Market Basket Rate

The market basket rate increase for the upcoming federal fiscal year is 2.4%. That is the maximum a hospital provider can receive. It is adjusted downward based on whether or not the hospital submitted quality data and whether or not the hospital is a meaningful user. Key point is to submit quality data and be a meaningful user to obtain the maximum Market Basket rate increases each year.

Medicare DSH

The estimated Medicare DSH amount for FY 2021 is $15,170,673,476 (25% of which pertains to Empirical DSH). This amount represents a $60 million reduction from the FY20 final rule. Worksheet S-10 audits have recently been conducted and continue for hospitals claiming Medicare DSH, so it is important to maintain proper logs for charity care and bad debt amounts claimed on Worksheet S-10 for hospitals claiming Medicare DSH.

Stem Cell Acquisition Costs

Effective for cost reporting periods beginning on or after October 1, 2020, costs related to hematopoietic stem cell acquisition for the purpose of an allogeneic hematopoietic stem cell transplant will be reimbursed on a reasonable cost basis.

A hospital that furnishes an allogeneic hematopoietic stem cell transplant is not required to be a Medicare certified transplant center as is required for solid organs. Hospitals using revenue code 0815 for inpatient allogeneic hematopoietic stem cells will be provided this reasonable cost-based reimbursement.

New Technology Add-On Payments

CMS has approved an alternative inpatient new technology add-on payment which will establish a process in which certain antimicrobial products approved as QIDPs (Qualified Infectious Disease Products). This appears directly correlated with the COVID-19 pandemic.

Market-based MS-DRG Weights

Hospitals will report on their Medicare cost report the median payer-specific negotiated charge that the hospital has negotiated with all of its Medicare Advantage (MA) organization payers, by MS-DRG, for cost reporting periods ending on or after January 1, 2021.

In addition, CMS is finalizing the adoption of a market-based MS-DRG relative weight methodology for calculating the MS-DRG relative weights, beginning in FY 2024. The market-based MS-DRG relative weight methodology would utilize the median payer-specific negotiated charge data negotiated between hospitals and MA organizations.

Hospital Acquired Conditions Reduction Program

HAC Reduction Program currently evaluates participating hospitals through six measurements: one CMS patient safety and adverse events measure and five CDC health care-associated infections measures. Since 2019, CMS has used a 24-month period to collect sets of measurements. This 24-month period methodology will become permanent and will advance by one year automatically thereafter every year.

Hospital Readmissions Reduction Program

The Hospital Readmission Reduction Program reduces payments to hospitals based on readmission rates. Traditionally, CMS has used three years of data for measuring readmissions, and the applicable period is announced with each rulemaking. CMS is making permanent the three-year reporting period of readmission data for the Hospital Readmissions Reduction Program. The measures created in FY 2019 will remain unchanged. This program is expected to save CMS over $500 million and impact over 2,000 hospitals.

Hospital Value Based Purchasing Program

CMS is providing newly established performance standards for certain measures for the FY 2023 program year, the FY 2024 program year, the FY 2025 program year, and the FY 2026 program year. The estimated amount available for value-based incentive payments for FY 2021 discharges is approximately $1.9 billion.

Medicare Bad Debt Reporting Requirements

CMS finalized several changes related to allowable Medicare bad debts in this IPPS rule. The intent appears to clarify some longstanding policies that have been the source of Provider Reimbursement Review Board appeals. Some of the changes are as follows:

  • CMS clarifies that emails and text messages are valid mechanisms to use for following up on a billing statement. This update was provided due to feedback in comment periods from HFMA and others.
  • The rule clarifies that collection efforts must last 120 days from an initial bill before being written off and that the 120-day clock resets when a payment is received.
  • For dual beneficiaries, hospitals can claim deductibles and co-insurances in instances where the state Medicaid program does not provide a remittance advice (or permit a Medicare provider’s enrollment) if the provider submits the appropriate documentation to the MAC. The final rules provides this would include sufficient notification from the state that it has no obligation to pay the Medicare cost sharing, calculation of what the state owes for cost sharing and verification of the beneficiaries’ Medicaid eligibility. Initially, CMS proposed not to allow any amounts as bad debt if the hospital could not document the amount with a remittance advice from the state.
  • Regarding FASB Topic 606, in the final rule, CMS revises its initial proposal to specify that for cost reporting periods beginning before October 1, 2020, Medicare bad debts must not be written off to a contractual allowance account but must be charged to an expense account for uncollectible accounts. For cost reporting periods beginning on or after October 1, 2020, Medicare bad debts must not be written off to a contractual allowance account but must be charged to an uncollectible receivables account that results in a reduction in revenue.

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Dan Schoenbaechler, CPA, FHFMA
Healthcare Consulting Manager • 502.566.1097