Medicare DSH Update and Recent Developments

1. Medicare DSH Update and Recent Developments Texas Association for Healthcare Financial Administration * 2014 Seminar Series * June 19, 2014

2. The New DSH Frontier Manie Campbell, Partner

3. 10 Rules of Medicare • Just because it has a code doesn’t mean it’s covered. • Just because it’s covered doesn’t mean you can bill for it. • Just because you can bill for it doesn’t mean you’ll get paid for it. • Just because you’ve been paid for it doesn’t mean you can keep the money. • Just because you’ve been paid once doesn’t mean you’ll get paid again.

4. 10 Rules for Medicare • Just because you got paid for it in one state doesn’t mean you’ll get paid in another state. • You’ll never know all the rules. • Not knowing the rules can land you in the slammer. • There’s always somebody who doesn’t get the message. • There’s always somebody who gets the message and ignores it.

5. DSH Rule For FFY 2014 Effective Federal Fiscal Year 2014 • New DSH formula • 25% based on current formula • 75% based on uncompensated care

6. CMS’s Definition OfUncompensated Care

7. DSH Uncompensated Care Factor 1 75% of amount which would have been paid under old DSH formula • CMS estimates this to be $9.25 billion DSH Payment under old rule = $12.34B x 75% = $9.25B

8. DSH Uncompensated Care Factor 2 1 minus percent change in uninsured population • CMS estimates this to be 88.8% Uninsured percentages based on CBO estimates • Uninsured in 2013 (based on 2010 report) = 18% • Estimate for 2014 published in Feb 2013 = 16% 1 – [(.16-.18)/.18] = 1 - .111 = .889 less statutory reduction .001 = .888 $9.2535B x .888 = $8.217B

9. Medicare DSH Reimbursement • Source: CMS, Office of the Actuary.

10. DSH Uncompensated Care Factor 3 • Percent of individual hospital uncompensated care costs to total uncompensated care costs • This represents each hospital’s “piece of the pie” • CMS discusses the use of S-10 data • CMS indicates S-10 data is not yet appropriate to use • CMS proxy for uncompensated care is to count low income patients • CMS to use Medicaid eligible days and SSI days as a proxy for uncompensated care • Hospitals in States which have accepted Medicaid expansion will benefit compared to hospitals States without Medicaid expansion • Cannot be appealed • If at audit your % goes down, payback • If it goes up, nothing

11. Issuance Of The NPRs NPR’s: Being issued or have been issued for fiscal years 2007, 2008, and 2009 Various issues that may need to be appealed or reopened in the future: • Disproportionate Share Hospital (DSH) Calculation • SSI percentage Ratios (SSI%) – Medicare Proxy • Medicare Part C Days • Dual Eligible Days – Exhausted Days and Medicare Secondary/No Pay Days • Systemic Errors • DSH Eligible Days – Medicaid Proxy

12. Issuance Of The NPRs:Recommendations Schedule deadlines for Reopenings • Three (3) years from the NPR date Schedule deadlines for Appeals • 180 days from the NPR date • Board must receive Provider’s request no later than 180 days after the Provider received the determination being appealed • Provider is presumed to have received the determination 5 days after issuance, unless established to the contrary by a preponderance of the evidence. (42 C.F.R. § 405.1801(a)(1)) • Date of receipt by the Board is date of delivery if delivered by a nationally-recognized courier, or the date stamped “received” if delivered otherwise, unless established to the contrary by a preponderance of the evidence • Determination of date of receipt is not subject to appeal

13. Issuance Of The NPRs:Recommendations Order MEDPAR Data through the Centers for Medicare and Medicaid Services (CMS) • Data Usage Agreement (DUA) process Appeal your NPRs for self-disallowed items or items adjusted during audit • Whether through an Individual Appeal or Group Appeal Join Group Appeals • Strength in numbers • May not have a choice

14. The Appeals Game There are four (4) players in the Medicare cost report appeals arena • The Provider • Appeals adjustments • The MAC • Defends adjustments • The PRRB • Strong interest in docket management • If a case can be dismissed, it will be dismissed • The Courts

15. Jurisdictional Challenges The PRRB is currently questioning jurisdiction when a provider appeals an issue not adjusted or protested for all cost reporting periods ending on or after December 31, 2008 The PRRB is generally denying jurisdiction (more discussion to follow) Need to amend cost reports that have not had an NPR issued • MAC reluctant to amend cost reports for protest item only Protest – It may be your only avenue to appeal an issue

