Cost Report Worksheet S-10, Uncompensated Care, and Other Updates is an overview of the ACA impact on Medicare DSH including DSH payment methodology changes. Originally presented by HORNE Healthcare Partner David Butler, CPA, FHFMA, and Manager Jim Wadlington, CPA, FHFMA, at the HFMA: Louisiana Chapter 2016 Winter Institute on January 25, 2016.

1. COST REPORT
WORKSHEET S-10,
UNCOMPENSATED CARE,
AND OTHER UPDATES
David Butler, CPA, FHFMA
Jim Wadlington, CPA, FHFMA

2. OVERVIEW
 Topics to be covered
 IPPS Overview
 DSH Payment Changes
 DSH/Uncompensated Care Pool
 Worksheet S-10 Review
 Appeals
 Helpful tips to maximize Medicare DSH

3.  Section 1886(d) of Social Security Act
 Set forth payment for operating costs of acute care hospital
inpatient stays under Medicare Part A
 Under Inpatient Prospective Payment System (IPPS), each
case is categorized into a diagnosis-related group (DRG)
 Each DRG has a payment weight assigned to it, based on the
average resources used to treat Medicare patients in that DRG
 Hospitals that treat a high-percentage of low-income patients
receive a percentage add-on payment applied to the DRG-
adjusted base payment rate, known as the disproportionate
share hospital (DSH) adjustment
IPPS/DSH OVERVIEW

4.  Affordable Care Act impacts to Medicare DSH
 Section 3133 of ACA amended the Act to revise the method for
computing DSH
 Effective for discharges occurring on or after October 1, 2013
 Per CMS contractor Dobson|DaVanzo, “The goal of Section
3133 is to reduce the overall amount of Medicare DSH
payments, creating a separate additional payment consistent
with decreases in the uninsured rate and to target these
additional payments to hospitals with a high proportion of
uncompensated care.”
“Improvements to Medicare DSH Payments”
Final report submitted to CMS – Thursday, May 9, 2013
IPPS/DSH OVERVIEW

5. DSH PAYMENT CHANGES
 DSH Payment Methodology Changes
 Starting in FY 2014, hospitals initially receive 25% of “empirically
justified” DSH
 Remaining 75% of DSH into a separate funding pool for DSH hospitals
 Distributed based on proportion of uncompensated care
 To decline each year as required by ACA

6. DSH PAYMENT CHANGES
 Uncompensated Care Payments (75% pool)
 Product of three factors
 Factor One – Initial Size of the 75% Uncompensated Care DSH
Payment Pool
 Fixed amount; set prospectively
 Factor Two – Change in the Percentage of Uninsured
 Using CBO estimates
 Factor Three – Hospitals’ Uncompensated Care Payments
 SSI and Medicaid days as proxy

7. NEW DSH CALCULATION
EXAMPLE

8. DSH PAYMENT CHANGES
 CMS further decreases UCP pool by $1.2B for FY 2016
 Hospitals most affected will be those located in states that do not
expand Medicaid
 CBO estimate that the rate of uninsured will decrease from 13 to 11
percent
 Continued use of Medicaid inpatient days instead of Worksheet S-10
data; concerns regarding completeness of S-10
 CMS still intends to use S-10 in future periods (TBD)

9. DSH PAYMENT CHANGES
 UCP Pool for Louisiana Hospitals
 LA’s share of UCP pool decreased 17% from FY 2015 to FY 2016
 Only slight decrease in low income (factor 3) days
 2.19% in FY 2015 vs 2.16% in FY 2016
 DSH eligible hospitals are encouraged to report the most Medicaid
eligible days allowable under the DSH rules
 Based on methodology previously employed by CMS, cost report
years beginning in FY 2013 will most likely be used for FY 2017
Final Rule

10. FFY 2014
• Utilized FFY 2011 Hospital Medicaid days
• Pool amount of $9.4B
FFY 2015
• Utilized FFY 2012 Hospital Medicaid days
• Pool amount of $7.6B
FFY 2016
• Utilized FFY 2012 Hospital Medicaid days
• Pool amount of $6.4B
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-
Payment/AcuteInpatientPPS/index.html
UNCOMPENSATED CARE PAYMENT
(UCP) POOL

11. • Section 112(b) of the Balanced Budget Refinement Act (BBRA)
• Requires that short-term acute care (subsection d) and critical
access hospitals complete S-10
• Data reported on Worksheet S-10 shows cost incurred by the
hospital for providing inpatient and outpatient services for
which the hospital is not compensated
• Uses overall cost-to-charge ratio for the hospital applied to
hospital charges for government programs and charity
WORKSHEET S-10
OVERVIEW

12. • Overall cost to charge ratio calculated from fully loaded cost and
charges from Worksheet C
• “Fully loaded” costs and gross patient charges used
• Excludes non-reimburseable cost centers
• All-inclusive rate (AIR) providers must manually input
S-10

