Hospitals Should Evaluate How CMS Ruling 1498-R3 Affects Medicare SSI Percentages

A new ruling from the Centers for Medicare & Medicaid Services (CMS) changes the way a provider’s Medicare fraction is calculated for periods prior to October 1, 2004 —it’s now solely based on total days, without the option of covered days.

CMS Ruling 1498-R3, issued March 4, 2024, revokes Ruling 1498-R2 and applies to each properly pending claim in a disproportionate share hospital (DSH) appeal or open cost report, including those involving patient discharges pre-dating October 1, 2004.

Inpatient hospitals will need to evaluate open and pending appeals prior to October 1, 2004, and look at how SSI realignments are impacted.

Who Is Affected by Ruling 1498-R3

The ruling affects inpatient hospital cost reports two ways:

  • Medicare DSH payments with open or properly pending appeals for Cost Reports starting prior to October 1, 2004
  • Pending or new SSI Realignments for Cost Reports starting prior to October 1, 2004

Background on Ruling 1498-R3

The ruling, issued March 4, 2024, deals with the Medicare SSI percentage as it pertains to the Medicare disproportionate share hospital (DSH) calculation. The Medicare SSI percentage is calculated and published annually by CMS and has been the subject of litigation for decades.

CMS notes Ruling 1498-R3 is needed to comply with the Supreme Court ruling in Becerra v. Empire Health Foundation, for Valley Hospital Medical Center that evaluated the Medicare statute as it relates to the Medicare SSI percentage.

What Changes with Ruling 1498-R3

CMS Ruling 1498-R2 is revoked, which means SSI percentages are now calculated on total days, not covered days.

CMS Ruling 1498-R2 Is Revoked

CMS previously issued Ruling 1498-R2 on April 22, 2015. This ruling amended Ruling 1498-R issued April 28, 2010, and allowed hospitals to choose between two methods for calculating the Medicare SSI percentage for use in the Medicare DSH calculation.

The difference between the two methods revolved around the treatment of the non-covered Medicare Part A days and days for beneficiaries who have exhausted their Medicare Part A benefits.

SSI Percentage Now Calculated on Total Days Method Only

Any open cost year or properly pending appeal on the SSI percentage issue for cost reports beginning prior to October 1, 2004, will be settled using the total days method.

This method will include patient days for Medicare Part A beneficiaries for non-covered services as well as patient days for beneficiaries who have exhausted their Medicare Part A benefits in the denominator of the Medicare SSI percentage, and to the extent the same patients are entitled to SSI benefits, the same days will be included in the numerator of the Medicare SSI percentage.

Next Steps with Ruling 1498-R3

Hospitals should evaluate the impact on the Medicare DSH calculation for any open or pending appeals for years beginning prior to October 1, 2004.

Hospitals should also evaluate the impact on any previously requested or future requests for SSI realignments to the cost reporting year end for periods beginning prior to October 1, 2004.

We’re Here to Help

For questions related to this ruling or assistance in evaluating the potential impact to your organization, please contact your Moss Adams professional.

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