Hospitals divided on proposal to change how uncompensated care is paid
A CMS proposal to overhaul how hospitals are paid for uncompensated care has divided the medical community.
Some providers are saying a CMS proposal to change to way uncompensated care is paid for could be key to their financial solvency while others warn it could deplete them of revenue and force them to close.
The opinion of the hospital executives depends on where they reside.
In April, the CMS, which will distribute about $7 billion in uncompensated care, announced plans to change its formula to disperse the money .
The new formula relies mostly on the amounts of uncompensated care and charitable care each hospital claims on its Medicare cost report. Previously, it was based mostly on the number of Medicaid, dual-eligible and disabled patients each hospital served.
The Medicare Payment Advisory Commission said the change would distribute the funds in a more equitable fashion. The need for uncompensated care funds dropped as more people gained insurance through both Medicaid and insurance exchange expansion.
But hospitals in the 31 states that have expanded Medicaid say the new formula doesn't accurately convey uncompensated care costs.They say one problem could come from unaudited claims that could be inflated by hospitals.
Julie Clements, director of health and clinical affairs at The University of California Health System said in a June comment letter said she projected a $21 million loss should the change be made once fully implemented in 2020.
Because the uncompensated care pool is a fixed dollar amount, inaccuracies in the new formula would directly impact all hospitals, according to Albert Pirro, an attorney for the Greater New York Hospital Association.
He projects a potential loss to New York hospitals of over $730 million once fully implemented.
Another concern with the new formula is that it doesn't take into account Medicaid payment rates. Medicaid pays on average, 60% of Medicare rates for the same service.
"Even though we are now receiving reimbursement from Medicaid for patients who were formerly uninsured, we are still experiencing significant losses on caring for these patients," Garren Colvin CEO of St. Elizabeth Healthcare, a safety net hospital in Northern Kentucky said in a June comment letter.
In 2015, his hospital experienced Medicaid losses of $46.1 million. That was up from $33.1 million in 2014.
Hospitals in non-expansion states said they are at an even greater disadvantage because they tend to have the lowest Medicaid reimbursement rates. The formula change could be key to turning their financial woes around.
For instance, in fiscal year 2015 Emory Healthcare spent $83 million in uncompensated Medicaid expenses.
"This methodology brings parity and equity across the states regardless of the decision to expand Medicaid," Dr. Jonathan Lewin CEO of Emory Healthcare said in a June comment letter.
Hospitals in non-expansion want the CMS to immediately implement the change and not wait for any tweaks.
"Although some continue to argue further refinement is needed, [we are] concerned that the quest for perfection will impede improvement," Daniel Landon, senior vice president of governmental relations of the Missouri Hospital Association said in a June comment letter.
The CMS is likely to side with hospitals in non-expansion states, according to an analysis by the law firm Manatt Phelps & Phillips LLP.
While complaints about the formula last year were able to sway the Obama administration from finalizing the change, the Trump administration has stated that it believes the new formula is sound.
The CMS is expected to announce its decision one way or the other by August in the final inpatient hospital pay rule.
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