16. CMS Uninsured Proposed Rule 2012 • Expands “Uninsured” definition from person without coverage to service without coverage • Examples: limited coverage, or limited coverage programs (Indian Health), exhausted benefits, lifetime benefit expiration, etc. • Does not cover deductible/patient responsibility bad debt, non-medically necessary, prisoners • More consistent with pre-MMA definition • Must be an inpatient/outpatient health care service

17. Recent Legal Update – Trouble’s Brewing Todd Prine, Director

18. Topics for Today’s Discussion • Allina and Beyond: Who’s On First • Danbury: Tightening the Screws • Protest, Protest, Protest

19. Allina v. Sebelius Who’s On First

20. AllinaProcedural History • Issue: Whether enrollees in Part C are entitled to benefits under Part A, such that they should be counted in Medicare fraction, or, if not entitled to Part A, should they be included in Medicaid fraction. • Argued February 7, 2014 before United States Court of Appeals • Decided April 1, 2014 • Affirmed in-part, reversed in-part lower court decision

21. AllinaProcedural History Pre-2003 – Part C patients not entitled to benefits under Part A • include in Medicaid fraction 2003 – Proposed rule “clarifying that once beneficiary elects … Part C … should be included in the count of total patient days in the Medicaid fraction …” 2004 – Secretary mandated that Part C beneficiaries to be counted in Medicare fraction • proposed effective 2005, CMS issued correction adopting for 2007 Court decision: • CMS pulled a “switcheroo” • Clarify as used in 2004 would be clarifying “then-existing policy excluding Part C days from Medicare fraction” • 2003 notice of proposed rulemaking inadequate, not a logical outgrowth • No opportunity for public comment • No disclosure of critical information (“financial impact”) Held: Notice of rulemaking deficient – VACATE RULE • Reversed order to recalculate

22. Allina CMS options: • Recalculate DSH <2013 • New regulation adopting 2004 “clarification” • Continue to litigate 2004 position • Appeal Allina to Supreme Court Provider options: • Continue protesting Part C on Cost Report • Medicare Protest • Medicaid Protest • Continue PRRB Appeals • Continue Litigation

23. Danbury v. SebeliusTightening The Screws

24. Danbury Arguments • Decided by PRRB – May 23, 2014 • PRRB ruled in favor of MAC (surprise!!!!) • Issue: Whether the PRRB has jurisdiction over Medicaid days when there was no adjustment? NO JURISDICTION

25. Danbury PRRB Decision • Obligation to submit eligible day information when filing cost report • Congress did not intend additional reporting mechanism (state eligibility) • Provider has obligation as part of year end settlement to prove to MAC Medicaid days wrong • Provider has obligation to claim dissatisfaction HOWEVER… • PRRB acknowledges State verification might not be available for years • Practical impediment

26. Danbury HOWEVER… • Administrator historically held CMS did not adjust/acknowledge for impediment HOWEVER… • Akin to Bethesda: legal impediment standard, thus no adjustment required to meet jurisdiction

27. Danbury THUS… • No State data available => dissatisfaction!!! • Bethesda invoked, aligns with PRRB Rule 7 • Administrator does not concede Bethesda • Provider could have used own data (no state verification necessary) • Use estimates • PRRB discussion (problems with including unverified Medicaid days in cost report filing) • Raise false claims issue • How do you accurately estimate • Reopening’s are discretionary • Futility determine at time of filing

28. Danbury HOWEVER… • Provider failed to establish practical impediment JURISDICTION DENIED!! Danbury Lessons: Include protest item on cost report filing Amend cost report if possible to include protest File appeal/reopening of adjustment IF YOU HAVE MEDICAID DAYS APPEAL PENDING SEE ALERT 10 – DEADLINE FOR RESPONSE JULY 22, 2014.

29. Summary of Lessons Learned Allina • CMS unsure what to do with Part C Days for prior years • Protest to remove from Medicare Proxy / include in Medicaid Proxy • 2013 forward appears to fall in Medicare Proxy • Courts did not strike legitimacy of Part C days • Violation of APA • Court did not order recalculation Danbury • Protest Medicaid days on cost report • If appeal pending without adjustment perfect jurisdiction • See Alert 10 • Bethesda losing steam • Standards to invoke very high • “‘cause” will not suffice PROTEST! PROTEST! PROTEST!

30. For more information please contact: Manie Campbell – manie.campbell@campbellwilson.com Todd Prine – todd.prine@campbellwilson.com CampbellWilson, LLP 15770 Dallas, Parkway, Suite 500 Dallas, TX 75248 (214)373-7077 * * * * *