Medicare Payment and Reimbursement

HFMA Comments on CMS’s Proposed Inpatient Hospital PPS Rule for FY15

June 19, 2014 3:14 pm

June 30, 2014

Marilyn Tavenner
Centers for Medicare & Medicaid Services
Department of Health and Human Services
Attention: CMS-1599-P
P.O. Box 8011
Baltimore, MD 21244-1850

File Code: CMS–1607–P

Re: Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Fiscal Year 2015 Rates; Quality Reporting Requirements for Specific Providers; Reasonable Compensation Equivalents for Physician Services in Excluded Teaching Hospitals; Provider Administrative Appeals and Judicial Review; Enforcement Provisions for Organ Transplant Centers; and Electronic Health Record (EHR) Incentive Program

Dear Ms. Tavenner:

The Healthcare Financial Management Association (HFMA) would like to thank the Centers for Medicare & Medicaid Services (CMS) for the opportunity to comment on the 2015 Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Fiscal Year 2015 Rates; Quality Reporting Requirements for Specific Providers; Reasonable Compensation Equivalents for Physician Services in Excluded Teaching Hospitals; Provider Administrative Appeals and Judicial Review; Enforcement Provisions for Organ Transplant Centers; and Electronic Health Record (EHR) Incentive Program (hereafter referred to as the Proposed Rule) published in the May 15, 2014 Federal Register. 

HFMA is a professional organization of more than 40,000 individuals involved in various aspects of healthcare financial management. HFMA is committed to helping its members improve the management of and compliance with the numerous rules and regulations that govern the industry.  


HFMA would like to commend CMS for its thorough analysis and discussion of the myriad Medicare hospital reimbursement decisions addressed in the 2015 IPPS Proposed Rule. Our members have significant concerns regarding the proposals related to:  

  • Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs)
  • Hospital Readmissions Reduction Program Implementation of HAC Reduction Program for FY 2015
  • Hospital Value-Based Purchasing Program (VBP)
  • Hospital Inpatient Quality Reporting Program (IQR)
  • Cost Offset Adjustments Associated with the Delayed Implementation of the “Two-Midnight” Rule
  • Medicare Payment for Short Inpatient Hospital Stays
  • Transparency Requirement Under the Affordable Care Act
  • Appropriate Claims in Provider Cost Reports; Administrative Appeals by Providers and Judicial Review

Payment Adjustment for Medicare DSH Hospitals

As discussed in HFMA’s 2014 Proposed IPPS comment letter and subsequent DSH reduction comment letter (links below) HFMA continues to have significant concerns with the manner in which the Medicare DSH reduction is being implemented. Specifically, HFMA’s concerns extend to the: 

  • lack of settlement for two of the factors
  • need to make significant revisions to the S-10 worksheet before using it as a data source for factor three 

HFMA has concerns about the lack of settlement for Factors One and Two.  

Factor One:

HFMA is concerned about the potential for the CMS Actuary to underestimate DSH payments, which would ultimately result in an underfunded pool of uncompensated care payments for distribution to providers. Since 2010, this has occurred in three of the past five years as shown in the table1 below. 

Medicare DSH Payments Estimate to Actual/Updated Estimate 2010 – 2014 $, Millions
FFY Jan. Estimate Actual/Latest Est. Difference
2010 10,702 10,353 349
2011 10,867 11,498 (631)
2012 10,990 11,720 (730)
2013 12,491 12,300 191
2014 12,338 13,103 (765)

While CMS revised its projection upward in the FY 2014 IPPS final rule to $12.772 billion, based on the January 2014 estimate for FFY 2014, the uncompensated care pool is underfunded by $312 million as shown below.

July 2013

CMS Actuary Est.

