to begin reprocessing on 4/1/13
– CMS has instructed contractors to have all retroactive
claims reprocessed by 6/30/13
6
Medicare Hospital Reimbursement Update
• ATRA (cont.)
– Unfortunately OPPS hold-harmless transitional outpatient
payments (TOPS) were not extended
• Expired 12/31/12 for rural hospitals with < 100 beds
• Expired 2/29/12 for Sole Community Hospitals (SCH)
7
Medicare Hospital Reimbursement Update
• Sequestration
– Officially began 3/1/13, but not applicable to Medicare until 4/1/13
– 2% cuts to Medicare
• Applied to only the remaining Medicare payment after
coinsurance, deductibles, MSP payments
– Example $100 total payment, including $20 coinsurance
2% x ($100-$20) = $1.60 cut, not $2.00
• Being applied to interim pass-through payments
• Medicare EHR incentive payments are subject to 2% cut:
This 2% reduction will be applied to any Medicare EHR
incentive payment for a reporting period that ends on or after
April 1, 2013. If the final day of the reporting period occurs
before April 1, 2013, those incentive payments will not be
subject to the reduction.
8
Medicare Hospital Reimbursement Update
• Sequestration (cont.)
– Projected Medicare cuts of ~$10 billion for remainder of 2013,
with close to half specifically related to hospitals
– Sequestration less painful compared to cuts Congress might
implement in a spending reduction bill?
• $400+ billion over 10 years?
• More Medicare bad debt reductions?
• GME payment reductions?
• Reduction or elimination of special designations such as
CAH, MDH, SCH, etc?
9
Medicare Hospital Reimbursement Update
• Future of MDH
– In late April Senators Schumer (D-NY) and Grassley (R-IA) and
Representatives Reed (R-NY) and Welch (D-VT) introduced
legislation to extend MDH through September 30, 2014
• Further action may not come for several months depending
on other legislation
10
Medicare Hospital Reimbursement Update
• PPACA Medicaid DSH Reductions
– PPACA “requires aggregate reductions to state Medicaid
Disproportionate Share Hospital (DSH) allotments annually from
fiscal year (FY) 2014 through FY 2020.”
– On May 13 CMS issued proposed rule to implement $1.1 billion
in cuts for FY 14 and 15
– Proposed cut for WV – 4.34%
– Proposed overall cut for “Regular DSH States” – 4.42%
• 33 states including WV, plus DC
– Proposed overall cut to “Low DSH States” – 1.20%
• 17 states
– National average – 4.28%
11
FY 2014 IPPS Proposed
Rule – Medicare DSH
Revisions
12
Medicare DSH Background
• Enacted by statute in 1986.
• Purpose is to provide additional reimbursement for
hospitals that serve a disproportionate share of low
income patients.
• Low income patients tend to have more health issues
and do less health maintenance and thus increase the
amount of resources required to serve their health
needs.
• Medicare DSH reimbursement has increased
significantly over the last ten years.
13
Medicare DSH Reimbursement
Total federal spending: ($ billions)
•
•
•
•
•
•
•
FY 2000
FY 2001
FY 2002
FY 2003
FY 2004
FY 2005
FY 2006
5.18
5.68
6.63
7.10
7.82
9.00
9.18
•
•
•
•
•
•
FY 2007
FY 2008
FY 2009
FY 2010
FY 2011
FY 2012
9.40
10.12
10.42
10.83
11.59
11.93
Source: CMS, Office of the Actuary
14
Medicare DSH Reimbursement
Percentage of Inpatient Hospitals that Qualify for
Medicare DSH
•
•
•
•
•
FY 2003:
FY 2004:
FY 2005:
FY 2006:
FY 2007:
63%
67%
71%
73%
75%
•
•
•
•
•
FY 2008:
FY 2009:
FY 2010:
FY 2011:
FY 2012:
75%
77%
76%
78%
78%
Source: CMS, Office of the Actuary
15
Medicare DSH Reimbursement
The DSH add-on is based on the sum of two fractions:
(1) Medicare / SSI Fraction
Days for patients entitled to Medicare Part A and entitled
to SSI benefits
Divided By
Days for patients entitled to Medicare Part A
(2) Medicaid Fraction:
Days for patients eligible for Medicaid and not entitled to
Medicare Part A
Divided By
Days for patients in acute care areas (including nursery)
16
Medicare DSH “New” Methodology
• Section 3133 of PPACA requires significant revisions to
Medicare DSH
• Effective FY 2014 (beginning October 1, 2013) – only a
few months away!
