Reform Update: CMS' plan for DSH payments gets close review

As healthcare providers and analysts continue to digest more than 1,400 pages of the CMS' recent inpatient prospective payment proposed rule, they are analyzing how the agency would implement a new payment methodology for Medicare disproportionate-share hospital (DSH) payments next year.

The 2010 Patient Protection and Affordable Care Act decreases Medicaid and Medicare DSH payments—which community and safety net hospitals use to provide uncompensated care—starting in 2014, based on the belief that the law's coverage expansions will lower the number of uninsured and underinsured Americans.

Starting next year, the law lowers the base Medicare DSH payment to 25% of current levels. Disproportionate share hospitals will then receive the remaining amount of what would have been paid—about 75%—after the amount is reduced to reflect changes in the percentage of people who are uninsured. The CMS expects the changes to reduce payments by 0.9% compared with current payments.

Xiaoyi Huang, assistant vice president for policy at the National Association of Public Hospitals and Health Systems,said the organization's early read of the draft rule has the association frustrated that the CMS will use inpatient days for Medicaid and low-income Medicare patients as a proxy for uncompensated care, one of three factors in a complex formula the CMS will use to calculate the payments.

“The proxy CMS uses does not account for uninsured, period,” Huang said. The method also does not take into account that a lot of hospital care is delivered in outpatient settings. The NAPH plans to issue a report this month highlighting the effects the DSH payment changes would have on hospitals, Huang said.

The American Hospital Association is also studying the DSH provision and has created a working group led by Teri Fontenot, CEO of Woman's Hospital in Baton Rouge, La.

Erik Johnson, senior vice president at consulting firm Avalere Health, said hospitals could have fared worse in the proposed rule.

Another factor of the proposed DSH calculation calls for a 2 percentage point decline in the rate of uninsured, Johnson said, which is half what some in the industry had expected based on estimates from the Congressional Budget Office.

“On DSH, I have the sense they are being a little more cautious and not introducing a lot of radical things into the IPPS right now,” Johnson said. “They want to reserve the right to iterate how the DSH payment will get paid in future years.”

The White House press corps this week put President Barack Obama on the spot for the coming launch of health insurance marketplaces in every state.

HHS Secretary Kathleen Sebelius and other high-ranking officials—including Marilyn Tavenner, whose confirmation as CMS administrator remains hanging—have vowed to reporters and lawmakers that when Oct. 1 arrives, the exchanges envisioned in the healthcare reform law will be ready to begin enrolling millions of Americans. Obama said the administration is “pushing very hard to make sure we're hitting all of the deadlines and benchmarks," and he touted a revised—and significantly shorter—application form that will make it easier for people to enroll.

The matter of health insurance exchanges came up in a press briefing largely dedicated to national security. NBC News correspondent Chuck Todd wanted to know why, in the president's view, would Montana Sen. Max Baucus, the Democrat who wrote much of the legislation, say he was worried the administration is headed for a “train wreck” with the insurance marketplaces.

“I think that any time you're implementing something big, there's going to be people who are nervous or anxious about getting it done until it's done,” the president said.

About 42% of Americans are unaware that the Patient Protection and Affordable Care Act is still law, and nearly half the public (49%) says they don't have enough information to understand how it will affect them or their family, the Kaiser Family Foundation reported this week. HHS is expected to begin its public-outreach efforts about the law this summer, and the new results from Kaiser underscore a strong need for that education campaign: the portion of those who said they don't have enough information to understand how the law will affect them was higher among two groups that stand to gain the most from it: the uninsured (58%) and low-income households (56%).

American Hospital Association President and CEO Rich Umbdenstock highlighted healthcare reform as he told attendees at the AHA's annual meeting in Washington this week that hospitals are moving toward "the ideal intersection of patient outcomes, sustainable costs and healthier communities.” Now, hospitals must get better, he said, on information, teamwork, and engagement, and they are making progress. Staff members at Brigham and Women's in Boston are sharing information by highlighting their mistakes—and the improvements those mistakes can lead to—in an online employee newsletter about missteps. Meanwhile, Children's National Medical Center in Washington, D.C., has improved in the area of engagement as the 283-bed hospital conducts rounds that involve family members. "We must get better," Umbdenstock said, "at making the patient and family perspective a routine part of hospital operations."

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