CMS Publishes Proposed Rule for Medicare DSH Treatment of Medicare Part C Days

On August 6, 2020, the Centers for Medicare & Medicaid Services (CMS) published the Treatment of Medicare Part C Days in the Calculation of a Hospital’s Medicare Disproportionate Patient Percentage (DPP) proposed rule in the Federal Register.

CMS issued the rule in response to the Azar v. Allina Health Services Supreme Court ruling.

This rule affects Medicare Disproportionate Share Hospital (DSH) reimbursement calculations, and, if finalized, will be effective retroactively for discharges before October 1, 2013.

Proposed Changes

CMS proposes that Medicare Advantage (MA), or Medicare Part C, days be included in the Medicare or supplemental security income (SSI) fraction of the Medicare DSH patient percentage for cost reporting periods that include discharges before October 1, 2013. This is a retroactive rule that will apply to any open cost reports with periods beginning before October 1, 2013.

This proposal follows the same methodology that was prospectively adopted in the 2014 fiscal year (FY) Inpatient Prospective Payment System (IPPS) final rule. It’s also the same methodology that was included in the 2004 IPPS rule, which was later vacated through litigation in the DC Circuit Court of Appeals. The issue was also addressed in a 7 to 1 favorable decision for hospitals by the Supreme Court in June 2019.

CMS cites that they “continue to believe that a patient enrolled in an MA plan remains entitled to benefits under Medicare Part A and should be counted in the Medicare fraction of the DPP, and not the numerator of the Medicaid fraction.” CMS further states that it’s in the public interest to maintain the status quo.

Economic Impact

CMS states there is no economic impact as a result of this proposal because the fiscal years that would be affected have been settled consistent with the proposed policy.

The alternative proposal, as discussed below, could have an economic impact of up to $600 million in hospital Medicare DSH payments according to CMS estimates for cost report periods ending in 2013 alone. This estimate doesn’t include the entire relevant time period.

Alternative to Proposed Rule

CMS has also considered an alternative to the proposed rule: removing the days from the Medicare or SSI fraction and including the SSI numerator days in the Medicaid fraction. CMS has computed the impact of that alternative, as noted above.

However, hospitals should carefully evaluate CMS’s computed impact of that alternative as the assumption made is inconsistent with how the so-called dual eligible days would be treated in the calculation.

Considerations for Hospitals

Medicare DSH Treatment of Medicare Part C Days has been the subject of litigation for over a decade, and hospitals have prevailed numerous times in court. This proposed rule would negate those victories.

Hospitals should consider the following:

  • The actual impact the proposed rule would have on payments to which hospitals are entitled under court rulings
  • What’s in the public interest

Hospitals are encouraged to actively engage in the rulemaking process through the submission of comments.

Public Comments

Public comments can be submitted until 5:00 p.m. EST on October 5, 2020. When commenting, reference CMS-1739-P. For options to submit your comments, refer to the proposed rule.

We’re Here to Help

For more information about the proposed rule and the implications for your hospital, contact your Moss Adams professional.

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