Health Care Industry Brochure

Fiscal Year 2015 DSH Reimbursement Database Available

On August 4, 2014, the Centers for Medicare & Medicaid Services (CMS) released the 2015 Inpatient Prospective Payment System Final Rule. In the final rule, CMS updated estimates from the Office of the Actuary and the Congressional Budget Office (CBO), leading to a substantial decrease in Uncompensated Care Disproportionate Share (DSH) payments compared to the proposed rule. The uncompensated care portion of the DSH payment is a product of three factors:

Factor 1:  This factor represents 75 percent of DSH payments under the old DSH methodology. Using the July 2014 Office of the Actuary estimate for Medicare DSH payments for FY 2015, CMS has calculated Factor 1 to be approximately $10.038 billion—significantly less than the proposed rule estimate of $10.654 billion.

Factor 2:  CMS has employed a weighted average of the number of uninsured individuals under the age of 65 for calendar years 2014 and 2015, according to the CBO April 2014 estimate. The CBO estimates the uninsured rate will decrease from 16 percent in 2014 to 13 percent in 2015. The uninsured percentage then is applied to a statutory formula, resulting in a calculated Factor 2 of 76.19 percent. This estimate also is lower than the proposed rule estimate of 80.36 percent.

Factor 3:  CMS will continue to use insured low-income days (Medicaid days plus Medicare SSI days) as a proxy for calculating Factor 3. The 2012 SSI days, along with Medicaid days from the 2011/2012 Medicare cost reports as updated in the March 2014 HCRIS database, are used to determine Factor 3. Medicaid days are obtained from Worksheet S-2 of the Medicare cost report for hospitals that CMS believes will qualify for the empirical DSH payment. The number of hospital days is divided by the total days of all DSH hospitals to calculate a hospital’s specific ratio.

The total uncompensated care payment amount (Factor 1 x Factor 2) is substantially less than what was paid in 2014 and what was originally proposed for 2015. The 2014 pool of uncompensated care payments was approximately $9.04 billion and proposed to be $8.56 billion in 2015. However, due to changes in estimates explained above, the 2015 uncompensated care payment is calculated to be $7.65 billion, nearly a $1 billion decrease from the proposed rule. In addition, the Affordable Care Act gives CMS authority to make these estimates and, therefore, cannot be challenged through administrative or judicial review.

Hospitals in states that elected to expand Medicaid will benefit from a higher empirical DSH payment and potentially higher uncompensated care payments in future years if the methodology for Factor 3 continues to be used. However, CMS is likely to adopt Worksheet S-10 of the Medicare cost report to calculate uncompensated care payments in the near future, which will result in large fluctuations in payments from year to year.

BKD has created a database (see below) to illustrate the variance of uncompensated care payments from fiscal year 2014 to 2015 by hospital.

For more information on how the final DSH instructions could affect your organization, contact your BKD advisor.

DSH Reimbursement Database Download

After downloading the database, enter your hospital provider number into the red area to find your uncompensated care payments.

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