• FY 14 IPPS proposed rule published on April 26, 2013
was the first guidance provided by CMS.
17
Medicare DSH “New” Methodology
• The “new” Medicare DSH will have two components:
– Part one will be 25% of the amount determined using the current
payment calculation.
– Part two will be an allocation of a pool of funds:
• The pool will be based on the remaining 75%
• Each hospital’s share of the pool will be based on the
hospital’s uncompensated care as a percentage of total
uncompensated care for all hospitals sharing the pool.
18
Medicare DSH Proposed Rule FFY 2014
• UCC portion of funds to be allocated based on 75% of
what would have been paid for DSH for FFY 2014
under old rule less estimated reduction in uninsured
less statutory reduction.
• Source used for estimated DSH payments for 2014
under old rule – Office of Actuary.
19
Medicare DSH Proposed Rule FFY 2014
• DSH Payment under old rule = $12.34B, 75% = $9.25B
• Uninsured percentages based on CBO estimates.
• Uninsured for 2013 published in 2010 = 18%, estimate
for 2014 published in Feb 2013 = 16%.
• 1-[(.16-.18)/.18] = 1 - .111 = .889 less statutory reduction
.001 = .888.
• $9.2535B x .888 = $8.217B
20
Medicare DSH Proposed Rule FFY 2014
• Total DSH funds for allocation of UCC = $8.217B
• How will these funds be allocated?
– Months of speculation in the industry
– Most believed the source would be cost report Worksheet S-10
• CMS proposes use of a proxy to estimate UCC Medicaid days plus Medicare SSI days
21
Medicare DSH Proposed Rule FFY 2014
• Why was S-10 not used as the source? Proposed rule
discusses in some length
– S-10 is “a new data source” and has been “used for specific
payment purposes only in relatively restricted ways” (EHR)
– S-10 has not been subject to audit other than related to EHR
– CMS believes that when information requested drives payment,
it is more likely to be accurate
– CMS uses wage index as example that information must be
audited to be used for payment purposes
– Hospitals expressed concern that they have not had enough
time to learn how to submit accurate and consistent data on
Worksheet S-10
22
Medicare DSH Proposed Rule FFY 2014
• Why was S-10 not used as the source? (cont.)
– S-10 instructions still require clarification to ensure consistency.
– May propose to use S-10 in the future “once hospitals are
submitting accurate and consistent data”
– Medicaid days have been the driver of the DSH payment since
the inception of the DSH regulation. They have also been
subject to audit
– Many providers contacted CMS to voice concerns over issues
with using S-10
– CMS requests comments on the proposed rule related to S-10
23
Medicare DSH Proposed Rule FFY 2014
• Source of UCC portion
– Same rules apply for counting Medicaid days
– Source for Medicaid days – “most recent available filed cost
report”
• Appears to be based on cost report period beginning in FFY
2011 for most providers
– Source for Medicare SSI days – “most recent available SSI
ratios”
• Currently the most recent SSI is 2010 but CMS expects to
update to 2011 in final rule
24
Medicare DSH Proposed Rule FFY 2014
• Table published that includes Medicaid and Medicare
SSI days and hospital percentages for allocation
– Available online at http://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/AcuteInpatientPPS/dsh.html
– If amended cost report was processed by MAC, those appear to
be included. If additional Medicaid days submitted for audit,
those are not included in table because final settlement is not
complete
25
Medicare DSH Proposed Rule FFY 2014
• Hospitals have 60 days from Proposed rule to notify
CMS of change in subsection (d) status
• No change can be made to Medicaid days
• ACA prescribes that the estimates used by the Secretary
are not subject to judicial review
– Estimates include the factors used as well as the time period
used
26
Medicare DSH Proposed Rule FFY 2014
• What will be the timing of payment determination?
– Prospectively paid on federal fiscal year regardless of hospital
year
• Paid on an interim rate and subject to cost report
settlement?
– No cost settlement except potentially for SCH
• Will all hospitals be allowed to share in the 75% pool or
just those also eligible for the 25% payment?
– Only those eligible for any DSH payment, providers still must
reach the 15% threshold to receive any DSH
27
Medicare DSH Proposed Rule FFY 2014
• How will the 12% cap currently applicable for many rural
and certain urban hospitals be applied?
– Cap is not addressed in the proposed rule at all
– Calculated payment using CMS table results in total DSH
payment above 12% for certain capped hospitals we have
assessed
28
Medicare DSH Proposed Rule FFY 2014
• SCH – whether or not they will participate in the interim
DSH pool will be estimated
– If the estimate is incorrect, adjustment will be made at cost report
settlement
– SCH reimbursement – Greater of HSP or Federal + 25% DSH
portion - the 75% is not to be included in comparison.
