Proposed Rule2023-03673
Medicaid Program; Disproportionate Share Hospital Third-Party Payer Rule
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
February 24, 2023
Issuing agencies
Health and Human Services DepartmentCenters for Medicare & Medicaid Services
Abstract
This proposed rule would address recent legislative changes to the Social Security Act, which governs the hospital-specific limit on Medicaid disproportionate share hospital (DSH) payments, as a result of the Consolidated Appropriations Act, 2021. This proposed rule would afford States and hospitals more clarity on how the limit, the changes to which took effect on October 1, 2021, will be calculated. Additionally, this proposed rule would enhance administrative efficiency by making technical changes and clarifications to the DSH program.
Full Text
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<title>Federal Register, Volume 88 Issue 37 (Friday, February 24, 2023)</title>
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[Federal Register Volume 88, Number 37 (Friday, February 24, 2023)]
[Proposed Rules]
[Pages 11865-11887]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-03673]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 433, 447, 455, and 457
[CMS-2445-P]
RIN 0938-AV00
Medicaid Program; Disproportionate Share Hospital Third-Party
Payer Rule
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Proposed rule.
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SUMMARY: This proposed rule would address recent legislative changes to
the Social Security Act, which governs the hospital-specific limit on
Medicaid disproportionate share hospital (DSH) payments, as a result of
the Consolidated Appropriations Act, 2021. This proposed rule would
afford States and hospitals more clarity on how the limit, the changes
to which took effect on October 1, 2021, will be calculated.
Additionally, this proposed rule would enhance administrative
efficiency by making technical changes and clarifications to the DSH
program.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on April 25, 2023.
ADDRESSES: In commenting, please refer to file code CMS-2445-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation to <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-2445-P, P.O. Box 8016, Baltimore, MD
21244-8016.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-2445-P, Mail Stop C4-26-05, 7500
Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Lia Adams, (410) 786-8258, Charlie
Arnold, (404) 562-7425, Richard Cuno, (410) 786-1111, Stuart Goldstein,
(410) 786-0694, Charles Hines, (410) 786-0252, and Mark Wong, (415)
744-3561, for Medicaid Disproportionate Share Hospital Payments and
Overpayments. Jennifer Clark, (410) 786-2013, for Children's Health
Insurance Program (CHIP).
[[Page 11866]]
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following
website as soon as possible after they have been received: <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Follow the search instructions on that website to
view public comments. CMS will not post on <a href="http://Regulations.gov">Regulations.gov</a> public
comments that make threats to individuals or institutions or suggest
that the individual will take actions to harm the individual. CMS
continues to encourage individuals not to submit duplicative comments.
We will post acceptable comments from multiple unique commenters even
if the content is identical or nearly identical to other comments.
I. Background
A. Overview
Title XIX of the Social Security Act (the Act) established the
Medicaid program as a Federal-State partnership for the purpose of
providing and financing medical assistance to specified groups of
eligible individuals. States have considerable flexibility in designing
their programs, but must abide by requirements specified in the Federal
Medicaid statute and regulations. Each State is responsible for
administering its Medicaid program in accordance with an approved State
plan, which specifies the scope of covered services, groups of eligible
individuals, payment methodologies, and all other information necessary
to assure the State plan describes a comprehensive and sound structure
for operating the Medicaid program, and ultimately, provides a clear
basis for claiming Federal matching funds.
Section 1902(a)(13)(A)(iv) of the Act requires that States consider
the situation of hospitals that serve a disproportionate share of low-
income patients with special needs, in a manner consistent with section
1923 of Act, in determining payments. The purpose of this proposed rule
is to update the regulatory requirements of the disproportionate share
hospital (DSH) program in response to the Consolidated Appropriations
Act, 2021 (herein, referred to as the CAA) (Pub. L. 116-260, December
27, 2020) and to further improve upon the program. More specifically,
the proposed provisions seek to implement the DSH-related provisions of
the CAA concerning the treatment of third-party payments for purposes
of calculating Medicaid hospital-specific DSH limits. We note that the
CAA also created new supplemental payment reporting requirements
through the addition of section 1903(bb) of the Act; however, DSH
payments were specifically excluded from these requirements, and we
have issued guidance on those requirements.\1\
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\1\ ``New Supplemental Payment Reporting and Medicaid
Disproportionate Share Hospital Requirements under the Consolidated
Appropriations Act, 2021,'' State Medicaid Director Letter #21-006,
December 10, 2021. Available at <a href="https://www.medicaid.gov/federal-policy-guidance/downloads/smd21006.pdf">https://www.medicaid.gov/federal-policy-guidance/downloads/smd21006.pdf</a>.
