On October 3, 2013, CMS published an interim final rule related to certain changes to the disproportionate share hospital (DSH) uncompensated care payment methodology that CMS set forth in the FY 2014 Inpatient Prospective Payment Systems (IPPS)/long-term care hospital (LTCH) PPS final rule.  The changes affect how CMS will reconcile interim to final uncompensated care payments to hospitals with cost report years that span more than one federal fiscal year.  The rule also provides for inclusion of the consideration of Indian Health Service (IHS) hospitals in Factors 1 and 3 of the uncompensated care formula.  To learn more background regarding the IPPS final rule to the DSH payments, please see the August 5, 2013 Health Headline on CMS Releases FY 2014 Hospital IPPS Final Rule prior to reading the changes set forth in the interim final rule.

CMS clarifies in its interim final rule that with respect to the reconciliation process for uncompensated care payments for hospitals with cost reporting periods that begin after October 1, 2013, it intends:

to align final payments for the uncompensated care payment with each individual hospital’s cost reporting periods and to reconcile interim uncompensated care payment amounts on the hospital’s cost report for the proportion of the cost reporting period that overlaps a Federal fiscal year and in which the interim payments were made or should have been made.

78 Fed. Reg. 61191, 61193 (Oct. 3, 2013).  In order to accomplish this alignment, a hospital with cost reporting periods that span the Federal fiscal year will be eligible for the respective pro rata shares of its uncompensated care payment if it were eligible for DSH in that cost reporting period.  If the hospital were to be ineligible for DSH in that cost reporting period, it would be ineligible to receive the respective pro rata share of the uncompensated care payment for the respective Federal fiscal year.

As for the treatment of IHS hospitals, CMS revises its original policy for the data that will be considered in calculating Factor 1 and Factor 3 for FY 2014 and subsequent years.  In particular, for purposes of Factor 1, with respect to the March 2013 update of Medicare Hospital Cost Report Information System (HCRIS), CMS will also consider supplemental cost report data provided by IHS hospitals to CMS as of March 2013.  CMS will also recalculate Factor 1, to incorporate the Office of the Actuary’s estimate of Medicare DSH payments to IHS hospitals, based on this supplemental data.  CMS also changes its policy with respect to calculating Factor 3 and now will also allow the Medicaid days for IHS hospitals to be included in determining Factor 3 of the new uncompensated care payment as opposed to only considering the SSI days.  CMS concluded that the omission of the Medicaid days significantly understated the actual amount of uncompensated care furnished by these hospitals.

Comments must be submitted no later than 5:00 p.m. on November 29, 2013, to CMS for consideration, and the regulations are effective October 1, 2013.  The interim final rule is available here.