Jan. 2014

CMS Actuary Estimate

Difference FY2014 Factor 2

Est. FY2014

Uncompensated Care Pool


12,772 13,103 (331) 0.9430 (312) 

HFMA continues to strongly recommend that CMS annually reconcile estimated DSH payments to actual DSH payments for FY 2014 and subsequent years. Any adjustments necessary to account for the actual vs. projected Factor One should be made to the uncompensated pool in the next available federal fiscal year. CMS has long used similar mechanisms to adjust provider payments for alleged increases in documentation and coding intensity.

Factor Two: HFMA remains concerned that the CBO’s estimate of the percentage of the population gaining insurance coverage as a result of ACA is too high. While enrollment in the state and federal exchanges exceeded CBO projections there is an open question as to how many of these individuals are actually newly insured. Additionally, it remains to be seen how many of the approximately 8.1 million enrollees will remain continuously insured over the course of 2014. Any changes in the number of enrolled for 2014 will not only impact the estimates for FFY 2014 but also FFY 2015. Additionally 242 states continue to refuse to expand Medicaid.

The February 2014 CBO analysis estimates that in 2014 approximately eight million individuals will gain coverage via Medicaid3. That number grows to 12 million in 2015. Currently, despite the Supreme Court ruling, these numbers are not significantly reduced from the March 20, 2010 estimate of Medicaid expansion (2014: 10 million, 2015: 15 million4). An estimated 5.8 million individuals who would have been eligible for the Medicaid expansion live in states that have opted not to expand coverage5  HFMA is concerned that the CBO’s projections of Medicaid expansion (and the resulting decrease in the number of uninsured individuals) are overstated.

HFMA continues to strongly recommend that CMS reconcile the estimate of the change in the uninsured and final settle with providers for FY 2014 and subsequent years. Otherwise, this program runs the risk of reducing DSH/uncompensated care payments to providers beyond what was statutorily intended by the ACA. We would recommend using the Current Population Survey to provide a base year (2013) and actual year (2014) given the relatively short lag time in data. If CMS is truly locked into using data from the CBO by statute, we would ask that you work with the CBO to develop a retrospective reconciliation for 2014 and subsequent years in order to maintain a similar comparison. As above, any adjustments necessary to account for the actual vs. projected Factor Two should be made to the uncompensated pool in the next available fiscal year.

HFMA agrees with CMS that ultimately the most appropriate place to collect the data necessary to calculate the uncompensated care amount is the cost report worksheet S-10. However, it remains concerned about the accuracy of data provided by the current version of the S-10 worksheet and its related instructions. CMS needs to work with hospitals to improve the instructions for the S-10 and resolve the significant flaws that exist in the current worksheet. The main challenges include:

Audit Process for Charity Care and non-Medicare Bad Debt: Currently, there are no published charity care audit instructions for Medicare contractors to follow when reviewing charity care and non-Medicare bad debt. The audit procedures should be similar to those related to allowable Medicare bad debt. The auditor should be instructed to pull a sample and, if the provider followed its own charity care and bad debt policies, the charity care and bad debt should be allowable. Additionally, providers are only allowed to appeal adjustments that have a material settlement impact on the cost report. While the data used to calculate the uncompensated care payment will have a significant reimbursement impact on hospitals, it does not “settle” on the cost report. CMS must allow hospitals a mechanism to appeal adjustments to the S-10. 

Timing of Charity Care and Bad Debt Reporting: Instructions for line 20 state that charity care charges should be limited to services “delivered during this cost reporting period.” This is problematic in that it does not reflect the reality of hospital operations and will ultimately understate charity care costs. Hospitals can grant charity care at any point in the patient account resolution process. Depending on the level of documentation required to obtain charity care and the patient’s responsiveness in submitting the proper documentation, charity care can be granted long after the cost report for the fiscal year in which the services were delivered.

