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November 19, 2005

Medicare Disproportionate Share Hospital Adjustment

As a general rule Medicaid and section 1115 Waiver Days secondary payer days may be included in the Medicaid fraction (ratio of Title XIX days to total patient days) of the disproportionate share percentage formula if the primary insurance is not Medicare.

Hospitals may not include dual eligible Medicare/Medicaid days in the Medicaid fraction even if the Medicare patient has exhausted Part A coverage. Hospitals may not include dual eligible Medicare HMO/Medicaid days in the Medicaid fraction either. CMS indicates that these days will be included with the Medicare SSI fraction (ratio of Medicare SSI days to total Medicare days) if the patient is entitled to Medicare Part A and SSI. This policy is effective for discharges occurring on or after October 1, 2004.

See page 256 at Federal Regulations and Notices - CMS-1428-F(2) Display

Hospitals should verify prior and future Medicare SSI data to validate that their payments are appropriate and consider appealing any discrepancies. A hospital may request to have its Medicare SSI fraction recomputed based on the hospital's cost reporting period if that year differs from the Federal fiscal year (9/30). This request may be made only once per cost reporting period, and the hospital must accept the resulting DSH percentage for that year, whether or not it is a more favorable number than the DSH percentage based on the Federal fiscal year. CMS has proposed to furnish the data for a hospital's patients eligible for both SSI and Medicare at the hospital's request beginning with cost reporting periods that include December 8, 2004. Currently, a hospital must have an appeal properly pending before the Provider Reimbursement Review Board (PRRB) or before an intermediary on the issue of whether it is entitled to DSH payments, or the amount of such payments in order to obtain access to the relevant data that CMS uses to determine the SSI fraction.

Labor/delivery room days are to be excluded from total days and from Medicaid days in the Medicaid fraction of the formula. Labor/delivery room days relate to maternity patients who are in the labor/delivery area at the census hour and have not yet used a bed on the routine nursing floor. As this will likely reduce Medicare disproportionate share hospital (“DSH”) reimbursement it is likely that appeals will occur related to this CMS policy. Hospitals should claim the appropriate reimbursement and adequately disclose their position.

If a hospital utilizes birthing rooms then a time study is required according to CMS for proper classification of the labor/delivery portion of the routine costs to ancillary services. This reclassification will also result in a decrease of the available bed count for purposes of determining whether the 100-bed DSH threshold is met to receive the higher lever of DSH payment. This treatment is quite similar to reducing available beds by non-distinct outpatient observation bed days which has been a matter of controversy in several jurisdictions.

Posted by Michael McKibben at November 19, 2005 06:16 PM

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