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This proposed rule also seeks to clarify regulatory payment and
financing definitions and other regulatory language that could be
subject to misinterpretation, refine administrative procedures used by
States to comply with Federal regulations, and remove regulatory
requirements that have been difficult to administer and do not further
the program's objectives.
For the CAA-related provisions of this proposed rule, we propose an
applicability date of October 1, 2021, to align with the effective date
in the statute. This information is noted in each of the CAA-related
provision sections. We propose that the remaining provisions, if
finalized, would be effective 60 days after publication of the final
rule.
B. Disproportionate Share Hospital (DSH) Payments
1. Background
States are statutorily required to make DSH payments to qualifying
hospitals that serve patients who are uninsured and enrolled in the
Medicaid program, as described in section 1923(d) of the Act. States
generally have flexibility regarding the specific hospitals to which
they make payments and how they determine the amount of those payments,
within certain parameters. Section 1902(a)(13)(A)(iv) of the Act
requires that States consider the situation of hospitals that serve a
disproportionate number of low-income patients with special needs, in a
manner consistent with section 1923 of the Act. DSH payments are not
considered part of base payments or supplemental payments to providers,
as they are made under distinct statutory authority. Section 1923 of
the Act contains specific requirements related to DSH payments,
including aggregate annual State-specific DSH allotments that limit
Federal financial participation (FFP) for Statewide total DSH payments
under section 1923(f) of the Act, and hospital-specific limits on DSH
payments under section 1923(g) of the Act. Under the statutory
hospital-specific limits, a hospital's DSH payments may not exceed the
costs incurred by that hospital in furnishing inpatient and outpatient
hospital services during the year to certain Medicaid beneficiaries and
the uninsured, less payments received under title XIX (other than
section 1923 of the Act) and payments by uninsured patients. In
addition, section 1923(a)(2)(D) of the Act requires States to provide
an annual report to the Secretary describing the DSH payment
adjustments made to each DSH.
Section 1001(d) of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Pub. L. 108-173, December 8, 2003)
added section 1923(j) of the Act to require States to report additional
information about their DSH programs. Section 1923(j)(1) of the Act
requires States to submit an annual report including an identification
of each hospital that received a DSH payment adjustment during the
preceding fiscal year (FY) and the amount of such adjustment, and such
other information as the Secretary determines necessary to ensure the
appropriateness of the DSH payment adjustments for such FY.
Additionally, section 1923(j)(2) of the Act requires States to submit
an independent certified audit of the State's DSH program, including
specified content, annually to the Secretary.
2. Consolidated Appropriations Act, 2021 (CAA) DSH Requirements
The CAA was enacted on December 27, 2020. It modified the Medicaid
statute in several ways, including by updating section 1923 of the Act.
Specifically, Division CC, Title II, Section 203 of the CAA (herein
referred to as section 203) amended section 1923(g) of the Act, which
describes the methodology for calculating hospital-specific Medicaid
DSH limits. This provision took effect October 1, 2021. For purposes of
calculating the hospital-specific DSH limit, section 203 of the CAA
modified the calculation of the Medicaid portion of the hospital-
specific DSH limit to include only costs and payments for services
furnished to beneficiaries for whom Medicaid is the primary payer for
such services, as specified in section 1923(g)(1)(B)(i) of the Act.
