Proposed S-10 Changes Could Significantly Impact Your DSH Payment

The Centers for Medicare & Medicaid Services’ (CMS) federal fiscal year (FFY) 2017 Proposed Rule incorporates uncompensated care cost data from CMS Worksheet S-10 (S-10) for distributing Medicare Disproportionate Share Hospital (DSH) payments beginning in FFY 2018. If finalized, the proposal could cause large swings in Medicare DSH payments as a result of fund redistribution. In addition, we anticipate information reported on S-10 will be scrutinized during Medicare’s cost report audit. During historical reviews of uncompensated care data, supporting documentation of amounts reported has been similar to a Medicare bad debts audit. Going forward, we anticipate CMS will continue to require this documentation, which, following extrapolation, could result in a decreased payment.

It’s important for hospitals to understand how information is reported on S-10, both historically and prospectively. For FFY 2018, CMS proposes to use S-10 data from FFY 2014 cost reports in combination with insured low-income days from previous periods for determining the distribution of uncompensated care payments. It will be interesting to see if FFY 2014 is the first year incorporated into the new payment methodology once the Final Rule is released in August.

BKD is actively submitting questions and comments to CMS for the proposed uncompensated care changes. Some areas of concern we have expressed to CMS include:

• Clarification in regard to how amounts should be reported for patients who qualify for partial charity. If patients qualify for partial charity and make payments on the noncharity portion of their balance, in certain instances, reporting these payments can actually create a negative cost of charity care.
• Many hospitals incorporate presumptive charity models into their charity policies. Medicare Administrative Contractors (MAC) are currently inconsistent regarding presumptive charity and whether it’s considered allowable.
• Current instructions state to report charges for bad debts written off on balances owed during the cost reporting period. We recommend CMS clarify the instructions so amounts are recorded by bad debt write-off date in the same fashion as Medicare bad debts.
• During recent MAC reviews of S-10 data, sample selections have been pulled using a method that isn’t shared with providers during audit. We recommend that CMS implement guidance for a statistical sampling methodology verifiable by providers and allowing for consistent treatment across the United States.

BKD National Health Care Group regularly collaborates concerning uncompensated care reporting and will continue to do so as CMS directives evolve. We’re actively working with numerous organizations on uncompensated care reporting. CMS has been clear for many years it intends to eventually use S-10 information for uncompensated care payments, and that certainly seems close to becoming a reality.