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Earlier this year, the Centers for Medicare and Medicaid Services finalized fundamental changes to how it reimburses hospitals for uncompensated care costs. When first proposed, the move raised alarm among physicians, hospitals, health systems, state health departments, and others around the country, and even prompted a lawsuit in New Hampshire.
In the months since the official adoption by the CMS, it remains unclear how the change will affect hospitals around the country, particularly the safety net hospitals that rely on these payments most.
In its final rule issued in April 2017 and finalized on August 2, 2017, the federal agency said the intent of the change is to more fairly distribute a fixed amount of DSH funds to the hospitals most in need. It also argued the change is a more consistent interpretation of the existing statute [Section 1923(g)], provides clarification around language that has been the subject of inquiry over the last decade, and promotes what it calls “fiscal integrity.”
“These allotments essentially establish a finite pool of available federal DSH funds that states use to pay the federal portion of payments to all qualifying hospitals in each state,” the final rule reads. “As states often use most or all of their federal DSH allotment, in practice, if one hospital gets more DSH funding, other DSH-eligible hospitals in the state may get less.”
This is not, however, the way all parties see it. For instance, in a comment submitted to the CMS in September 2016, the National Association of Urban Hospitals expressed its concern that DSH payments already are inadequate to cover the financial burden associated with providing care in low-income communities, such as translation services and the costs of employing physicians to practice in more challenged settings.2
In a letter to the CMS, the Minnesota Department of Human Services said it agrees with the agency that DSH payments should not be used to “subsidize costs that have been paid by Medicare and other insurers” but disagrees with the agency’s approach. Its argument includes a challenge to the CMS’ statutory authority to change the formula based on existing language.3
“I think the reason it’s contentious is because when you’re dealing with a fixed dollar amount and you’re talking about redistributing dollars, someone is going to lose,” said John McHugh, PhD, professor of health management at the Mailman School of Public Health at Columbia University. “A facility receiving DSH payments is already dealing with high levels of uncompensated care; the hospitals are operating on very thin margins. They are very often getting by because of these payments.”
Despite the CMS’ seemingly good intentions, Bradley Flansbaum, DO, MPH, MHM, a hospitalist at Geisinger Health System and member of the SHM Public Policy Committee, remains skeptical that the hospitals that need and deserve DSH payments will actually see more redistributed in their favor.
If hospitals in need see fewer DSH dollars, Dr. McHugh noted, they will feel the squeeze.
“It’s not easy to operate safety net hospitals,” he said. “And on top of that, hospitals have been operating under a certain assumption and it’s changing, and it takes time to incorporate those changes. There will probably be some fallout for the first couple of years as hospitals are adapting their practices. It could mean loss of services. It could mean the loss of quality physicians and quality staffing, and that can impact patient care.”
How will hospitals adapt?
The CMS did not give hospitals transition time. The reinterpretation became effective in June 2017, just 60 days after the agency issued the final rule. Dr. McHugh said he is not sure why the agency did not build in time for hospitals to adapt, particularly given the uncertainty around the national uninsured rate going forward, with so many potential changes to the American health care system under a new administration.
How any of these changes trickle down to hospitalists remains to be seen, said Dr. Flansbaum. Dr. McHugh believes it could lead to increased patient loads, higher turnover and churn, and fewer experienced physicians in safety net hospitals as younger doctors are hired and burn out. “At the end of the day, that feeds into patient care and patient satisfaction and quality,” he said.
However, hospitals across the country have been living with this “slow burn” for a long time, said Dr. Flansbaum, though not necessarily due to inadequate DSH payments. At least in some areas, reimbursements have gone down, hospital occupancy rates have declined, rural hospitals have closed, hospitals have consolidated, and people have been laid off.
It’s important to ensure the hospitals providing care for high levels of uninsured or underinsured patients receive the help they need, he said, and it’s also important to examine the role hospitals play as a whole in the American health care system.
“It’s an expensive system,” he said. “We have we created a system where, unlike other countries that have developed more vigorous primary or outpatient care, we have created an inpatient health system.”
With the CMS’ change, the government is the only entity that seems to win across the board, Dr. McHugh said. He said he would not be surprised if analysts looked to see how hospitals were affected by it in coming months.