Similarly, the instructions for line 26 state that bad debt charges (both Medicare and non-Medicare) reported on the line should be related to services provided during the fiscal year (either written off or expected to be written off). Not only is this inconsistent with the way allowable Medicare bad debt is treated, but like charity care, following the current instructions will under report non-Medicare bad debt. As an accounting concept (that CMS follows in its requirements for a provider to claim a bad debt related to a beneficiary’s deductible and co-insurance on the cost report as reimbursable) a provider cannot write an account off to bad debt until it has been deemed uncollectible/worthless. For most patients this determination will be made long after the cost report has been filed. Further, like Medicare bad debt we believe that worksheet S-10 should include only bad debt that has actually been written off (not expected to be written off). We believe this would reduce the administrative complexity of compiling and auditing bad debt debts claim on worksheet S-10.

CMS should correct the instructions for both lines 20 and 26 to better reflect the timing of when accounts are granted charity care or written off to bad debt. The language should read “charges written off during the period covered by the cost report.”

Partial Payments by Patients: Reducing gross charges for charity care by any partial payments received from the patient is appropriate accounting treatment. However, the instructions related to line 22 pose two problems. First, there is a timing issue similar to those discussed above related to reporting charity care granted and bad debt expense. The instructions require that only partial payments received for care delivered during the cost reporting period be reported. As with charity care granted and bad debt expense, the less burdensome approach suggested by HFMA would be to report all gross charges waived during the period and all related payments received during the period.

The instructions also require that hospitals report payments “expected” as well as received. The difficulty is that the gross amounts expected from patients for whom there have been partial write-offs pursuant to a hospital’s charity care policy are often not paid in full. Under proper accounting, the amount of such payments would have to be discounted to reflect the amount that is expected in reality to be paid. There is no discussion in the instructions on how such estimates should be made, how they will be reviewed by Medicare contractors, and how experience showing that a prior year’s estimate was too high or too low should be reflected, if at all, on the current year’s S-10. As with bad debt, we would encourage CMS to limit partial payments reported on the S-10 to those actually received to reduce the administrative burden for providers. However, if CMS does not change the instructions, it needs to work with the industry to provide guidance to hospitals and contractors as to how these estimates will be handled in the S-10 instructions. 

Transition Period: HFMA believes that transitioning from CMS’s current method of distributing the uncompensated care pool using SSI and Medicaid days to a method based on S-10 data could cause a significant reallocation of the uncompensated care pool creating “winners and losers.” Preliminary analysis by Premier shows that 74% of hospitals have a difference in payments greater than -25% or +25% compared to what they are currently estimated to receive for uncompensated care payments . HFMA strongly encourages CMS to use a transition period to minimize cash flow disruptions to providers who see a significant decrease in their uncompensated care payments as a result of the change in allocation methodology. We believe CMS should use a minimum of a three year transition period that blends the allocation methodologies similar to what is currently done with decreases in wage index due to MSA changes. However, we would encourage CMS to conduct analysis to better understand the impact and use a phase in period of appropriate duration to allow providers an opportunity to mitigate the negative financial consequences.

Hospital Readmissions Reduction Program (HRRP)

In prior comment letters (links included below), HFMA has expressed significant concern about the insufficient risk adjustment for the HRRP measures. Additionally, the FY 2015 proposed IPPS rule includes three issues related to the HRRP that concern HFMA. These are the: 

  1. Impact of health professional shortage areas (HPSA) on hospital readmission rates.
  2. Impact of nursing home quality on readmission rates.
  3. Inclusion of the CABG readmissions measure into the HRRP. 

Insufficient Risk Adjustment: HFMA continues to be concerned by the dearth of economic variables included in the risk-adjustment mechanism, given the role that these factors play in a patient’s likelihood of readmission. We appreciate CMS’s attempt to analyze the impact of economic status (presented on pages 366-367 of the 2013 proposed IPPS rule) on the penalties meted out by the HRRP. However, we continue to believe that CMS’s analysis under appreciates the effect economic status has on readmissions. MedPAC analysis has shown that there is a positive relationship between the percentage of SSI beneficiaries in a hospital’s patient population and the likelihood of incurring a HRRP penalty7.

