Jonathan Skaggs, PYA Senior Manager, along with attorney Chris Kenny, a partner with King & Spalding, offered an in-depth look at the CMS 2552-10 Medicare cost report worksheet S-10.

1. Prepared for
February 22, 2019
Presented by:
Chris Kenny, JD, Partner, King & Spalding
Jonathan Skaggs, MBA, MHA, Senior Manager
Medicare DSH
CMS 2552-10 Worksheet S-10 Update

2. Prepared for the Georgia Society of Certified Professional Accountants 2019 Healthcare Conference Page 1
Agenda
 CMS Form 2552, Worksheet S-10
 Rules, Transmittals, Questions and Answers
 Lessons Learned
 Opportunities

3. CMS Form 2552, Worksheet S-10

4. Prepared for the Georgia Society of Certified Professional Accountants 2019 Healthcare Conference Page 3
Medicare DSH Payment Section 3133
 The Affordable Care Act (ACA) required DSH payments to be
reduced by approximately $22.1 billion from FY14 to FY191
 Beginning in FY14, Section 3133 of the ACA modified the
methodology for computing the Medicare DSH payments into
two pieces:
 Empirical Medicare DSH (25%)
 Uncompensated Care (75%)
 Reduced to incorporate changes to uninsured <65 years old
Note:
1) Douglas W. Elmendorf, Director of the Congressional Budget Office. March 20, 2010. Letter to Nancy Pelosi,
Speaker, U.S. House of Representatives, Table 5. (accessed 9/21/13)
2) Published in the August 3, 2019, Federal Fiscal Year 2019 IPPS Proposed Rule
FY17 FY18 FY192
DSH $3.60 $3.89 $4.08
UCC $5.98 $6.77 $8.27
Total $9.58 $10.66 $12.35

5. Prepared for the Georgia Society of Certified Professional Accountants 2019 Healthcare Conference Page 4
Medicare DSH Payment Section 3133
Uncompensated Care Exceptions
 Uncompensated Care Exceptions
 Puerto Rico Hospitals (eligible)
 Maryland Hospitals (not eligible since not included in IPPS)
 Sole Community Hospitals (SCH)
 Hospital-specific rate (not eligible)
 IPPS rate (eligible)
 Medicare Dependent Hospital (MDH) (eligible)
 IPPS Bundled Payment for Care Improvement (BPCI) and
Comprehensive Care for Joint Replacement Model (CCJRM)
hospitals (eligible)
 Rural Community Hospital Demonstration Program (not eligible)
 30 hospitals continue participation through 12/31/2021
 Upon completion, hospitals revert to IPPS and will become eligible;
participation is based upon their DSH criteria, similar to all other IPPS
hospitals

6. Prepared for the Georgia Society of Certified Professional Accountants 2019 Healthcare Conference Page 5
Overview
 Why does the reporting of charity, uncompensated care,
and bad debt matter?
 Nonprofit hospitals under increased scrutiny
 Are the benefits being provided sufficiently to warrant tax
exemptions?
 Federal, state, or local level exemption, tax exempt bonds,
charitable deduction, other?
 Reporting can affect payment amounts
 Disproportionate Share Hospital (DSH)
 Public perception

7. Prepared for the Georgia Society of Certified Professional Accountants 2019 Healthcare Conference Page 6
Overview (cont.)
 Federal reporting requirements
 Calculations of the cost of charity and indigent care
 Developing a work plan to aid hospital staff, counsel, the
C-Suite, and the Board in preparing a uniform message
Background
Definitions
Report timing
Discuss
Uncompensated
care
What
Is…
Cross-
department work
plan
Education for the
C-Suite and
beyond
Develop

8. Prepared for the Georgia Society of Certified Professional Accountants 2019 Healthcare Conference Page 7
Worksheet S-10
 Section 112(b) of the Balanced Budget
Refinement Act (BBRA) requires that short-
term acute care hospitals--1886(d) of the
Act--submit cost reports containing data on
the cost incurred by the hospital for
providing inpatient and outpatient hospital
services for which the hospital is not
compensated