– SCHs should check their status on the table
29
Medicare DSH Proposed Rule FFY 2014
• No redistribution per proposed rule! If SCH received
allocation and should not have, no retroactive change to
other hospital percentages
• Reason provided in proposed rule – this is “inherent use
of estimates”. (CMS) “does not know of any reason to
believe there will be a bias toward systematic
overpayment or underpayment.”
30
UCC Percentage – Top 15 Hospitals
FY 2014 IPPS Proposed Rule: Implementation of Section 3133 of the Affordable Care Act
- Medicare DSH - Supplemental Data
PROV
NAME
Proposed
Medicaid
Days
Proposed
Proposed Insured Low
Medicare Income
Proposed
SSI Days
Days
Factor 3
Projected to
Receive DSH
for FY 2014
330059 MONTEFIORE MEDICAL CENTER
185096
41778
226874 0.632298%
Y
100022 JACKSON HEALTH SYSTEM
195957
22070
218027 0.607642%
Y
330101 NEW YORK-PRESBYTERIAN HOSPITAL
168017
39537
207554 0.578453%
Y
100006 ORLANDO REGIONAL HEALTHCARE
138508
11874
150382 0.419115%
Y
450015 PARKLAND HEALTH AND HOSPITAL SYSTEM
137560
4993
142553 0.397295%
Y
150056 CLARIAN HEALTH PARTNERS INC D/B/A METHODIST IU RIL
127778
9467
137245 0.382502%
Y
100007 FLORIDA HOSPITAL
114674
21787
136461 0.380317%
Y
180088 NORTON HOSPITALS, INC
107995
10195
118190 0.329396%
Y
330169 BETH ISRAEL MEDICAL CENTER
87384
30768
118152 0.329290%
Y
450388 METHODIST HOSPITAL
98256
19482
117738 0.328136%
Y
330024 MOUNT SINAI HOSPITAL
88121
25543
113664 0.316782%
Y
330194 MAIMONIDES MEDICAL CENTER
82170
28792
110962 0.309251%
Y
440049 METHODIST HEALTHCARE MEMPHIS HOSPITALS
91065
17590
108655 0.302822%
Y
330009 BRONX-LEBANON HOSPITAL CENTER
92214
16438
108652 0.302813%
Y
450289 HARRIS COUNTY HOSPITAL DISTRICT
105922
2720
108642 0.302785%
Y
31
Case Study
• Generally, winners appear to be those hospitals with
high Medicaid + low Medicare.
• Generally, losers appear to be those hospitals with low
Medicaid + high Medicare.
32
FY 2014 IPPS Proposed Rule: Implementation of Section 3133 of the Affordable Care Act- Medicare DSH- Supplemental Data
PROV
NAME
Proposed
Proposed
Proposed
Medicare SSI Insured Low
Medicaid Days
Days
Income Days
100022 JACKSON HEALTH SYSTEM
195957
22070
2011 Medicare DSH Amount
218027
Proposed
Factor 3
Projected to Pool amount
Receive DSH per Proposed
for FY 2014
Rule
0.607642%
Y
49,929,907
41,320,844
x 25%
10,330,211
UCC portion of DSH based on CMS table
49,929,907
Total DSH Estimate for 2014
60,260,118
Total DSH for 2011
41,320,844
Increase
18,939,274
Days Utilization – 2011 Cost Report
Medicare
Medicaid
All Others
22%
52%
26%
100%
33
FY 2014 IPPS Proposed Rule: Implementation of Section 3133 of the Affordable Care Act- Medicare DSH- Supplemental Data
PROV
NAME
Proposed
Proposed
Medicare SSI
Medicaid Days
Days
140124 JOHN H STROGER HOSPITAL
51400
Proposed
Insured Low
Income Days
1756
2011 Medicare DSH Amount
Proposed
Factor 3
53156
Projected to
Receive DSH
for FY 2014
Pool amount
per Proposed
Rule
Y
12,173,144
0.148146%
5,877,328
x 25%
1,469,332
UCC portion of DSH based on CMS table
12,173,144
Total DSH Estimate for 2014
13,642,476
Total DSH for 2011
5,877,328
Increase
7,765,148
Days Utilization – 2011 Cost Report
Medicare
Medicaid
All Others
11%
44%
45%
100%
34
FY 2014 IPPS Proposed Rule: Implementation of Section 3133 of the Affordable Care Act- Medicare DSH- Supplemental Data
PROV
Proposed
Proposed
Medicare SSI
Medicaid Days
Days
NAME
010092 D C H REGIONAL MEDICAL CENTER
28516
Proposed
Insured Low
Income Days
8465
2011 Medicare DSH Amount
Proposed
Factor 3
36981
Projected to
Receive DSH
for FY 2014
.103066%
Y
Pool amount
per Proposed
Rule
8,468,941
14,555,978
x 25%
3,638,995
UCC portion of DSH based on CMS table
8,468,941
Total DSH Estimate for 2014
12,107,936
Total DSH for 2011
14,555,978
Decrease
(2,448,042)
Days Utilization – 2011 Cost Report
Medicare
Medicaid
All Others
63%
22%
15%
100%
35
Medicare DSH “New” Methodology
Recommendations
• Verify numbers used in Proposed Rule Table. May be
worth commenting on if there are systematic problems.