HFMA continues to strongly recommend that CMS conduct a thorough analysis of the role economic factors play in Medicare readmissions. We believe that this analysis should be conducted at the claims level for readmitted Medicare patients and match their zip codes to existing poverty data to provide an accurate understanding of the role economic conditions, which are beyond a hospital’s control, play in readmissions.

Further, HFMA continues to recommend that CMS include SSI and other similar economic indicators (e.g., presence of Medicaid as a secondary payer) to improve risk adjustment until the NQF develops a readmissions measure that fully accounts for economic drivers. In the interim, HFMA supports MedPAC’s proposal to evaluate a hospital’s readmission rates against rates for a peer group of hospitals with a similar share of economically challenged Medicare beneficiaries as identified by the percentage of Medicare patients on Social Security Income. Additionally, much like the excluded conditions, CMS should work with NQF to develop readmissions measures that fully account for economic drivers.

We continue to believe that refining the risk-adjustment mechanism is necessary to ensure a level playing field for all providers while protecting safety net hospitals and their communities from the unintended and counter-productive consequences of an incomplete risk-adjustment mechanism. For these facilities, inpatient Medicare payments are a larger than average component of their revenue. Any reduction in Medicare payment related to an incomplete risk adjustment will have both direct and indirect consequences. As a direct consequence, it will limit providers’ ability to invest in programs to reduce unnecessary readmissions, and the socio-economic factors that cause them, further harming Medicare beneficiaries. Indirectly, it will reduce employment and increase the ranks of uninsured in these communities as safety net hospitals will likely respond to additional financial pressure by reducing staffing levels.

Relationship of HPSA on Readmission Rates: Research shows patients who receive timely physician follow-up care post discharge are significantly less likely to be readmitted2,3. Given the role that timely follow-up care plays in reducing potentially preventable readmission rates it is reasonable to ask how potentially preventable readmission rates for hospitals located in HPSAs compare to those that are not located in HPSAs. While research in this area is limited, previous work finds that Medicare beneficiaries living in HPSA’s are more likely to experience a potentially preventable hospitalization8. HFMA strongly recommends that CMS study the relationship between a hospital’s readmission rates and whether or not it’s located in a HPSA. If CMS finds a positive correlation between readmission rates and hospital’s location in a HPSA, HFMA believes that this factor needs to be accounted for when calculating a hospital’s expected readmission rate.

Impact of Nursing Home Quality on Readmission Rates: In previous comment letters, HFMA has expressed its concern regarding both the general misalignment of incentives created by a lack of SNF readmission penalty and the specific impact that SNF quality has on readmissions rates. Congress has passed legislation implementing a SNF readmissions penalty beginning in FFY 2019 that will better align incentives. However, in the interim, there is no mechanism to adjust potentially preventable readmission rates for the quality of SNFs that Medicare beneficiaries use. The OIG has found that on average higher quality SNFs (those with a four or five star rating) have admission rates to acute care facilities that are four percentage points lower than lower quality SNFs (those with three stars or less)9. While hospitals in many instances are partnering with SNFs to coordinate care transitions and improve the quality of care provided at SNFs they cannot steer Medicare beneficiaries to SNFs that they believe to be high quality. Even if hospitals could steer patients, in many instances high quality SNFs may not have available beds (e.g. areas where high quality SNFs are less prevalent or areas where high quality SNFs exist but they lack capacity to meet demand).

HFMA recommends that CMS take the following steps to account for SNF quality in the HRRP:

  • Conduct further research into the impact of SNF quality on hospital readmissions. If as suggested by the OIG study there is a measurable impact on potentially preventable readmissions, CMS should work with the NCQA to develop and include a mechanism to account for SNF quality in readmissions measures.
  • Work with the provider community and OIG to identify legal barriers that prevent hospitals and SNFs from collaborating and create sufficient exemptions that will further efforts to reduce preventable readmissions.

