DSH and the Life of Pie

Picture your hospital’s Medicare DSH dollars as a pie. Starting October 1, 2013, one quarter of the pie will be sliced up based on the traditional DSH formula. As long as a hospital meets the minimum DSH threshold (now referred to as the empirical formula) for the traditional calculation, it can receive a piece of the larger DSH pie comprised of the uncompensated care component. However, the first quarter of the pie is fresh and current while the larger piece is two and sometimes three years old.

Starting in FFY 2014 hospitals will receive 25% of their calculated empirical DSH payments, as long as they continue to qualify using the traditional thresholds. The larger uncompensated care pool will be awarded only to those hospitals that qualify for traditional DSH in that current year. However, payments from the pool are based on Medicaid and Medicare SSI volumes reported in a prior year and are not subject to change or appeal.

For example, for January 31 through August 31 hospital year ends, the amount a hospital will receive in uncompensated care DSH dollars in FFY 2014 has been determined based on as-filed Medicare cost reports ending in 2012. For September 30 through December 31 year-end hospitals, the FFY uncompensated formula payment was calculated based on filed 2011 cost report data.

The uncompensated care DSH pool is, for the most part, a prospective fixed dollar amount for each qualifying hospital. CMS used the “most recent” cost reporting data available from the HCRIS database to calculate each hospital’s ratio. For FFY 2014 that was data reported as of March 2013.

 What Does this Mean?

In an unusual move, CMS has portioned out 75% of Medicare DSH payments ($9.2B) based on unaudited data. While hospitals are well-experienced in compiling Medicaid eligible days, providers often times have several chances to finalize their logs to ensure they receive full reimbursement. For at least the short term, as CMS continues to use Medicaid days as the proxy for uncompensated care, providers need to hone their abilities to identify Medicaid eligible days at the time they file their cost reports or shortly thereafter.

If you traditionally file your Medicare cost report using a conservative number for Medicaid days only to later increase it through a more in-depth analysis and to include subsequent (retroactive) eligibility results, you will not receive your full portion of the 75% of the dollars that are due your facility, perhaps ever. Under such constraints, a hospital would benefit from reporting all the Medicaid days it can reasonably document, or expect to document, at the time the cost report is filed. June 30 and August 31 year end hospitals will have very little time to amend a cost report to correct Medicaid days. September and December year end hospitals theoretically have a longer opportunity to amend cost reports, but whether such an amendment for any fiscal year end will be incorporated into the next DSH uncompensated care pool calculation by CMS remains a question.

Strategies to Consider:

As CMS rolls out these quasi-fixed prospective payment policies, here are some strategies to consider:

  • Analyze the difference between your as-filed and audited Medicaid eligible days for the past several years to determine a trend factor for retroactive eligibility. Incorporate this factor in your next filed Medicare cost report so that your uncompensated care portion of the DSH calculation does not leave you short-changed.
  •  If you are currently capped for the empirical DSH formula at 12%, please note the uncompensated care portion of the DSH is not capped. Therefore, hospitals that do not traditionally spend a lot of time identifying Medicaid days should rethink that strategy and identify all Medicaid days as their books and records will support.
  • For California hospitals that must wait for thirteen months to obtain verifiable eligibility, perform the eligibility verification tasks sooner, even if it is not the entire population in the cost reporting year to amend what you can before CMS locks in the uncompensated formula for the next year.
  • Continue to pay attention to the empirical DSH formula by obtaining DSH eligibility and amending cost reports once again, if necessary, prior to Medicare audit.
  •  If you are currently not eligible for DSH, make sure you still file a cost report with all of the eligible days you are entitled to since an updated SSI percent may change your status. CMS prospectively computes an uncompensated care component for all hospitals, even those not currently qualified to receive DSH. If a hospital does qualify, it will be paid using the estimated factor and amount based on Medicaid days from previously filed cost reports.
  •  All hospitals should now report their Medicaid days on Worksheet S-2 (as well as S-3). This includes hospitals that may not qualify for empirical DSH. CMS has issued a Transmittal allowing non-qualifying hospitals to report days on S-2.

California Batch Process Eligibility Verification Dilemma

California has a separate batch re-verification process specifically designed to address the Medicaid eligibility validation procedures for Medicare DSH reimbursement. The California DSH Eligibility Re-Verification Process was initiated to provide better support for Medicare disproportionate share hospitals and their MACs. Further, re-verification of disproportionate share patient’s eligibility status was needed by hospitals to address CMS audits and lawsuits. A stated benefit to the re-verification process was that it allowed access to data no longer available on the Automated Eligibility Verification System (AVES), Point of Service (POS) network or through 270/271 submissions. However this batch process is only available 13 months after the patients’ service dates.

Under the DHCS re-verification and Matching Program, “the valid inquiry window precedes the standard 13-month claims adjudication time period (current and prior 12 months). Eligibility inquiries for dates of service within the last 13 months should be processed via the AEVS or POS network and will not be processed by this program.” Source: Department of Health Care Services Disproportionate Share Hospital Eligibility Re-Verification Process User Manual

Further the AVES, POS and 270/271 contemporaneous eligibility verification systems available to California hospitals do not have as robust a patient matching database. The 13-month re-verification eligibility results are much more comprehensive, but for purposes of the CMS uncompensated Care DSH calculation it is not available to test a full fiscal year by the time the Medicare cost report is filed. For instance, you could not search name or date of birth using the AVES or the POS process. This is critical because in many cases, the hospital does not have Medi-Cal IDs to input in the AVES or POS inquiries. This is often true in cases where Medi-Cal coverage is pending or is secondary or tertiary to a commercial payer.

The 13-month re-verification process allows for a batch process that screens entire hospital inpatient volumes using multiple identifiers to find Medi-Cal eligible patient days. The AVES and POS verification process are relatively slow and are not set up to verify the volume of patients that would produce the equivalent screening from the re-verification process. Neighboring states such as Nevada and Arizona allow for contemporaneous batch processing of eligibility results, even based on a patient’s name and date of birth.

It is a compelling argument that California, with twice as many Medicaid enrollees (11 million) as any other State, should have a more efficient, contemporaneous process to evaluate Medicaid eligibility. It was opined at the time that the DHCS 13-month re-verification process was established that the delay was put in to thwart hospitals from using the system to increase the claims billed to Medi-Cal. However, to use the re-verification system, submitters must agree to use recipient eligibility information only “for the purpose of the Hospital’s claiming the Medicare DSH payment and this information shall not in itself give rise to a payment obligation for DHCS.”

Perhaps it is time for California hospitals to lobby the DHCS to modify the time period to access batch eligibility data on a more current basis.

What does the Uncompensated Care DSH Have to do With S-10?

We are concerned that many hospitals have not adequately focused on the completion of the cost report Worksheet S-10. Providers should be submitting accurate information and analyzing their underlying policies, procedures and data to ensure it all meets the intended objectives. If and when CMS uses S-10 uncompensated care costs, hospitals should be ready so that they only need to make minor adjustments quickly, if necessary. Do not put significant future DSH dollars at risk should CMS migrate from the current Medicaid and SSI day calculation to reported uncompensated care cost.

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