But, he remains optimistic. In fact, the final rule also came with an $800 million increase in the amount of uncompensated care payments for acute care hospitals in fiscal year 2018, the CMS says.4
“Hospitals are adaptable,” Dr. McHugh said. “I think what you’ll see is this will spur some innovation in terms of patient care maybe a few years down the road. It may hit some stumbling blocks in the early going but there may be some positive changes in the future.”
References
1. Medicaid Program; Disproportionate Share Hospital Payments –Treatment of Third Party Payers in Calculating Uncompensated Care Costs. Centers for Medicare and Medicaid Services final rule. Citation 82 FR 16114. Published April 3, 2017. Last accessed August 14, 2017. https://www.federalregister.gov/documents/2017/04/03/2017-06538/medicaid-program-disproportionate-share-hospital-payments-treatment-of-third-party-payers-in
2. Kugler E. 2016-09-14 NAUH Medicaid Program DSH Payments – Treatment of Third Party Payer in Calculating Uncompensated Care Costs. September 14, 2016. Last accessed August 14, 2017. https://www.regulations.gov/document?D=CMS-2016-0144-0020
3. Berg A. Proposed Rule on Disproportionate Share Hospital Payments – Treatment of Third Party Payers in Calculating Uncompensated Care Costs, CMS-2399-P. September 14, 2016. Last accessed August 14, 2017. https://www.regulations.gov/document?D=CMS-2016-0144-0046
4. CMS finalizes 2018 payment and policy updates for Medicare hospital admissions. Published August 2, 2017. Last accessed August 14, 2017. https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2017-Press-releases-items/2017-08-02.html
Earlier this year, the Centers for Medicare and Medicaid Services finalized fundamental changes to how it reimburses hospitals for uncompensated care costs. When first proposed, the move raised alarm among physicians, hospitals, health systems, state health departments, and others around the country, and even prompted a lawsuit in New Hampshire.
In the months since the official adoption by the CMS, it remains unclear how the change will affect hospitals around the country, particularly the safety net hospitals that rely on these payments most.
In its final rule issued in April 2017 and finalized on August 2, 2017, the federal agency said the intent of the change is to more fairly distribute a fixed amount of DSH funds to the hospitals most in need. It also argued the change is a more consistent interpretation of the existing statute [Section 1923(g)], provides clarification around language that has been the subject of inquiry over the last decade, and promotes what it calls “fiscal integrity.”
“These allotments essentially establish a finite pool of available federal DSH funds that states use to pay the federal portion of payments to all qualifying hospitals in each state,” the final rule reads. “As states often use most or all of their federal DSH allotment, in practice, if one hospital gets more DSH funding, other DSH-eligible hospitals in the state may get less.”
This is not, however, the way all parties see it. For instance, in a comment submitted to the CMS in September 2016, the National Association of Urban Hospitals expressed its concern that DSH payments already are inadequate to cover the financial burden associated with providing care in low-income communities, such as translation services and the costs of employing physicians to practice in more challenged settings.2
In a letter to the CMS, the Minnesota Department of Human Services said it agrees with the agency that DSH payments should not be used to “subsidize costs that have been paid by Medicare and other insurers” but disagrees with the agency’s approach. Its argument includes a challenge to the CMS’ statutory authority to change the formula based on existing language.3
“I think the reason it’s contentious is because when you’re dealing with a fixed dollar amount and you’re talking about redistributing dollars, someone is going to lose,” said John McHugh, PhD, professor of health management at the Mailman School of Public Health at Columbia University. “A facility receiving DSH payments is already dealing with high levels of uncompensated care; the hospitals are operating on very thin margins. They are very often getting by because of these payments.”
Despite the CMS’ seemingly good intentions, Bradley Flansbaum, DO, MPH, MHM, a hospitalist at Geisinger Health System and member of the SHM Public Policy Committee, remains skeptical that the hospitals that need and deserve DSH payments will actually see more redistributed in their favor.
If hospitals in need see fewer DSH dollars, Dr. McHugh noted, they will feel the squeeze.
“It’s not easy to operate safety net hospitals,” he said. “And on top of that, hospitals have been operating under a certain assumption and it’s changing, and it takes time to incorporate those changes. There will probably be some fallout for the first couple of years as hospitals are adapting their practices. It could mean loss of services. It could mean the loss of quality physicians and quality staffing, and that can impact patient care.”
How will hospitals adapt?