Inclusion of CABG Measure: CMS proposes to include a readmissions measure for CABG surgeries in the 2017 HRRP which currently lacks National Quality Foundation (NQF) endorsement. The ACA requires that CMS only use measures endorsed by the NQF. HFMA urges CMS not to finalize the CABG measure for inclusion into the HRRP until the measure has received NQF endorsement as mandated by the ACA.

Implementation of HAC Reduction Program for FY 2015

HFMA strongly supports efforts to reduce preventable hospital acquired conditions (HAC). Additionally, as we have discussed in our whitepaper Defining and Delivering Value, we believe the shift to more outcomes focused quality measures is in general a positive one10. However, we are concerned there is significant overlap among the measures proposed for the 2015, 2016, and 2017 HAC Reduction Program and the 2015, 2016, and 2017 proposed value-based purchasing (VBP) programs. Given the significant overlap of the proposed HAC measures and the VBP program, HFMA strongly recommends eliminating the overlapping measures from the VBP program. While we believe it was appropriate to include patient safety measures in the outcomes domain of VBP prior to the implementation of the HAC reduction program, incorporating overlapping measures in both the VBP and HAC reduction program constitutes “double jeopardy,” penalizing a hospital twice for the same issue.

If CMS insists on using the same measures for both the HAC program and the VBP outcome domain (2015 – 2016) and safety domain (2017 and thereafter) HFMA recommends that CMS remove the overlapping measures from the VBP calculation for hospitals that incur the HAC penalty. This allows CMS to achieve its policy goal of holding all hospitals accountable for HACs (beyond CMS’s current “never-event policy”) while not penalizing a hospital that incurs the HAC penalty three times for the same error. We believe this step is merited given the outsized role that the outcomes plays the VBP domain weighting in 2015 (30%) and 2016 (40%) and the increasing emphasis placed on the safety domain in the 2015 proposed rule. Under the proposed rule, the safety domain for FFY 2017 increases from 15% to 20%.

Hospital VBP Program

In addition to the concerns discussed above regarding the significant and unacceptable overlap between the Hospital VBP and HAC reduction programs, HFMA continues to take issue with the domain weighting within the VBP program and the Medicare Spending Per Beneficiary (MSPB-1) measure.

As stated in previous comment letters (links included below) we remain deeply concerned that the currently proposed VBP program exacerbates existing misalignments among the various provider types to the detriment of some providers.

HCAHPS Weighting: We continue to believe the HCAHPS domain is over-weighted as it comprises 30% of the overall VBP 2015 and 25% in 2016 and 2017. While providers should focus on improving patient satisfaction, anecdotal evidence has shown significant variation in scores due to differences in acuity level and region of the country11. Further, a recent study found that “patient satisfaction was independent of hospital compliance with surgical processes of quality care and with overall hospital employee safety culture12.”

As in prior comment letters, HFMA strongly recommends that CMS conduct a patient level study to better understand the relationship between HCAHPS scores and outcomes. This study should include the effect of factors beyond a hospital’s control such as patient severity and region. Otherwise, CMS runs the risk of inappropriately penalizing facilities for a measure that may have little relationship to patient outcomes. We are also concerned that without understanding the relationship of patient acuity and geography on HCAHPS scores, CMS could inadvertently penalize hospitals that provide higher acuity services to a sicker patient population or disadvantage hospitals in one region over another.

Finally, we believe that CMS should significantly reduce the weighting of the HCAHPS domain until the relationship between HCAHPs scores and differences in location and variances in acuity are better understood.

Efficiency Metric: CMS is including an efficiency metric in the 2015 VBP program. The metric is defined as “inclusive of all Part A and Part B payments from 3 days prior to a subsection (d) hospital admission through 30 days post discharge with certain exclusions. It is risk adjusted for age and severity of illness, and the included payments are standardized to remove differences attributable to geographic payment adjustments and other payment factors.”

