A Substantive Reimbursement Requirement for Medicare DSH Calculations

According to the Centers for Medicare & Medicaid Services’ (CMS) 2016 Outpatient Prospective Payment System (OPPS) Final Rule, for hospitals to potentially qualify for Medicare reimbursement related to any given issue, they must first make a cost report claim for the reimbursement.

Alternatively, if the provider feels the reimbursement associated with a specific item doesn’t adhere to current Medicare policy, they must file the cost report under protest. This regulation applies to cost reports starting on and after January 1, 2016.

Additionally, CMS has instructed its Medicare Administrative Contractors (MACs) to accept one amended cost report for the purpose of reporting disproportionate share hospital (DSH) days within 12 months of the initial cost report filing.

While the regulations aren’t new, many organizations struggle to complete them correctly. Certain conditions apply, as discussed below, but hospitals have an avenue to help verify days that couldn’t have been identified at initial cost report filing will be addressed at a later date.

Background

Introduced in the fiscal year (FY) 2015 Inpatient Prospective Payment System (IPPS) Proposed Rule, and then adopted in the 2016 OPPS Final Rule, CMS incorporated a concept into the regulations that was initially introduced by the Provider Reimbursement Review Board (PRRB) Rules in 2008.   

The PRRB, from a jurisdiction perspective, had been requiring this same treatment for cost reports going back to those starting on and after December 1, 2008. Then, the 2016 OPPS rule provided a shift from board rules surrounding jurisdiction over an issue to regulations governing cost report payment to highlight the importance of this matter.

CMS cited several reasons surrounding this adoption, including advancing the “interests of administrative finality and efficiency,” claiming that MACs would have “an opportunity to correct any misconceptions that the provider may have had” concerning items filed under protest. In addition, CMS asserted this adoption would “enhance CMS’ ability to accurately estimate the program’s potential liabilities.”

Medicare DSH and Medicaid Eligible Days

One item of good news is CMS has clearly acknowledged one area where it may not be possible for providers to claim the appropriate cost at the time of the initial cost report filing.

Specifically, they noted that the documentation of all Medicaid eligible patients claimed in the Medicare Disproportionate Share Hospital (DSH) calculation may not be available due to various items outside of the provider’s control. In these instances, CMS states providers will continue to have the opportunity to submit amended cost reports, and the MACs will be required to accept them. 

Many hospitals have material changes when retrospectively reviewing Medicaid-eligible days. The additional Medicaid eligible days that can’t be documented at the time of filing averages 6.6%.

Timeline to Amend

CMS has instructed MACs to accept “one amended cost report submitted within a 12-month period after the hospital’s cost report due date, solely for the specific purpose of revising Medicaid eligible patient days in order to calculate DSH payments after a hospital receives updated Medicaid eligible patient days from the state.” See page 266 of the 2016 OPPS rule for details.

Parameters for Amending

Echoing the Medicare DSH appeal requirements set forth in PRRB Alert 10, CMS has placed strict parameters around amending a cost report for additional Medicaid eligible days, and it’s not as easy as it may sound. Specifically, the provider must do all of the following:

  • Identify the number of additional Medicaid eligible days being sought in the amendment
  • Describe the process used to identify the days claimed in the initial filing
  • Explain why the additional Medicaid days couldn’t be verified at the time of the initial filing

Challenges Hospitals Face in Meeting the Parameters

These requirements pose significant challenges for providers; they require in-depth record keeping and processes to support a hospital’s claim for additional Medicaid eligible days that couldn’t have been claimed in the initial cost report filing. Many healthcare providers aren’t prepared to provide that level of detail, the eligibility verification process descriptions, or an explanation of why Medicaid days couldn’t be claimed at the time of the initial cost report filing. 

For hospitals that didn’t include a state match when preparing the initial Medicare DSH data—or those that use multiple processes, such as utilizing an internal process for the initial cost report filing and then a subsequent review by the hospital or an outside firm—proving the additional days found on a secondary run that couldn’t have been claimed in the initial filing is challenging.

Additionally, the hospital will have to defend its process for completeness and thoroughness and prove it captured all the available days at initial cost report filing. This may prove difficult if there are different processes or different players involved in the two looks at DSH-eligible days.

Consequences

It’s expected that MACs will strictly enforce these parameters, and it’s clear that simply filing an amended cost report with additional Medicaid-eligible days without evidence of a robust Medicare DSH reimbursement process could be subject to rejection by the MAC. 

To learn more, see our Medicare DSH checklist.

Considerations for Hospitals

With this substantive reimbursement requirement firmly in place, hospitals must have a consistent process for claiming costs for Medicare DSH to fully address the filing of all allowable costs in the initial cost report and protest items. This process will also be necessary when filing timely cost report amendments.

As a result of the requirements, hospitals should:

  • Evaluate if in-house or vendor’s Medicare DSH processes meet these requirements
  • Verify the reimbursement team has the necessary systems, resources, and protocols in place

It’s also recommended hospitals put their best efforts forward when compiling initial cost report patient detail to help ensure it’s complete and compliant.

Further, hospitals should verify their staff or vendor is monitoring the 12-month deadline. The 12-month window generally ends around the next filing of the cost report, therefore it’s often a busy time, and this deadline could get missed.

The absence of a cohesive, consistent process is likely to result in hurdles and obstacles on the way to the successful settlement of amended cost report filings, or unfortunately, the denial of the amendment. If providers don’t adhere to the timeline and requirements set forth in this regulation, initial payment determinations, an amended cost report, and any additional DSH reimbursement could fall to the wayside.  

We’re Here to Help

If you’re concerned about whether your Medicare DSH process will pass muster when compared to this regulation set forth in the 2016 OPPS Final Rule, contact your Moss Adams professional to discuss possible solutions.