The CMS did not give hospitals transition time. The reinterpretation became effective in June 2017, just 60 days after the agency issued the final rule. Dr. McHugh said he is not sure why the agency did not build in time for hospitals to adapt, particularly given the uncertainty around the national uninsured rate going forward, with so many potential changes to the American health care system under a new administration.
How any of these changes trickle down to hospitalists remains to be seen, said Dr. Flansbaum. Dr. McHugh believes it could lead to increased patient loads, higher turnover and churn, and fewer experienced physicians in safety net hospitals as younger doctors are hired and burn out. “At the end of the day, that feeds into patient care and patient satisfaction and quality,” he said.
However, hospitals across the country have been living with this “slow burn” for a long time, said Dr. Flansbaum, though not necessarily due to inadequate DSH payments. At least in some areas, reimbursements have gone down, hospital occupancy rates have declined, rural hospitals have closed, hospitals have consolidated, and people have been laid off.
It’s important to ensure the hospitals providing care for high levels of uninsured or underinsured patients receive the help they need, he said, and it’s also important to examine the role hospitals play as a whole in the American health care system.
“It’s an expensive system,” he said. “We have we created a system where, unlike other countries that have developed more vigorous primary or outpatient care, we have created an inpatient health system.”
With the CMS’ change, the government is the only entity that seems to win across the board, Dr. McHugh said. He said he would not be surprised if analysts looked to see how hospitals were affected by it in coming months.
But, he remains optimistic. In fact, the final rule also came with an $800 million increase in the amount of uncompensated care payments for acute care hospitals in fiscal year 2018, the CMS says.4
“Hospitals are adaptable,” Dr. McHugh said. “I think what you’ll see is this will spur some innovation in terms of patient care maybe a few years down the road. It may hit some stumbling blocks in the early going but there may be some positive changes in the future.”
References
1. Medicaid Program; Disproportionate Share Hospital Payments –Treatment of Third Party Payers in Calculating Uncompensated Care Costs. Centers for Medicare and Medicaid Services final rule. Citation 82 FR 16114. Published April 3, 2017. Last accessed August 14, 2017. https://www.federalregister.gov/documents/2017/04/03/2017-06538/medicaid-program-disproportionate-share-hospital-payments-treatment-of-third-party-payers-in
2. Kugler E. 2016-09-14 NAUH Medicaid Program DSH Payments – Treatment of Third Party Payer in Calculating Uncompensated Care Costs. September 14, 2016. Last accessed August 14, 2017. https://www.regulations.gov/document?D=CMS-2016-0144-0020
3. Berg A. Proposed Rule on Disproportionate Share Hospital Payments – Treatment of Third Party Payers in Calculating Uncompensated Care Costs, CMS-2399-P. September 14, 2016. Last accessed August 14, 2017. https://www.regulations.gov/document?D=CMS-2016-0144-0046
4. CMS finalizes 2018 payment and policy updates for Medicare hospital admissions. Published August 2, 2017. Last accessed August 14, 2017. https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2017-Press-releases-items/2017-08-02.html
Earlier this year, the Centers for Medicare and Medicaid Services finalized fundamental changes to how it reimburses hospitals for uncompensated care costs. When first proposed, the move raised alarm among physicians, hospitals, health systems, state health departments, and others around the country, and even prompted a lawsuit in New Hampshire.
In the months since the official adoption by the CMS, it remains unclear how the change will affect hospitals around the country, particularly the safety net hospitals that rely on these payments most.
In its final rule issued in April 2017 and finalized on August 2, 2017, the federal agency said the intent of the change is to more fairly distribute a fixed amount of DSH funds to the hospitals most in need. It also argued the change is a more consistent interpretation of the existing statute [Section 1923(g)], provides clarification around language that has been the subject of inquiry over the last decade, and promotes what it calls “fiscal integrity.”
“These allotments essentially establish a finite pool of available federal DSH funds that states use to pay the federal portion of payments to all qualifying hospitals in each state,” the final rule reads. “As states often use most or all of their federal DSH allotment, in practice, if one hospital gets more DSH funding, other DSH-eligible hospitals in the state may get less.”