As discussed in previous comment letters, physicians control the majority of decisions that impact spending across an episode of care. Therefore, it will be difficult to isolate and ascribe responsibility for a beneficiary’s overall spending to a given hospital. CMS needs to work with the hospital community to develop and implement efficiency metrics sensitive enough to measure spending that hospitals directly influence. Any metric that does not achieve this goal will ultimately reflect variations within physician practices, not underlying hospital cost efficiency. This will only penalize hospitals for the clinical preferences of community physicians, a factor that is beyond the control of hospitals.

HFMA continues to strongly recommend that CMS take the following steps to ensure that hospitals aren’t inappropriately penalized for factors beyond their control related to the overall efficiency of patient care.

  • Delay implementation of the efficiency metric until after the “Physician Value-Modifier” is implemented into the payment system for all physicians. Hospitals should not be expected to bear the brunt of penalties related to physician preferences. Implementing a penalty on only one side of the equation will only further misalign the financial incentives between physicians and hospitals and fail to improve the quality of care for Medicare beneficiaries.
  • Work with hospitals to refine the efficiency metric. Limiting the measurement to only conditions related to the index admission would be a significant improvement over all spending over a 30-day period and would be a more accurate proxy for factors within a hospital’s control.
  • As discussed under the readmissions section, CMS needs to understand the impact on hospital specific readmissions rates that operating in HPSA has. If there is a positive correlation between being located in a HPSA and higher potentially preventable readmission rates, this will also likely negatively impact the efficiency metric for providers in HPSAs. CMS should adjust the efficiency metric to mitigate the impact of operating in a HPSA on the hospital efficiency measure.
  • As discussed under the readmissions section, CMS needs to understand the impact of SNF quality on hospital specific readmissions rates. If there is a positive correlation between receiving patients from low quality SNFs and higher potentially preventable readmission rates, this will also likely negatively impact the efficiency metric for providers in HPSAs. CMS should adjust the efficiency metric to mitigate the impact of SNF quality on the hospital efficiency measure.

Hospital IQR Program

HFMA’s Value Project Report, Defining and Delivering Value, found that only 45 percent of providers agreed that quality metrics were either “very consistently” or “somewhat consistently” defined across payers. Moving forward, HFMA believes that CMS needs to convene a working group across the various Medicaid programs and major national/regional payers in an effort to align quality metrics across payers. This would greatly reduce the administrative burden on providers and also facilitate the transition to accountable care models.

Specific to the proposed rule, HFMA is concerned that several of the measures lack NQF endorsement and question the appropriateness of the new efficiency metrics. Additionally, HFMA would like to better understand CMS’s intended future uses of the voluntary electronic reporting option measures as they include a significant volume of non-Medicare.

Lack of NQF Endorsement: Four of the measures (CABG Readmissions, CABG Mortality, Pneumonia Payment Per Episode, and Heart Failure Payment Per Episode lack NQF endorsement. HFMA believes these measures need to receive NQF endorsement prior to inclusion in the IQR.

Efficiency Metrics Include Spending Over Which Hospitals Have Little Control: Similar to the general Medicare per beneficiary spend measure the Pneumonia Payment Per Episode and Heart Failure Payment Per Episode reflect the decisions of a broad array of healthcare providers across the care continuum. We believe that CMS should delay the inclusion of these measures into the IQR until all of the issues outlined above in the discussion of the overall efficiency metric are addressed appropriately for these specific measures.

Voluntary Electronic Measures Include Significant Non-Medicare Populations: Four of the measures (Hearing Screening Prior to Hospital Discharge – NQF #1354, PC-05 Exclusive Breast Milk Feeding – NQF #0480, Home Management Plan of Care Document Given to Patient/Caregiver, and Healthy Term Newborn – NQF #0716) proposed for the voluntary electronic reporting option are focused on patient populations that have a low representation of Medicare beneficiaries. While CMS has not yet proposed to make these measures mandatory for the IQR payment determination or included any of these measures in the VBP program, HFMA believes it would be inappropriate to tie Medicare payment (either IQR or VBP) to measures where a significant portion of the measured population is not covered by Medicare. Other payers are likely using these measures (or similar) for some form of payment determination. We believe it is inappropriate to duplicate these efforts.

