Hospitals and states say a proposed change to the way Medicaid pays hospitals that serve high levels of Medicaid and uninsured patients could be illegal and would destabilize safety net hospitals if finalized.
In August, the CMS proposed defining the cost of uncompensated care by subtracting any payments made by third parties such as Medicare and private insurance.
The agency currently reimburses hospitals for the difference between the total cost of inpatient and outpatient care for Medicaid patients and the total Medicaid payments received. These include fee for service, managed care and Medicaid payments.
For some years now, the CMS has asked states to calculate Medicaid disproportionate-share hospital payments under the new methodology. But states have fought back, and in March a New Hampshire court ruled that the CMS can't impose the policy.
In comments submitted before a Sept. 14 deadline on the final rule, industry stakeholders said the policy should be stopped until all litigation is decided.
“Courts will be the ultimate arbiters of the CMS' regulatory authority on this issue, so it is premature to begin a rulemaking process on an issue for which the agency's authority is so ambiguous,” Bruce Siegel, CEO of America's Essential Hospitals, said in a comment.
In its proposed rule, the CMS said it needed to clarify that only actual uncompensated-care costs are included in the Medicaid hospital-specific disproportionate-share limit.
For example, if a hospital treated two Medicaid patients at a cost of $2,000 and received a $100 payment from Medicaid for each individual, the total uncompensated care cost to the hospital is $1,800.
Under the proposed change, if a hospital treated two Medicaid-eligible patients at a cost of $2,000 and received a $500 payment from a third party for each individual and a $100 payment from Medicaid for each individual, the total uncompensated care cost to the hospital is $800.
Because Medicaid does not require people to be uninsured, only indigent, to gain coverage, the Government Accountability Office estimates that 7.6 million out of the 56 million people enrolled in the Medicaid program in 2012 had private coverage and 10.6 million Medicaid enrollees had other public coverage, including Medicare and Tricare.
An example would be a child with severe disabilities who lives with an employed parent who needs to use Medicaid as a wraparound because their private coverage is inadequate.
Tim Wolters, director of reimbursement of Citizens Memorial Hospital, Bolivar, Mo., wrote in a comment that if the CMS believes the wording in the statute is inappropriate, it should take the matter up with Congress.
State health officials, hospital associations and systems also took umbrage.
“CMS' proposed rule signiﬁcantly chips away at this very important building block thereby shaking the foundation of safety net hospitals,” Larry Fitzgerald, chief financial officer at the University of Virginia Medical Center, said in a comment. “We are disturbed by the seeming trend in CMS policy that continues to whittle away at these vital funding streams for safety net hospitals.”
If finalized, the rule will create a disincentive for hospitals to serve vulnerable populations, the Texas Health and Human Services Commission said.