Hospitals have identified data inconsistencies that could complicate CMS’s plans to switch to using S-10 data to determine uncompensated care payments. 

April 17—Medicare is looking to finally implement a change in hospital readmission penalties to account for hospitals with larger shares of low-income patients.

The Centers for Medicare & Medicaid Services (CMS) issued an Inpatient Prospective Payment System (IPPS) proposed rule on April 14 that would implement a socioeconomic adjustment for the Hospital Readmissions Reduction Program (HRRP) by FY19. The change, required by the 21st Century Cures Act, would assess penalties for higher readmissions based on performance relative to hospitals with similar shares of patients who are dually eligible for Medicare and Medicaid.

The change “will begin to level the playing field for essential hospitals as they serve low-income and other disadvantaged Americans,” Bruce Siegel, MD, president and CEO, America’s Essential Hospitals, said in a written statement.

Blair Childs, senior vice president for Premier Inc., said hospitals have long sought the proposed policy alternatives for calculating ranges of dual-eligible patients, assigning hospitals to peer groups, and computing payment adjustments.

However, Siegel said the proposed change is only the first needed to move to true risk adjustment based on the social and economic challenges of patients.

“We must go beyond adjusting only payments to adjusting measures so quality comparisons are fair,” Siegel said in a statement.

He urged CMS to extend the approach to other quality programs when the evidence for risk adjustment is compelling.

The Association of American Medical Colleges (AAMC) praised CMS for seeking feedback on including social risk factors in the Hospital Value-Based Purchasing program, the Hospital Acquired Conditions Reduction Program, and the Inpatient Quality Reporting program. Ivy Baer, senior director of policy and regulatory counsel for AAMC, said the advocacy group hoped the move was “a first step toward adopting the approach the AAMC has long advocated--adjusting these programs so that hospitals that treat vulnerable populations are not disadvantaged.”

Payment Increases

The rule drew hospital praise for a proposed 1.6 percent rate increase for FY18, after accounting for inflation and other adjustments required by law. That rate stems from an initial market-basket update of 2.9 percent for hospitals that were meaningful users of electronic health records (EHRs) in FY16 and that submit data on quality measures, minus—among other adjustments—a productivity cut of 0.4 percent and a 0.75 percent market-basket cut required by the Affordable Care Act (ACA).

CMS proposed an increase of 0.4588 percent to partially restore cuts made because of an American Taxpayer Relief Act of 2012 requirement that the agency recoup what it claimed was the effect of documentation and coding changes from FY10-12, which CMS said did not reflect real changes in case mix.

Additionally, CMS proposed a 0.6 percent cut to remove the onetime FY17 boost to restore cuts related to the two-midnight short-stay policy, which a federal court ruled were illegal.

The rule continued cuts to Medicare disproportionate share hospital (DSH) payments, as required by the ACA. However, Medicare DSH payments would increase by about $1 billion compared to FY17 because CMS planned to base those payments—linked to uninsured rates—on data from its National Health Expenditure Accounts, instead of from the Congressional Budget Office. The $1 billion increase amounts to a 1.2 percent increase in payments to hospitals.

“This is a welcome change, as essential hospitals still provide high levels of uncompensated care, even with improved coverage nationally under the Affordable Care Act,” Siegel said.

The total estimated increase in Medicare payments to hospitals for inpatient services in FY18 is $3.1 billion. 

Worksheet S-10 Issues

More concerning was CMS’s proposal for a three-year transition, beginning in FY18, to using Worksheet S-10 data to determine the amounts and distribution of uncompensated care payments. For several years, CMS has discussed using the Medicare cost report’s Worksheet S-10 data on hospital charity care and bad debt to determine the amount of uncompensated care that each hospital provides, in place of the current formula that centers on Medicaid and Medicare Supplemental Security Income (SSI) days.

“We are concerned that CMS has proposed to use the ‘Worksheet S-10’ data to determine the cost of treating uninsured patients without taking sufficient action to ensure the accuracy, consistency and completeness of these data prior to their use,” Tom Nickels, executive vice president for the American Hospital Association (AHA), said in a written statement.

A previous AHA analysis of FY14 data found 3 percent of cost reports registered negative bad debt expenses, more than 1 percent reported bad debt expenses of zero, and almost 8 percent reported charity care charges of zero.

“While incurring no charity care or bad debt is certainly possible, the high number of hospitals reporting such raises a red flag and supports the necessity of an audit,” Nickels wrote in an April 5 letter to CMS.

AHA previously urged CMS to take steps to improve the accuracy of S-10 data, including auditing the data and modifying the S-10 worksheet. Such modifications would include adoption of a broad definition of uncompensated care costs to include all unreimbursed and uncompensated care costs, such as Medicaid shortfalls and discounts for the uninsured. AHA said that since Congress has generally barred subsequent administrative and judicial review of DSH payment calculations, CMS needs to ensure that the data are accurate and consistent before they are used.

Ideas Sought

Also included in the proposed rule was a “request for information” seeking suggestions on ways to reduce the burden on providers of regulations, sub-regulatory guidance, policies, and procedures.

“We would like to start a national conversation about improving the health care delivery system, how Medicare can contribute to making the delivery system less bureaucratic and complex, and how we can reduce burden for clinicians, providers and patients in a way that increases quality of care and decreases costs—thereby making the health care system more effective, simple, and accessible while maintaining program integrity and preventing fraud,” CMS stated in a fact sheet on the rule.

Childs hailed the deregulatory push.

“Today, there are a range of contradictory programs, conflicting incentives, and other regulatory hurdles that hamstring providers from delivering quality, innovative care,” Childs said. “We are hopeful that CMS takes meaningful steps to streamline and simplify the heavy regulatory burden hospitals face.”

Other Changes

Proposed changes to the EHR Incentive Program that would take effect in CY17 include establishing a hospital reporting period consisting of two self‑selected quarters of data on clinical quality measures.

For 2018, CMS proposed reducing the EHR reporting period from the full year to a minimum of any continuous 90-day period during the calendar year.

Proposed 2018 changes to the Hospital Inpatient Quality Reporting Program include rewording the pain management questions in the Hospital Consumer Assessment of Healthcare Providers and Systems survey to focus on the hospital’s communications with patients about the patients’ pain during the hospital stay.

Changes to the Value-Based Purchasing Program include the removal of one measure and adoption of two measures. The measure to be removed is the eight-indicator Patient Safety for Selected Indicators measure from the Safety domain beginning with the FY19 program year.

CMS also proposed a 1 percent increase in the long-term care hospital (LTCH) PPS standard federal payment rate. Based on changes included in the proposed rule, CMS projected LTCH PPS payments would decrease by approximately 3.75 percent, or $173 million, in FY18—due in large part to the continued phase-in of a dual-rate payment system as required by the Pathway for SGR Reform Act of 2013.

The proposed rule will be published in the April 28 edition of the Federal Register, with comments accepted through June 13 at

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Tuesday, April 18, 2017