Cost Offset Adjustments Associated with the Delayed Implementation of the “Two-Midnight” Rule

As part of CMS’s “two-midnight” rule, the 2014 IPPS rule finalized a proposed .2 percent budget neutrality adjustment. The proposed rule estimated that this would reduce overall payments to hospitals by $220m. In its comment letter on the 2014 proposed IPPS rule HFMA encouraged CMS to forego the budget neutrality adjustment.

HFMA continues to believe that the budget neutrality adjustment is unnecessary as other analysis has shown that CMS’s projection overstated the positive impact on providers of the two midnight rule. Repealing the reduction would also give CMS an opportunity to revaluate the need for and scale of any necessary budget neutrality adjustment required by implementation of the two midnight rule.

Medicare Payment for Short Inpatient Hospital Stays

HFMA appreciates CMS’s request for assistance in defining and appropriately paying for short inpatient hospital stays. HFMA is working with its members to develop more detailed responses to CMS’s questions which will be submitted to CMS later this summer in a separate comment letter.

Transparency Requirement Under the Affordable Care Act

HFMA appreciates and supports CMS’s efforts to implement the transparency requirement under the affordable care act in a flexible manner. However, HFMA questions the effectiveness of transparency efforts that are charge-based.

A recent report13  developed by an HFMA taskforce comprised of representatives from consumers, hospitals, physicians, insurers, employers, and other key stakeholders recently agreed that all Americans, regardless of their insurance status, should be able to receive accurate price estimates from a reliable source; that transparency should help people make meaningful price comparisons ahead of service; and that price estimates should be accompanied by other relevant information (e.g., quality, safety, or outcomes) that will help consumers assess the value of a healthcare service. The continued emphasis on releasing charge data does not further these goals.

Some of the key recommendations for payers include:

  • Health plans should help members estimate their expected out-of-pocket costs, based on their current deductible status along with copayment and coinsurance information.
  • Health plans often have access to price information for many providers in a given region, which they can use to help members factor price into their decision-making process.

Given Medicare’s role as a payer, we would encourage CMS to follow these recommendations for both traditional Medicare and Medicare Advantage plans.

Appropriate Claims in Provider Cost Reports; Administrative Appeals by Providers and Judicial Review

CMS proposes to eliminate the requirement that a provider either claim reimbursement on its cost report for a specific item or self-disallow the item and file the cost report under protest in order for the PRRB to have jurisdiction over that item. Instead, the proposed rule states a provider must include all items for which it is requesting payment on its cost report as a condition for payment for those items. This requirement would apply even if the provider believes the payment requested may not comply with Medicare policy. If a provider does not include an appropriate claim for an item in its cost report, it would not receive payment for that item and would also lose the ability to appeal that item to the PRRB. Under the proposed change, a provider that fails to include an item on its cost report could file an amended cost report or request a reopening by its MAC to add the excluded item; however, whether to accept an amended cost report or issue a reopening is entirely at the MAC’s discretion under current Medicare regulations.

There are many instances in which a provider would need to include additional data or items in its cost report to file for appropriate reimbursement that cannot be accurately ascertained (and therefore comply with CMS regulations) at the time of cost report filing. One example is Medicaid DSH days. Even though cost reports are filed five months after the end of a provider’s fiscal year, it’s not uncommon for a hospital’s eligible Medicaid days to increase significantly for 12 or more months after the end of a fiscal year as financial assistance staff helps patients through the retroactive eligibility process. The incremental days determined as eligible after a cost report is filed represent a significant amount of DSH reimbursement, and in some instances may make the difference in whether or not a hospital qualifies for DSH. Therefore, HFMA believes that CMS is leaving too much discretion in the hands of MACs as to whether or not a cost report is allowed to be reopened or amended. If CMS elects to finalize this policy, it needs to clearly compel MACs, via regulation, to accept amended cost reports or allow cost reports to be reopened.