9. Prepared for the Georgia Society of Certified Professional Accountants 2019 Healthcare Conference Page 8
Reporting Period
CMS Form 2552, Worksheet S-10
Filed annually
Period can be shorter or longer
Electronic filing
Due 5 months after FYE5

10. Prepared for the Georgia Society of Certified Professional Accountants 2019 Healthcare Conference Page 9
Definitions
 Uncompensated Care - Charity care and bad debt,
including non-Medicare bad debt and non-reimbursable
Medicare bad debt; uncompensated care cost (UCC)
does not include courtesy allowances or discounts
 Non-Medicare Bad Debt - Health services for which a hospital
determines the non-Medicare patient has the financial capacity to
pay, but the non-Medicare patient is unwilling to settle the claim
 Non-Reimbursable Medicare Bad Debt - Amount of allowable
Medicare coinsurance and deductibles considered to be
uncollectible but are not reimbursed by Medicare
Source: CMS 2552-10 S-10 Instructions

11. Prepared for the Georgia Society of Certified Professional Accountants 2019 Healthcare Conference Page 10
Definitions (cont.)
 Charity Care - Health services for which a hospital demonstrates
that the patient is unable to pay; for Medicare purposes, charity care
is not reimbursable and unpaid amounts associated with charity care
are not considered as an allowable Medicare bad debt
 Uninsured Patients - Individuals with no source of third-party
healthcare coverage (insurance)
 Medically Indigent Patients – Individuals who do not have,
and are not able to afford, health insurance and are not eligible for
government-funded coverage, such as Medicaid or Medicare
Source: CMS 2552-10 S-10 Instructions

12. Prepared for the Georgia Society of Certified Professional Accountants 2019 Healthcare Conference Page 11
Worksheet S-10 Data Collection
 All applicable lines should be completed
 Need to Identify:
 Medicaid
 SCHIP
 Provider taxes/assessments
 Medicaid DSH
 State or local government indigent care
 Grants, gifts, income related to uncompensated and indigent care
 Charity care
 Bad debts

13. Prepared for the Georgia Society of Certified Professional Accountants 2019 Healthcare Conference Page 12
 Uninsured Patients: list total charges written off to charity care
 Insured Patients: list deductibles and coinsurance written off to
charity care for patients covered by a public program or private
insurer with which the provider has a contractual relationship
Hospital Uncompensated and Indigent Care Data
Uncompensated and indigent care cost computation
Line Item Description
Uninsured
Patients
Insured
Patients Total
20 Charity care charges and uninsured discounts for the
entire facility
21 Cost of patients approved for charity care and uninsured
discounts (line 1 * line 20)
22 Payments received from patients for amounts previously
written off as charity care
23 Cost of charity care (line 21 minus line 22)
Worksheet S-10 Line Items

14. Prepared for the Georgia Society of Certified Professional Accountants 2019 Healthcare Conference Page 13
CMS Comments Regarding S-10
 FY16
 …it remains premature to propose the use of Worksheet S-10 data
for purposes of determining Factor 3 for FY 2016…We still intend to
propose through future rulemaking the use of the Worksheet S–10 data
for purposes of determining Factor 3
 FY17
 We expect data from the revised Worksheet S-10 to be available to use
in the calculation of Factor 3 in the near future, and no later than FY2021
 FY18
 Growing correlation between the Worksheet S-10 data and IRS 990 data
 FY19 Final Rule
 No alternative data…currently available…that are a better proxy for the
costs … for treating individuals who are uninsured