This is not, however, the way all parties see it. For instance, in a comment submitted to the CMS in September 2016, the National Association of Urban Hospitals expressed its concern that DSH payments already are inadequate to cover the financial burden associated with providing care in low-income communities, such as translation services and the costs of employing physicians to practice in more challenged settings.2
In a letter to the CMS, the Minnesota Department of Human Services said it agrees with the agency that DSH payments should not be used to “subsidize costs that have been paid by Medicare and other insurers” but disagrees with the agency’s approach. Its argument includes a challenge to the CMS’ statutory authority to change the formula based on existing language.3
“I think the reason it’s contentious is because when you’re dealing with a fixed dollar amount and you’re talking about redistributing dollars, someone is going to lose,” said John McHugh, PhD, professor of health management at the Mailman School of Public Health at Columbia University. “A facility receiving DSH payments is already dealing with high levels of uncompensated care; the hospitals are operating on very thin margins. They are very often getting by because of these payments.”
Despite the CMS’ seemingly good intentions, Bradley Flansbaum, DO, MPH, MHM, a hospitalist at Geisinger Health System and member of the SHM Public Policy Committee, remains skeptical that the hospitals that need and deserve DSH payments will actually see more redistributed in their favor.
If hospitals in need see fewer DSH dollars, Dr. McHugh noted, they will feel the squeeze.
“It’s not easy to operate safety net hospitals,” he said. “And on top of that, hospitals have been operating under a certain assumption and it’s changing, and it takes time to incorporate those changes. There will probably be some fallout for the first couple of years as hospitals are adapting their practices. It could mean loss of services. It could mean the loss of quality physicians and quality staffing, and that can impact patient care.”
How will hospitals adapt?
The CMS did not give hospitals transition time. The reinterpretation became effective in June 2017, just 60 days after the agency issued the final rule. Dr. McHugh said he is not sure why the agency did not build in time for hospitals to adapt, particularly given the uncertainty around the national uninsured rate going forward, with so many potential changes to the American health care system under a new administration.
How any of these changes trickle down to hospitalists remains to be seen, said Dr. Flansbaum. Dr. McHugh believes it could lead to increased patient loads, higher turnover and churn, and fewer experienced physicians in safety net hospitals as younger doctors are hired and burn out. “At the end of the day, that feeds into patient care and patient satisfaction and quality,” he said.
However, hospitals across the country have been living with this “slow burn” for a long time, said Dr. Flansbaum, though not necessarily due to inadequate DSH payments. At least in some areas, reimbursements have gone down, hospital occupancy rates have declined, rural hospitals have closed, hospitals have consolidated, and people have been laid off.
It’s important to ensure the hospitals providing care for high levels of uninsured or underinsured patients receive the help they need, he said, and it’s also important to examine the role hospitals play as a whole in the American health care system.
“It’s an expensive system,” he said. “We have we created a system where, unlike other countries that have developed more vigorous primary or outpatient care, we have created an inpatient health system.”
With the CMS’ change, the government is the only entity that seems to win across the board, Dr. McHugh said. He said he would not be surprised if analysts looked to see how hospitals were affected by it in coming months.
But, he remains optimistic. In fact, the final rule also came with an $800 million increase in the amount of uncompensated care payments for acute care hospitals in fiscal year 2018, the CMS says.4
“Hospitals are adaptable,” Dr. McHugh said. “I think what you’ll see is this will spur some innovation in terms of patient care maybe a few years down the road. It may hit some stumbling blocks in the early going but there may be some positive changes in the future.”
References
1. Medicaid Program; Disproportionate Share Hospital Payments –Treatment of Third Party Payers in Calculating Uncompensated Care Costs. Centers for Medicare and Medicaid Services final rule. Citation 82 FR 16114. Published April 3, 2017. Last accessed August 14, 2017. https://www.federalregister.gov/documents/2017/04/03/2017-06538/medicaid-program-disproportionate-share-hospital-payments-treatment-of-third-party-payers-in
2. Kugler E. 2016-09-14 NAUH Medicaid Program DSH Payments – Treatment of Third Party Payer in Calculating Uncompensated Care Costs. September 14, 2016. Last accessed August 14, 2017. https://www.regulations.gov/document?D=CMS-2016-0144-0020
3. Berg A. Proposed Rule on Disproportionate Share Hospital Payments – Treatment of Third Party Payers in Calculating Uncompensated Care Costs, CMS-2399-P. September 14, 2016. Last accessed August 14, 2017. https://www.regulations.gov/document?D=CMS-2016-0144-0046
4. CMS finalizes 2018 payment and policy updates for Medicare hospital admissions. Published August 2, 2017. Last accessed August 14, 2017. https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2017-Press-releases-items/2017-08-02.html