HFMA looks forward to any opportunity to provide assistance or comments to support CMS’s efforts to refine and improve the 2015 IPPS Proposed Rule. As an organization, we take pride in our long history of providing balanced, objective financial technical expertise to Congress, CMS, and advisory groups.

We are at your service to help CMS gain a balanced perspective on this complex issue. If you have additional questions, you may reach me or Richard Gundling, Vice President of HFMA’s Washington, DC, office, at (202) 296-2920. The Association and I look forward to working with you.


Joseph J. Fifer, FHFMA, CPA

President and Chief Executive Officer

Healthcare Financial Management Association

About HFMA

HFMA is the nation’s leading membership organization for more than 40,000 healthcare financial management professionals. Our members are widely diverse, employed by hospitals, integrated delivery systems, managed care organizations, ambulatory and long-term care facilities, physician practices, accounting and consulting firms, and insurance companies. Members’ positions include chief executive officer, chief financial officer, controller, patient accounts manager, accountant, and consultant.

HFMA is a nonpartisan professional practice organization. As part of its education, information, and professional development services, HFMA develops and promotes ethical, high-quality healthcare finance practices. HFMA works with a broad cross-section of stakeholders to improve the healthcare industry by identifying and bridging gaps in knowledge, best practices, and standards.

Links to Comment Letters

DSH Reduction:
Comment Letter to CMS: FY14 IPPS Proposed Rule
HFMA Comments on Medicare DSH Payment Reductions

Comment Letter to CMS: FY14 IPPS Proposed Rule
HFMA Proactively Comments on the CMS Hospital Readmissions Reduction Program
HFMA’s Comment Letter to CMS on Hospital Value-Based Purchasing

Medicare Part B Rebilling:
HFMA Comments on Medicare Part B Inpatient Hospital Billing and the RAC Program

Value-Based Purchasing:
Comment Letter to CMS: FY14 IPPS Proposed Rule
HFMA Comments on the CMS Hospital Inpatient Value-Based Purchasing Program
HFMA’s Comment Letter to CMS on Hospital Value-Based Purchasing

HAC Penalty:
Comment Letter to CMS: FY14 IPPS Proposed Rule

1 CMS Data, received May 30, 2014
2 “Where the States Stand on Medicaid Expansion,” The Advisory Board Company
3 “Updated Estimates of the Insurance Coverage Provisions of the Affordable Care Act,” The Budget and Economic Outlook: 2014-2024
4 Letter from CBO to Rep. Nancy Pelosi, Congressional Budget Office
5 “The Cost and Coverage Implications of the ACA Medicaid Expansion: National and State-by-State Analysis,” Kaiser Commission on Medicaid and the Uninsured;  “Where the States Stand on Medicaid Expansion,”#160;The Advisory Board Company; HFMA analysis
6 Kugel, M; Lloyd, D
7 “Refining the Hospital Readmissions Reduction Program,” MedPac
8 Parchman ML, Culler SD. Preventable hospitalizations in primary care shortage areas. An analysis of vulnerable Medicare beneficiaries. Arch Fam Med. Nov-Dec 1999;8(6):487-491
9 “Medicare Nursing Home Resident Hospitalization Rates Merit Additional Monitoring,” Department of Health and Human Services, Office of the Inspector General.
10 Value Project Phase 2, HFMA.
11  Patient ratings to affect Medicare payments to hospitals, The Washington Post
12 Patient Satisfaction as a Possible Indicator of Quality Surgical Care, JAMA Surgery
13 “Price Transparency in Health Care: Highlights from the Task Force Report,” HFMA.


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