Medicare Hospital IPPS FFY 2022 Final Rule: 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” method1 – including data from the PHE – in the determination of “Factor 1”. Specifically, the $103m update2 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).
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.
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.