• Verify status of qualifying for DSH in Table.
• Include all appropriate Medicaid days in future filed cost
reports. Depending on timing, amendments may not be
included in the allocation.
• Example - we found $800,000 understatement in
allocation because provider did not do Medicaid analysis
before cost report was filed.
36
Medicare DSH “New” Methodology
Recommendations
• Comment on the proposed rule.
• Comments due to CMS by June 25, 2013.
• Watch for final rule which should be published in August.
Final rule will include comments from proposed rule and
CMS responses.
37
FY 2014 IPPS Proposed
Rule – Everything Else
38
Medicare Hospital Reimbursement Update
• Inpatient vs Observation
– CMS offers new guidance in an effort to clarify:
Under our proposal, Medicare’s external review contractors would
presume that hospital inpatient admissions are reasonable and
necessary for beneficiaries who require more than 1 Medicare
utilization day (defined by encounters crossing 2 “midnights”) in the
hospital receiving medically necessary services. If a hospital is
found to be abusing this 2-midnight presumption for nonmedically
necessary inpatient hospital admissions and payment (in other
words, the hospital is systematically delaying the provision of care
to surpass the 2-midnight timeframe), CMS review contractors
would disregard the 2-midnight presumption when conducting
review of that hospital.
39
Medicare Hospital Reimbursement Update
• Inpatient vs Observation
– CMS offers new guidance in an effort to clarify (cont.):
Similarly, we would presume that hospital services spanning less
than 2 midnights should have been provided on an outpatient
basis, unless there is clear documentation in the medical record
supporting the physician’s order and expectation that the
beneficiary would require care spanning more than 2 midnights or
the beneficiary is receiving a service or procedure designated by
CMS as inpatient-only.
40
Medicare Hospital Reimbursement Update
• Inpatient vs Observation
– CMS offers new guidance in an effort to clarify (cont.):
• Extensive additional discussions on admission and medical
review criteria for hospitals to consider
• Current guidance remains in effect until if/when this new
policy is finalized
• CMS has concluded this new guidance will result in an
increase in overall inpatient activity and has proposed a .2%
decrease in the FY 14 standardized amounts (both operating
and capital) to offset
41
Medicare Hospital Reimbursement Update
• CMS implementing additional CCRs for developing MSDRG relative weights
– In recent years hospitals have been required to break out certain
items separately on cost report:
• Implantable devices
• MRI
• CT scan
• Cardiac cath
– CMS believed this would result in more accurate relative weights
– Proposal to go from 15 to 19 CCRs in FY 14 to break each of
these out separately
42
43
44
45
Medicare Hospital Reimbursement Update
Proposed payment update:
Market Basket Update
2.5%
Market Basket Adjustment (PPACA)
-0.3%
Productivity Adjustment (PPACA)
Documentation and Coding Effect (ATRA)
Admission and Medical Review Criteria
-0.4%
-0.8%
-0.2%
0.8%
46
Medicare Hospital Reimbursement Update
National Adjusted
Operating
Standardized
Amount
(Full Update)
FY 2013
Final
FY 2014
Proposed
Change
$5,348.76
$5,376.04
$27.28
47
Medicare Hospital Reimbursement Update
Capital Standard Federal
Payment Rate
FY 2013
Final
FY 2014
Proposed
Change
$421.42
$425.49
$4.07
48
Medicare Hospital Reimbursement Update
• FY 2014 proposed wage index is based on wage
data from cost reporting periods beginning in
Federal Fiscal Year 2010 (3,427 hospitals included)
• Wage index also reflects Occupational Mix Survey
for calendar 2010 submitted in 2011
• FY 14 proposed national average hourly wage
(adjusted for occupational mix) = $38.2094 (2.0%
increase from FY 13 final of $37.4608)
49
Medicare Hospital Reimbursement Update
FY 2014 proposed wage index
Highest:
Santa Cruz-Watsonville, CA
1.7180
Lowest:
