In the preamble to the final inpatient prospective payment system (IPPS) rule, the Centers for Medicare & Medicaid Services (CMS) finalized its proposed methodology for calculating providers' SSI Ratios (aka Medicare Fractions) for purposes of the Medicare disproportionate share hospital (DSH) adjustment. 75 Fed. Reg. at 50,275 (Aug. 16, 2010).

As promised by CMS in its recent Ruling 1498-R (April 28, 2010), the preamble contains details relating to the new SSI Ratio calculation process, which will be utilized by CMS and the Medicare administrative contractors on a going-forward basis and when recalculating providers' DSH adjustments for pending administrative appeals and open cost reports. The new process was initially prompted by the D.C. district court's ruling in Baystate Medical Center v. Leavitt, 545 F.Supp.2d 20 (D.D.C. 2008), in which the court held that the agency's prior data-matching process did not utilize the best available data to match Medicare patient day information with SSI eligibility data when calculating SSI Ratios.

Going forward, CMS has pledged to use a wider range of databases (the SSI eligibility data file, the Medicare Enrollment Database (EDB), and the MedPAR file) in performing its revised match process, and has delayed the timing of the data match to 15 months after the close of the federal fiscal year in order to obtain more accurate and complete data (the agency previously used data updated only six months after the close of the federal fiscal year). The methodology outlined in the preamble to the final rule is virtually identical to the proposed rule; the only modification being the adoption of a policy to exclude a record from the data-matching process if CMS finds a Health Insurance Claims Account Number (HICAN) in the MedPAR file that cannot be located in the EDB (an unlikely scenario, according to CMS).

The preamble to the proposed rule also is significant in that CMS finalized regulatory amendments "clarifying" that days relating to Medicare Advantage patients belong in the SSI Ratio portion of the DSH calculation -- as opposed to the Medicaid Fraction -- because Medicare Advantage patients are still "entitled" to Medicare Part A. This interpretation is currently the subject of litigation.