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CMS Fixes Problems with Medicare DSH Payment Process in Interim Final Rule

October 4, 2013The Centers for Medicare and Medicaid Services (CMS) Sept. 30 issued an interim final rule clarifying how Uncompensated Care (UC) Disproportionate Share Hospital (DSH) payments will be made for providers with fiscal years that are not concurrent with the federal fiscal year. Comments on the interim final rule are due by 5 p.m. on Nov. 29.

The CMS interim final rule corrects the FY 2014 Inpatient Prospective Payment System (IPPS) final rule methodology so that providers with fiscal years that do not end Sept. 30 will not experience delays or recoupments of payments.  The AAMC supported CMS correcting this significant problem with the IPPS final rule.

The Affordable Care Act (ACA, P.L. 111-148 and P.L. 111-152) requires CMS to reduce 75 percent of Medicare DSH payments to reflect changes in the percentage of individuals under age 65 who are uninsured.  This reduced pool would then be redistributed as an “uncompensated care” payment to each hospital that qualifies for Medicare DSH payments and provides uncompensated care. CMS implemented these changes to the DSH payment methodology in the FY 2014 IPPS final rule[see Washington Highlights, Aug. 9].

In the Sept. 26 letter to CMS, the AAMC and American Hospital Association (AHA) expressed the need to clarify the 81 percent of DSH-eligible providers with cost reporting periods that are not concurrent with the federal fiscal year about when they would receive and reconcile UC payments. The AAMC and AHA urged CMS not to implement the final rule in a way that would require all hospitals with fiscal year ends other than Sept. 30 to pay back to CMS their FY 2014 UC payments made during their fiscal 2013 cost reporting periods, only to get them back at a later date.

Under the interim final rule, CMS will align final UC payments with each individual hospital’s cost reporting period and will true up the interim uncompensated care amounts on the hospital’s cost report for the proportion of the cost reporting period that overlaps a federal fiscal year.  The corrected methodology in the interim final rule ensures that all hospitals receive UC payments starting Oct. 1, 2013, and will not have to pay these back to CMS because of problematic language in the FY 2014 IPPS final rule.


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Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.

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Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806