Blog, Reimbursement, The Hospital Finance Podcast®

Bed Management Webinar [PODCAST]

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In this episode, we’re pleased to welcome back Tim Powell, Senior Reimbursement Consultant at BESLER, to give us a glimpse into the upcoming BESLER Webinar: Reimbursement Best Practices Series – Bed Management on Wednesday, July 12, at 1 PM ET.

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Highlights of this episode include:

  • What type of facilities are impacted by “Available bed days”
  • Available beds vs. licensed beds
  • Types of patient beds that are excluded
  • Observation-only beds
  • DSH payment impact

Kelly Wisness: Hi, this is Kelly Wisness. Welcome back to the award-winning Hospital Finance Podcast. We’re pleased to welcome back Tim Powell, a senior reimbursement consultant here at BESLER. In this episode, Tim will give us a glimpse into the upcoming BESLER webinar, the next in our Reimbursement Best Practices series, Bed Management, that we’re hosting on Wednesday, July 12, at 1 PM ET. Welcome back to the show, Tim, and thanks for joining us.

Tim Powell: Well, thank you very much. I really enjoy these things. And welcome from sunny and warm Miami, Florida.

Kelly: Awesome. Well, let’s jump in. What types of facilities are impacted by the number of beds and the related number of, quote, “available bed days” reported on the Medicare Cost Report?

Tim: Well, only teaching hospitals – and when I say teaching hospitals, that means that they’re covered under 42 CFR section 412.105 – are impacted by the number of available bed days that are reported. This impacts their funding and hence influences the financial viability of these institutions because of the large impact of these payments. These hospitals play a crucial role in educating our future physicians. They are both direct and indirect costs associated with GME that these hospitals have to bear. And Medicare provides some support for these costs, but it is largely based on a complex formula and takes several factors into account, including the number of full-time equivalent residents, the hospital’s Medicare patient mode, and the per resident amount from the base year. And specifically here, the ratio of resident FTEs to the average number of available beds for the facility. However, it is important to remember that Medicare’s formula for reimbursing hospitals is quite complex and includes a multitude of factors, and this is just one piece of the puzzle.

Kelly: It definitely is complex. Are available beds and licensed beds the same thing?

Tim: The number of licensed beds a hospital has is essentially a regulatory upper limit that is imposed by the state. However, the practical operational capacity of the hospital that has the number of beds that it can actually use to provide care on a daily basis is typically much smaller and can be influenced by several factors. First, there’s just physical infrastructure, including the number of oxygen hookups and IT supported that are available. There are crucial components in providing the modern medical care. For example, in an intensive care unit, the bed requires a multitude of different medical devices and machines that may be connected to the oxygen supply and the hospital’s IT system for monitoring and management. Therefore, the hospital’s infrastructure plays a key role in determining how many beds can be operational at any time. And second is the staffing issue. The number of available nursing staff is a critical determinant of the hospital’s operational capacity. Even if a hospital has the infrastructure to support a large number of beds, without sufficient nursing staff to provide care, those beds cannot be effectively utilized.

This is because the nurse-to-patient ratio is a crucial factor in determining patient safety and quality of care. When this ratio is too high, it may lead to increased risk of errors and decreased patient satisfaction and worse health outcomes. Hence, a hospital staffing level plays a major role in determining its operational bed capacity. Consequently, when it comes to reimbursement and funding, it’s necessary to consider the actual operational capacity of the hospital, not just the maximum capacity permitted by the state. This can have a real impact on how resources are allocated in the healthcare system, and it can affect both the financial viability of the hospitals and the quality of care provided to patients.

Kelly: Thank you for that distinction. Are all hospital beds included in the number of available beds?

Tim: Certain types of patient beds are excluded entirely from the determination of available beds. First, and only for the computation of indirect medical education, psychiatric and rehabilitation units that are paid under IPPS or OPPS are paid using a formula using the ratio of patient days divided by the days in the cost reporting period. And second, also importantly, is certain designated units, including designated observation units, which we’re going to talk about in a little bit, as well as designated beds for hospice-only services are fully excluded from the count.

Kelly: Very interesting. So, if an organization has some beds that are designated as “observation-only beds”, would the organization count those beds for Medicare as “available”?