Accordingly, the limit excludes costs and payments for services
provided to Medicaid beneficiaries with other sources of coverage,
including Medicare and commercial insurance). Section 1923(g) of the
Act, as modified
[[Page 11867]]
by the CAA, includes an exception to this methodology for hospitals in
the 97th percentile of all hospitals with respect to inpatient days
made up of patients who, for such days, were entitled to Medicare Part
A benefits and to supplemental security income (SSI) benefits. This
exception, as described in section 1923(g)(2)(B) of the Act, applies to
hospitals that are in the 97th percentile, either with respect to the
number of inpatient days or percentage of total inpatient days that
were made up of such days. The exception provides qualifying hospitals
with a hospital-specific limit that is the higher of that calculated
under the methodology in which costs and payments for Medicaid patients
are counted only for beneficiaries for whom Medicaid is the primary
payer, or the methodology in effect on January 1, 2020. From June 2,
2017, to the passage of the CAA, payments made by all third-party
payers (TPP), such as Medicare, other insurers, and beneficiary cost
sharing, would all be included in the calculation of hospital-specific
DSH limits, in accordance with the ``DSH Payments--Treatment of Third-
Party Payers in Calculating Uncompensated Care Costs'' final rule in
the April 3, 2017 Federal Register (82 FR 16114), which delineated the
treatment of TPP and the calculation of hospital-specific DSH limits.
We acknowledge there are data limitations, which we describe later
in this rule, that have delayed CMS' ability to clarify which hospitals
qualify for the exception for 97th percentile hospitals. This rule
proposes how CMS would determine which hospitals qualify for this
exception.
3. Annual DSH Audits and Overpayments
The ``Medicaid Program; Disproportionate Share Hospital Payments''
final rule published in the December 19, 2008 Federal Register (73 FR
77904) (and herein referred to as the 2008 DSH audit final rule) sets
forth the data elements necessary to comply with the requirements of
section 1923(j) of the Act related to auditing and reporting of DSH
payments under State Medicaid programs. The regulations at 42 CFR
447.299(c) finalized in the 2008 DSH audit final rule outline 18 data
elements States must submit to CMS, at the same time as the State
submits the completed audit required under 42 CFR 455.304, in order to
permit CMS verification of the appropriateness of such payments. One
such data element is the total uncompensated care cost, which equals
the total cost of care for furnishing inpatient hospital and outpatient
hospital services to Medicaid eligible individuals and to individuals
with no source of third-party coverage for the hospital services they
receive, less the sum of other payment sources listed in Sec.
447.299(c)(16). Despite the robust data, potential data gaps may exist
as a result of an auditor identifying an area, or areas, in which
documentation is missing or unavailable for certain costs or payments
that are required to be included in the calculation of the total
eligible uncompensated care costs.
Consequently, at times we are unable to determine whether a DSH
overpayment to a provider has occurred, the root causes of any
overpayments, and the amount of the overpayments associated with each
cause. In current practice, an auditor may include a finding (or
``caveat'') in the audit, stating that the missing information may
impact the calculation of total eligible uncompensated care costs,
rather than making a determination of the actual financial impact of
the identified issue. This lack of transparency results in uncertainty
even if costs are ultimately correct, and restricts CMS' and States'
ability to ensure proper recovery of all FFP associated with DSH
overpayments identified through annual DSH audits in instances where
errors did occur.
In the past, the Office of Inspector General (OIG) and the
Government Accountability Office (GAO) have raised concerns similar to
ours regarding oversight of the Medicaid DSH program. The 2008 DSH
audit final rule addressed concerns raised by the OIG \2\ by
implementing in regulations the independent certified audit
requirements under section 1923(j) of the Act, by requiring States to
include data elements as specified in Sec. 447.299(c) with their
annual audits. In 2012, the GAO published the report ``Medicaid: More
Transparency of and Accountability for Supplemental Payments are
Needed.'' \3\ Although Medicaid DSH payments are not ``supplemental
payments,'' as described previously, they are akin to supplemental
payments, and thus, the GAO's report did not focus on supplemental
payments exclusively. As part of the report, the GAO analyzed the 2010
DSH audits for 2007 DSH payments and found DSH payments that did not
comply with the audit requirements specified in part 455, subpart D.
For each of the required DSH audit elements, there were a number of
hospitals for which the GAO could not determine compliance due to data
reliability or documentation issues. For example, the GAO could not
determine compliance with the requirement that uncompensated care costs
are accurately calculated for 33.7 percent of hospitals analyzed by
GAO. The report highlights that, although the independent certified
audit requirements have allowed us to identify various compliance
issues and quantify some provider overpayments, in some instances,
findings remain unquantified.
