Medicare Payment and Reimbursement

Hospitals get relaxed Medicare repayment terms, short delay of DSH cut in federal funding bill

October 7, 2020 9:54 pm
  • The federal government gave hospitals a nine-month delay before repayment of Medicare loans starts.
  • The start of Medicaid DSH payment cuts was delayed 11 days.
  • Medicare and Medicaid extenders were authorized to continue until Dec. 11.

Hospital provisions in a recently enacted federal funding measure include the relaxation of some provisions of Medicare advance payment loans and a brief delay of $4 billion in cuts to Medicaid Disproportionate Share Hospital (DSH) payments.

On Oct. 1, President Donald Trump signed into law a continuing resolution that generally extends existing federal funding levels for healthcare and other programs through Dec. 11.

Changes to the Medicare Accelerated and Advance Payment Program, through which hospitals were eligible to receive six months of advance payments, include allowing hospitals to request:

  • Delaying recoupment of payments until one year from issuance
  • Implementing a graduated recoupment schedule in which 25% of Medicare payments will be withheld for the first 11 months of recoupment, with 50% withheld during the following six months
  • Extending the time frame for full repayment from one year to 29 months from the date of the first payment

From March 28 to April 26, CMS approved more than 45,000 applications for advance payments and paid made than $100 billion to hospitals, physicians, nonphysician practitioners and suppliers of durable medical equipment.

Repayment through withheld Medicare payments was scheduled to begin 120 days after issuance of the advance payments or by the end of August. However, that timetable was slowed after hospital groups urged CMS to provide time for Congress to modify the repayment schedule.

The continuing resolution also reduced the interest rate on outstanding balances remaining after the 29-month repayment period from 10.25% to 4%.

Within two weeks, CMS will publish online data on total advance payments distributed to each provider of services or supplier since passage of the CARES Act, which authorized the payments.

For providers wanting to use the leeway provided in the new legislation, additional guidance is expected from CMS.

Chad Mulvany, director of healthcare finance policy, strategy and development, for HFMA, said the repayment changes were “good first steps.”

“Obviously, we would like to see full loan forgiveness and will continue working with Congress to help them understand the need for this,” Mulvany said.

Chip Kahn, president and CEO of the Federation of American Hospitals, said “the ongoing pressures of the current crisis required a revision of the repayment terms.”

Rick Pollack, president and CEO of the American Hospital Association (AHA), said Seema Verma, administrator of CMS, “managed the recoupment process by calibrating it with the impending congressional action.”

“Their approach avoided potential confusion and significant administrative burden at a time when hospitals are focused on the pandemic,” Pollack said.

Brief delay implemented for DSH cuts

The new measure also delayed until Dec. 11 planned cuts in Medicaid DSH payments. That followed a spring delay as provided by the CARES Act, which put off the $4 billion in scheduled cuts from May 22 to Nov. 30.

The DSH cuts, originally required by the Affordable Care Act to begin in FY14, were delayed four times previously. The delays also ballooned the size of the cuts from their original amounts and now are scheduled to total $44 billion by 2025.

Pollack said AHA will push for extending the delay of Medicaid DSH cuts for the entirety of FY21 (through Sept. 30).

Bruce Siegel, MD, MPH, president and CEO of America’s Essential Hospitals, said the latest delay to the DSH cuts will help hospitals and Congress “work toward a sustainable solution to the threat these cuts pose to healthcare access for low-income patients.”

Siegel urged Congress and the administration to provide more support for hospitals, “especially as the nation faces a predicted increase in COVID-19 cases this fall and winter.”

“We must ensure essential hospitals on the front lines of the COVID-19 pandemic have the resources they need to respond effectively to this public health emergency,” Siegel said.

Medicare, Medicaid extenders also included

The new legislation also provided an 11-day extension, through Dec. 11, for a range of Medicare and Medicaid policies known as extenders. These included:

  • The Medicare work geographic practice cost-index floor
  • Funding for quality measure endorsement, input and selection
  • Funding outreach and assistance for programs to help low-income beneficiaries
  • The Medicaid “Money Follows the Person” rebalancing demonstration
  • Medicaid spousal impoverishment protections for those receiving home- and community-based services
  • The Community Mental Health Services demonstration program at certified community behavioral health clinics


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