Rural Alabama
0.7123
50
FY 2014 Proposed Wage Index – West Virginia
FY 2013 Final
FY 2014 Proposed
Change
Washington-Arlington-Alexandria, DC-VA
1.0453
1.0345
-1.0%
Hagerstown-Martinsburg, MD-WV
0.9440
0.9276
-1.7%
Winchester, VA-WV
0.9347
0.9153
-2.1%
Huntington-Ashland, WV-KY-OH
0.8492
0.8699
2.4%
Morgantown, WV
0.8259
0.8230
-0.4%
Charleston, WV
0.8083
0.8168
1.1%
Cumberland, MD-WV
0.8763
0.8010
-8.6%
Parkersburg-Marietta-Vienna, WV-OH
0.7488
0.7555
0.9%
Steubenville-Weirton, OH-WV
0.7523
0.7445
-1.0%
Wheeling, WV-OH
0.7384
0.7445
0.8%
Rural WV
0.7384
0.7445
0.8%
51
Medicare Hospital Reimbursement Update
• Occupational Mix Survey
– FY 14 wage index adjusted by Occ Mix Surveys submitted in
2011
• 91.7% response rate – CMS continues to threaten to punish
providers that do not comply
• Largest impacts on wage index from Occ Mix Survey:
– St. Cloud, MN – 6.5% increase
– Olympia, WA – 5.3% decrease
– Next survey will be based on calendar 2013, due 7/1/14, and
applied to FY 16-18 wage index
52
Medicare Hospital Reimbursement Update
• Delay in CBSA Refinement
– Office of Management and Budget (OMB) released CBSA
refinements on February 28, 2013
• Updated to reflect 2010 Census
• Significant changes
– New CBSAs added
» Example – Beckley, WV (Fayette and Raleigh counties)
– Some CBSAs merged
– Counties switched or removed from several urban CBSAs
(conversely may affect state rural wage index)
» Example – Putnam County moving from Charleston to
Huntington CBSA
– Changes to certain Combined Statistic Areas – can be
critical factor for urban geo reclass opportunities in certain
circumstances
53
Medicare Hospital Reimbursement Update
• Delay in CBSA Refinement (cont.)
• CMS says it does not have time to implement for FY 14 – will
delay until FY 15
– Providers negatively affected should consider submitting
comment
54
Medicare Hospital Reimbursement Update
• Geographic Reclassifications
– Hospitals already approved for reclass for FY 2014 must submit
request by if they want to withdraw their reclass for FY 2014
within 45 days of proposed rule being published in Federal
Register (FY 14 deadline June 24)
– Hospitals wishing to submit an application to reclassify for FYs
15-17 must submit application by 9/3/13
55
Medicare Hospital Reimbursement Update
• Graduate Medical Education
– IME: no significant changes
– GME: proposal to include Labor & Delivery days in calculation
• Result will be decreased GME payments
– Effective 10/1/13, teaching hospitals will no longer be able to
count resident time spent at a CAH
• CAHs can still be reimbursed at 101% of allowable cost for
their own residency program
56
Medicare Hospital Reimbursement Update
• Hospital Value Based Purchasing
– Initial payment reduction increases to 1.25% in FY 14
– Measures and domain weights for FY 14 previously finalized by
CMS
– Proposes three new measures and removal of three other
measures for FY 16
57
Medicare Hospital Reimbursement Update
• Hospital Readmissions Reduction Program
– Maximum penalty increases to 2% in FY 14
– Proposal to expand the number of procedures exempt from being
considered a readmission
– Proposal to add two measures for FY 15:
• Patients admitted for exacerbation of chronic obstructive
pulmonary disease (COPD)
• Patients admitted for elective total hip or total knee
arthroplasty (THA/TKA)
58
Medicare Hospital Reimbursement Update
• Hospital Acquired Conditions
– New in FY 15
– Hospitals in the lowest performing quartile will have 1% reduction
in inpatient payments
– Calculation based on two domains with equal weight
• First domain to include six Agency for Healthcare Research
and Quality (AHRQ) patient safety indicators
• Second domain to include two Centers for Disease Control
and Prevention (CDC) infection measures for FY 2015
– Additional calculation factors to include patient's age, gender,
and comorbidities
59
Contact Information
David Hall, CPA
Senior Manager
Dixon Hughes Goodman LLP
336-714-8147
david.hall@dhgllp.com
60