New York, Tennessee score big in HCFA turnabout on DSH
New York, Tennessee score big in HCFA turnabout on DSH
Hospitals that serve a disproportionate number of poor and elderly appear likely to receive a five-year, $2.14 billion boost from the federal government.
Interim final rules published by the Health Care Financing Administration (HCFA) in January would allow hospitals in Delaware, Hawaii, Massachusetts, Missouri, New York, Oregon, Tennessee, and Vermont to use days provided under so-called Medicaid expansion programs in its calculation of Medicare disproportionate share payments. Medicare disproportionate share hospitals (DSHs) receive funding tied to the level of care provided to Medicaid patients and low-income elderly.
"We’re thrilled about it," says Lynne Fagnani, vice president for finance and reimbursement at the National Association of Public Hospitals and Health Systems in Washington, DC.
Effective for discharges from Jan. 20 onward, the interim final rule allows hospitals to count as Medicaid the care provided to people who are eligible for the program through a section 1115 waiver. The rule tweaks earlier policy that says care to people in a Medicaid section 1115 research and demonstration project could be included in the definition, but only if such people could have enrolled in Medicaid without a waiver anyway.
"We believe allowing hospitals to include the section 1115 expanded waiver population in the Medicare DSH calculation is fully consistent with the congressional goals of the Medicare DSH adjustment to recognize the higher costs to hospitals of treating low-income individuals covered under Medicaid," states the narrative in the interim final rule published in the Federal Register Jan. 20. Comments will be received on the rule through the close of business on March 20.
In New York, hospitals have been drawing down the higher reimbursement all along, and the policy keeps intact a critically important source of revenue, says Jeannie Cross, vice president for communications for the Healthcare Association of New York State. About 130 New York hospitals are affected, 20 of which would have fallen below the Medicare DSH threshold altogether under a restricted definition, she says.
What’s in a name?
Arriving at a definition of what constitutes a Medicaid day for the purposes of the Medicare DSH payment has been a tortured, multi-year process for federal officials and hospital representatives alike.
In order to satisfy hospitals and eliminate variation in the practices of third-party intermediaries, in early January, HCFA allowed the payment for certain disputed days, but restricted hospitals’ ability to go back and request the higher reimbursement if they had not been doing so all along. (See "Hospitals can keep disputed DSH payments," State Health Watch, February 2000, p. 8.) Another point of contention is that the two DSH guidelines issued in recent weeks still don’t recognize programs, such as those without section 1115 waivers, that states may administer through the Medicaid program but fund completely with state funds.
"I think a lot of these problems are a product of the fact that Medicaid isn’t Medicaid anymore," says Ms. Fagnani. "There are all these other categories of individuals. The purpose of the adjustment was to reflect low-income individuals, not to reflect fine distinctions on who is or isn’t in one of those categories."
The HCFA interim final rule notes the Medicare DSH program predates the ability of states to experiment with their Medicaid programs and didn’t anticipate how that flexibility might complicate the legal definition of a Medicaid day.
The impact of the latest policy change varies dramatically among the eight states. Two states with close ties to the administration in this election year, New York and Tennessee, account for almost three-fourths of the total disputed DSH payments, with New York expecting about $850 million over five years and Tennessee about $700 million over the same time period.
Barely a ripple
On the other hand, the change is barely making a ripple in other expansion program states. When the interim final rule was published, for example, Hawaii Medicaid officials weren’t even sure how many of its 123,000 Medicaid managed care enrollees were part of its section 1115 expansion population. The head of the association representing the state’s acute and long-term facilities didn’t know the financial impact of the rule and doubted it would be significant.
"It’s not going to affect a great number of facilities here," says Richard Meiers, president and chief executive officer of the Healthcare Association of Hawaii. "It will have an impact here, but certainly not the impact we would like to have seen."
Similarly, the Missouri Hospital Association has no idea what the impact of the policy change will be on members, says spokeswoman Barbara Long. Association members are working with state officials to establish a tracking system to monitor the effect of the change, she says.
HCFA officials told Massachusetts hospitals the policy would mean about $200 million over five years for hospitals in the state, says Joe Kirkpatrick, vice president for health care finance and managed care for the Burlington-based Massachusetts Hospital Association. The hospitals’ own calculations suggest the number is closer to $100 million, he says.
While "grateful" for HCFA’s decision, the National Association of Public Hospitals and Health Systems would like to see the DSH formula go even further, says Ms. Fagnani. The association supports recommendations by the Medicare Payment Advisory Commission (MedPAC) for statutory changes that would, for the purposes of DSH, define low-income "broadly, to include all care to the poor."
MedPAC would include in the definition care to patients in indigent care programs other than Medicaid as well as uncompensated care, including both charity care and bad debt.
"All of these variations of who and who isn’t Medicaid would be resolved if the formula was as broadly all-encompassing as possible and included anyone who is considered low-income," says Ms. Fagnani.
Even with the $700 million bonus provided courtesy of the latest policy change, Tennessee hospitals are chafing under a previous HCFA stance. That policy allows contested days to be recognized retrospectively, but only in hospitals that had been asking for them all along or that had met an Oct. 15 HCFA deadline to ask for reconsideration of the affected Medicare cost reports.
Hospitals that used a more conservative definition of Medicaid and have not already asked for a second look have no further recourse to do so, under current policy.
"Groups that have reported things correctly are being penalized, because they’re not getting paid," says Tennessee Hospital Association vice president David McClure.
Contact Ms. Fagnani at (202) 585-0100, Mr. McClure at (615) 401-7465, Ms. Cross at (518) 431-7600, Ms. Long at (573) 893-3700, and Mr. Kirkpatrick at (781) 272-8000, ext. 173.
The MedPAC recommendations are found in "Report to the Congress: Medicare Payment Policy," March 1999, Medicare Payment Advisory Commission. Contact MedPAC at (202) 653-7220, or visit its Web site: www.med pac.gov.
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