13. Lines 2 – 8 for reporting Medicaid charges and payments
• Includes inpatient and outpatient payments received or
expected for Title XIX covered services delivered during the
cost report period
• Includes payments and charges where Medicaid is the primary
payer. Medicaid secondary should not be included.
• Excludes physician or other professional services
• Includes charges and payments for Medicaid managed care
programs
• Must include Medicaid DSH and supplemental payments, net
of associated provider taxes or assessments
S-10
MEDICAID

14. • Line 2 – Net revenue includes DSH received
• Line 3 answer is “Y”
• Line 4 answer is also “Y”
S-10
MEDICAID

15. • Line 2 – Net revenue includes DSH received
• Line 3 answer is “Y”
• Line 4 answer is “N”
• No difference in payer margin; only making sure all payments
are accounted for
S-10
MEDICAID

16. LaCHIP
• Provides health coverage to uninsured children up to age 19
• Household income must be below income limits
• Uses higher income limits than traditional Medicaid (217% of
FPL)
LaCHIP Affordable Plan
• Same as LaCHIP, but for income limits up to 250% of FPL
S-10
SCHIP

17. • Line 9 – Payments received or expected for services delivered that
are covered by stand-alone SCHIP (not eligible for coverage under
Title XIX)
• Line 10 – Gross revenue (charges) for stand-alone SCHIP
• As with Medicaid, this should exclude physician and other
professional services
S-10
SCHIP

18. Lines 13 and 14
Same calculation as SCHIP, only for state or local government indigent
care programs
• Not commonly entered
• Example: Texas has County Indigent Health Care Program
S-10
OTHER STATE OR LOCAL GOVERNMENT

19. • Line 17 – Private grants, donations, or endowment income
• Non-government grants, gifts and investment income received
during the period restricted to funding uncompensated care
• Include interest or other income earned from any endowment
fund for which the income is restricted
• Line 18 – Govt grants, appropriations or IGTs
• Includes funds for general operating support as well as special
purposes related to operation of the hospital
• Includes funds from Federal Section 1011 program
• Neither line reduces “shortfall”
S-10
GRANTS, DONATIONS AND OTHER FUNDING

20. Lines 20 – 23
Calculates the cost of charity care
• Line 20 – Initial Obligation of Patients approved for Charity Care
• Uninsured – Patient’s total charges
• Insured – Deductible and coinsurance amounts
• Line 21 – Calculated cost using CCR from line 1
• Line 22 – Partial payment from patients approved for Charity Care
• Does NOT include payments from payers
• Do not include payments for professional services
• Line 23 – Cost of Charity Care
S-10
UNCOMPENSATED CARE

21. Lines 24 and 25
• Line 24 – Charges for patient days beyond a LOS limit
imposed by Medicaid or other indigent care program
• Example: Medicaid “exhausted” days
• Line 25 – If Line 24 is “Y”, enter the applicable charges
• Does not impact calculated unreimbursed or uncompensated
care cost; informational only
S-10
UNCOMPENSATED CARE

22. Lines 26 – 31
• Line 26 – Total facility bad debt expense
• Exclude physician and other professional services
• Patient liability amounts only
• Must include Medicare bad debts claimed by hospital and all sub-units
• Line 27 – Adjusted (reimburseable) bad debts
• Calculated number; flows from hospital and all reimburseable sub-units
• Lines 28 – 31
• Calculations to arrive at net unreimbursed and uncompensated care cost
(see example)
S-10
UNCOMPENSATED CARE

23. S-10
UNCOMPENSATED CARE

24. Protect your hospital’s appeal rights!
Issues to appeal (for DSH and LIP)
• Medicaid Eligible Days
• This ensures timely payment for DSH on the cost report, as well as
preserves amounts to be received through uncompensated care pool
• Ensuring Correct Counts of SSI Days (Data Match)
• Data Use Agreements with CMS
• Uncompensated Care
• S-10 instructions ambiguous
• Uncompensated Care Adjustment
• Could be errors associated with the calculation of CMS’ published pool
amount (E, Pt A Line 35)
APPEALS

25. Other possible appeal items:
• Dual Eligible Days for DSH
• Less likely to succeed
• Medicare Advantage Dual Eligible Days for DSH
• For cost reports prior to FFY 2014
• Allina v. Sebelius
• Two Midnight Rule
• Non-DSH related, but should also be calculated and used
APPEALS

26. • Important to take time to consider the future impacts of cost report
information
• Balancing act: Estimate unpaid and additional eligible days
• Pay careful attention to utilization trends to avoid overpayment
• Retroactive eligibility (for TPL claims) often is not reflected
until 3-6 months after year end
• Monitor published SSI percentages for potential
under/overpayments
• Monitor Proposed and Final Rules for accuracy of S-2 data
HELPFUL HINTS

27. David Butler, CPA, FHFMA
Partner, HORNE Healthcare
david.butler@hornellp.com
601.326.1000
ABOUT THE PRESENTERS
Jim Wadlington, CPA, FHFMA
Manager, HORNE Healthcare
jim.wadlington@hornellp.com
601.326.1000

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