In this episode, part one of a three-part series on uncompensated care, we are joined by Bob Mahoney, senior consultant for BESLER. Bob will discuss DSH and how it relates to uncompensated care funding for hospitals.
Highlights of this episode include:
- Bob explains why DSH is part of the entire uncompensated care pool.
- What effects has the ACA had on DSH since it was recently ruled unconstitutional?
- Tips on what hospitals can be doing right now to ensure they are being reimbursed properly.
- The importance of hospitals submitting clean and accurate logs of Medicaid days with their cost reports.
- And more…
Download our new special report for more on the interdependence of DSH, S-10, and Bad Debts and how they determine whether a hospital will receive its appropriate share of uncompensated care reimbursement.
Mike Passanante: Hi, this is Mike Passanante. And welcome back to the Hospital Finance Podcast.
Today, we’re going to be covering part one of our three-part series around uncompensated care. And I am joined by Bob Mahoney who’s a senior consultant on our Reimbursement Services Team here at BESLER.
Bob, welcome to the podcast.
Bob Mahoney: Michael, thank you! Nice to be here. I’m going to be talking about DSH today and how it relates to uncompensated care funding for hospitals.
Mike: Yeah, and that’s really my first question. So this is going to be a three-part series. And we’re going to be talking about DSH first time out. And then, we’re going to be talking about the S-10. And we’re going to be talking about bad debt on different podcasts.
But today, you are going to focus on DSH. Why DSH? Why is that part of the entire uncompensated care pool?
Bob: The uncompensated care pool is such a significant number for hospitals and their bottom line. You really can’t look at uncompensated care in terms of hospital reimbursement in the Medicare cost report without looking at DSH along with bad debt and the S-10 because that’s where they’re all coming together.
So today, what I’m going to do is focus on what you need to do keep your DSH numbers correct and positive and compliant, and also how this ties in with your uncompensated care, where it’s going to go in the S-10, and also how it affects bad debt.
The uncompensated care number—and I’ll probably repeat this a couple of times—for 2019, in the final rule, is $8 billion. It’s a significant number for hospitals. And DSH is a large part of that.
Mike: So, let’s get something laid out on the table because there was a ruling in December of 2018 by a federal judge in Texas declaring the Affordable Care Act unconstitutional. And of course, DSH is affected by the ACA.
So, is there any effect on DSH at this point?
Bob: At this point, no. And for something to go through the court system, it’ll take time. But on December 14th, a federal judge in North Texas district ruled that the entire ACA was rendered unconstitutional after Congress in 2017 repealed the tax penalty and forced an individual mandate. This ruling of course is being appealed by the Fifth Circuit Court of Appeals and possibly the Supreme Court before it’s completely settled.
So this would be probably late 2019 before we hear about it again; and probably into 2020 if it goes to the Supreme Court.
But as most people on this podcast remember, it was Section 3133 of the ACA which changed the Medicare DSH starting in 2014. CMS adjusted Medicare DSH payments. And 75% of the funding came from the newly insured population which was part of the uncompensated care pool which, as I’ve said earlier, was $6.8 billion in 2018. It’s projected to be over $8 billion in 2019.
Mike: So Bob, you mentioned that 75% of the funding is coming from newly insured. What about the 25%?
Bob: The other 25% which some people called classic DSH is still very important. And it’s how you qualify for DSH. And obviously, if you qualify for DSH, it gets you into the uncompensated care pool. And it’s 25% based on your patient volume. So it’s a very important number. And it triggers the whole uncompensated care and S-10 worksheet.
Mike: So, given this new mix, is the importance of the empirical DSH been reduced?
Bob: Yes and no. I mean empirical DSH is still an impact for many hospitals. Like I said, you need it to qualify to get into the uncompensated care pool and be a DSH. It affects your 340B which is very important with pharmaceutical payments—drug charges, we know, being high.
The ACA with the Medicaid expansion, allowed many states to expand their Medicaid programs. They allowed hospitals to qualify that hadn’t previously qualified. Those hospitals are finding it challenging because they’re less experienced. Becoming a DSH hospital and getting the UCC money does have its benefits, but there is some work to do with that.
You need to fill out your cost report properly and have the right documentation so you can protect your appeal rights later on as these laws keep changing.
Mike: That’s right. And hospitals work hard to make sure they get reimbursed properly.
Bob, do you have any tips on what hospitals could be doing now?
Bob: They need to optimize their Medicaid eligible days by capturing and validating every patient eligible to be included in the Medicaid fraction DSH calculation. Like I said, that gets you the 25% but also kicks off the 75%. And I think it’s real important nowadays, it’s a regulation, that hospitals submit a clean and accurate log of Medicaid days with their cost report.
Mike: And that’s a requirement now, isn’t that correct?
Bob: Yes, that is a requirement in the 2019 final rule. A Medicaid eligible daylog that agrees with the days being claimed be filed with the cost reports. Hospitals need to file a report that is clear of errors and compliant. That would preserve their appeal rights. And it makes the process even smoother.
Mike: Yeah, certainly a complex area, Bob, and one that’s going to potentially be affecting hospitals that maybe didn’t deal with DSH in the past. So it’s something that everyone needs to be aware of.
Bob: And it is important. Tying this all back together, the UCC, not only when you submit the cost report, you need to submit the log for your DSH days, but you also need to submit your bad debt log and an uncompensated care log.
So, these are big changes. And that’s how the S-10’s are going to really affect all of these and how you’re paid. It’s a combination of your DSH money, your uncompensated care pool, and the hospital’s bad debts. You have to submit clean logs. This is going to be a big number going forward. That’s 75%. And eventually, it’ll be 100%.
So, thank you.
Mike: Yeah, I look forward to exploring those on future podcasts in this series and hearing more about that in this most complex area and this new horizon of the uncompensated care pool that we’re dealing with.
Bob, thanks so much for joining us on the podcast today.
Bob: Thanks for having me, Mike.
Mike: If you’d like to download our new paper that talks about uncompensated care, and specifically S-10, bad debt and DSH, go to Besler.com/uncompensatedcare, and get your copy today.