15. Rules, Transmittals, and Questions &
Answers Released by CMS

16. Prepared for the Georgia Society of Certified Professional Accountants 2019 Healthcare Conference Page 15
Transmittal 10 – November 18, 2016
Clarified that hospitals may report any
discounts given to uninsured patients who
meet the hospital’s charity care criteria
 This includes patients with coverage from an entity
that does not have a contractual relationship with the
provider
 Pre-10/1/2016 – report based on date of service; report
based on total initial payment obligation (regardless of %
discount)
 Post-10/1/2016 – report based on date of write-off (not
DOS); report based on amount written off (taking into
account % discount)

17. Prepared for the Georgia Society of Certified Professional Accountants 2019 Healthcare Conference Page 16
FY18 Final Rule
 Incorporated 3-year blended transition
 S-10 UCC in Year 1 as 1/3 of Factor 3, transitioning completely to
UCC by Year 3
 Uncompensated care re-defined
 Cost of charity care + Cost of non-Medicare and non-
reimbursable Medicare bad debt
 Medicaid shortfall will no longer be included
Year 1
FY18
Year 2
FH19
Year 3
FY20
Days 66.67% 33.33% 0%
UCC 33.33% 66.67% 100%
Total 100% 100% 100%

18. Prepared for the Georgia Society of Certified Professional Accountants 2019 Healthcare Conference Page 17
FY18 Final Rule (cont.)
 Implemented Factor 3 changes from proposed rule,
incorporating total UCC from Worksheet S-10
 Maintained that proposed 3-year transition and
change to UCC definition will be incorporated in the
future
 Working to release clear S-10 instructions and
provide further guidance to assist with completion
 Proposed to audit highest UCC providers and other
providers through random sampling

19. Prepared for the Georgia Society of Certified Professional Accountants 2019 Healthcare Conference Page 18
Transmittal 11 – September 29, 2017
 Transmittal 11
 Changed the guidance for reporting on Worksheet S-10
Line 20 to include claims that meet the provider’s Financial
Assistance Policy in addition to Charity
 Discounts for uninsured patients under “financial assistance
policy” are included
 Pre-10/1/2016 treatment of non-discounted charges – Are
the amounts “expected to be received?”
 MedLearn Example 7
 Charity care charges attributable to deductibles and
co-insurance are no longer reduced by CCR

20. Prepared for the Georgia Society of Certified Professional Accountants 2019 Healthcare Conference Page 19
Transmittal 11 – September 29, 2017
 Transmittal 11
 Charges for non-covered services for Medicaid
enrollees and charges for days exceeding length-of-
stay limit can be reported as charity care or financial
assistance, if part of CCP or FAP policy
 Non-Reimbursable Medicare bad debt is no longer
subject to CCR

21. Prepared for the Georgia Society of Certified Professional Accountants 2019 Healthcare Conference Page 20
FY19 Final Rule
 Increases funding for UCC from $11.67 billion to $12.35
billion – reflection of increase in uninsured
 Detailed patient listing of all charity/uninsured discounts
claimed on Worksheet S-10 required for cost reporting
periods beginning on or after October 1, 2018
 CMS will “trim” aberrant data for purposes of distributing
UCC pool
 CMS will consider data “aberrant” for any hospital with significant
increases in uncompensated care reflected in its resubmitted S-
10 data for FY 2014 and FY 2015
 Risk that valid data will be trimmed due to better reporting by
hospitals as clearer instructions came out

22. Lessons Learned

23. Prepared for the Georgia Society of Certified Professional Accountants 2019 Healthcare Conference Page 22
Lessons Learned from CMS’s Review
 Date of Service or Write-Off Date
 Financial Assistance Policy
 Full or Partial Discounts
 Insured vs. Uninsured
 Expected Payments
 Profitable Accounts?
 Documentation

24. Discussion/Questions & Answers

25. PYA, P.C.
800.270.9629 | www.pyapc.com
Jonathan Skaggs
MBA, MHA,
Senior Manager
jskaggs@pyapc.com
(800) 270-9629
Chris Kenny
Partner
King & Spalding
ckenny@kslaw.com
(202) 626-9253
Thank you!