Tim: We’re going to be talking in detail on the webinar about this. And a lot of providers struggle with this. Some providers have units that are called observation units, when in practice if there is an overflow in the hospital or decision is made after admitting a patient for observation that they should be admitted for inpatient care, they stay in the observation unit. You can only completely remove them from the list of beds used to compute the count of available beds if the beds are never used for inpatient stays, and the patients in the unit are transferred when they’re admitted as inpatients. You do get some relief for the mixed-use observation beds as observation bed days are also computed by dividing the number of observation hours by 24 hours in a day, and are adjusted into the IME computation.

Kelly: Thank you for that explanation. Does bed management impact organizations DSH payment?

Tim: A lot of providers ask this question. Disproportionate share, or DSH, payments are partially determined by the ratio of Medicaid days to total days. And after changes in the DSH payment formula in the Accountable Care Act, the impact of this ratio has been greatly diminished. But the number of available bed days does not impact the DSH payment, only the number of actual days.

Kelly: Interesting. So how does an organization’s average daily census indicate that they may have an issue with the number of available bed days reported?

Tim: Well, you should always look at the ratio of patient days to available bed days if you’re a teaching hospital. A low ratio may indicate that you are over-reporting the number of available bed days, and you may be able to make adjustments to your operations that greatly reduce the number of reported available bed days and conversely increase your Medicare reimbursement. So, during the webinar, we’re going to talk at length about what we call the gold standard, which is used to make sure that you can remove certain beds from the beds used to compute the number of available bed days.

Kelly: Very good. And if an organization increased their beds during COVID, do they have to report those beds and bed days to Medicare?

Tim: Well, again, Kelly, we get a lot of questions about this, and also goes along with the overall the overall decision that the number of bed days is supposed to be based on the number of beds that are normally placed in service. But we’re going to discuss in the webinar a significant development in healthcare regulations that came about as a direct response to the COVID-19 epidemic. The Centers for Medicare and Medicaid Services, or CMS, recognizing the immense pressure that the pandemic has put on our healthcare system, introduced some important regulatory flexibilities back in April 30th of 2020. And these changes were specifically designed to help teaching hospitals that needed to temporarily increase their bed capacity deal with the influx of COVID-19 patients. Traditionally, the number of available bed days a hospital has directly impacts the indirect medical education payment amounts that they receive. But CMS recognized that the unique challenges hospitals were facing during the pandemic.

So, they amended the regulations through Section 412.105 D1 in a way that would prevent these hospitals from experienced reductions in their IME payments, even if they had to temporarily increase their bed count. And specifically, I want to mention that the COVID epidemic has been determined to be over. So, any of those adjustments are no longer applied to future periods. So specifically, for the duration of the COVID-19 epidemic, a hospital’s bed count was effectively frozen at the level it was on the day before the PHE was declared. This means that any beds that were added to deal with the pandemic would not negatively impact the hospital’s IME payment. To put the policy into action, CMS has requested approval from the Office of Managing Budget, or OMB, to make certain amendments to the hospital’s cost reporting form known as the CMS 25-5210 and the instructions that come with it. One major change proposed is the addition of a new line, line 34, to Worksheet S3. This line would be dedicated to COVID-19 PHE bed days or the number of days temporarily added during the pandemic.

The draft instructions indicate that the total of these additional bed days would be excluded from the calculation of the hospital bed days available on worksheet E, part A, line 4. This important update represents a crucial adjustment to how teaching hospitals’ reimbursement for Medicare is calculated, providing financial relief to hospitals at a critical time and ensuring that they have the resources necessary to continue and provide essential care to their communities. And again, we’re going to be delving deeper into these changes during the webinar.

Kelly: Looking forward to that. And thank you so much for joining us today, Tim, for sharing this glimpse into the upcoming webinar on Bed Management that you’re presenting live on July 12th, 1 PM Eastern Time. And as a bonus, you can earn CPE. Thanks again, Tim.

Tim: Thank you very much, Kelly. I really appreciate it.

Kelly: And thank you all for joining us for this episode of The Hospital Finance Podcast. Until next time…

[music] This concludes today’s episode of the Hospital Finance Podcast. For show notes and additional resources to help you protect and enhance revenue at your hospital, visit The Hospital Finance Podcast is a production of BESLER | SMART ABOUT REVENUE, TENACIOUS ABOUT RESULTS.


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