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\2\ ``Audit of Selected States' Medicaid Disproportionate Share
Hospital Programs,'' March 2006 (A-06-03-00031), <a href="https://www.oig.hhs.gov/oas/reports/region6/60300031.pdf">https://www.oig.hhs.gov/oas/reports/region6/60300031.pdf</a>.
\3\ <a href="https://www.gao.gov/assets/660/650322.pdf">https://www.gao.gov/assets/660/650322.pdf</a>.
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We agree with the report that more transparency is needed, but to
obtain the necessary overpayment amounts under current reporting
processes, CMS or the State would have to conduct a secondary review or
audit, which would be burdensome and largely redundant. By proposing
that States must submit to CMS in its annual reports described in Sec.
447.299(c) an additional data element requiring a dollar estimate of
any Medicaid DSH provider overpayments, as discussed further in section
II. of this rule, we hope to further enhance our oversight to better
ensure the integrity of hospital-specific limit calculations.
Amounts in excess of the hospital-specific limit are regarded as
overpayments to providers, under 42 CFR part 433, subpart F. Section
1903(d)(2)(C) of the Act provides that, when an overpayment by a State
is discovered, the State has a 1-year period to recover or attempt to
recover the overpayment before an adjustment is made to FFP to account
for the overpayment. FFP is not available for DSH payments that are
found in the independent certified audit to exceed the hospital-
specific limit. Currently, regulations in Sec. 433.316 provide for
determining the date of discovery of an overpayment, which is necessary
to determine the statutory 1-year period, but it does not specify how
this relates to the independent certified DSH audits required under
section 1923(j)(2) of the Act and 42 CFR part 455, subpart D.
Accordingly, the discovery of overpayments necessitates the return
of the Federal share, or redistribution by the State of the overpaid
amounts to other qualifying hospitals, in accordance with the State's
approved Medicaid State plan. While the preamble to the 2008 DSH audit
final rule generally addressed the return or redistribution of provider
overpayments identified through DSH audits, it did not include specific
procedural requirements for returning or redistributing overpayments.
Therefore, we have identified this area as an opportunity to strengthen
program oversight and integrity protections,
[[Page 11868]]
specifically with respect to the overpayment and redistribution
reporting process and requirements for identifying the financial impact
of audit findings. In this proposed rule, we propose requirements to
enhance these areas.
4. DSH Health Reform Reduction Methodology
Section 2551 of the Affordable Care Act \4\ (ACA) amended section
1923(f) of the Act to require aggregate reductions to State Medicaid
DSH allotments annually from FY 2014 through FY 2020, to account for
the then-anticipated decrease in uncompensated care as a result of
expansions of coverage authorized by the ACA. The ACA specified in
section 1923(f)(7)(B) of the Act certain factors CMS must consider in
implementing these reductions, and left certain components of the
methodology to the Secretary of Health and Human Services to define (as
described later in this section). The methodology is referred to as the
DSH Health Reform Methodology (DHRM). We published a final rule in
October 2013 that delineated a methodology to implement the annual
reductions only for FY 2014 and FY 2015 in order to accommodate data
refinement and methodology improvement for later reduction years.
However, Congress has since modified section 1923(f)(7) of the Act
several times such that the reductions have never taken effect. On
September 25, 2019, we published a final rule \5\ (2019 final rule)
delineating a revised methodology for the calculation of DSH allotment
reductions, which at that time were scheduled to begin in 2020.
Congress has since further delayed the start of these reductions until
FY 2024. The CAA modified section 1923(f) of the Act such that the
reductions occur beginning FY 2024 through FY 2027, in the amount of $8
billion each year.
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\4\ Patient Protection and Affordable Care Act of 2010, Public
Law 111-148, as amended by the Health Care and Education
Reconciliation Act of 2010, Public Law 111-152.
\5\ 84 FR 50308.
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Section 1923(f)(7) of the Act requires the Secretary to develop a
methodology to determine the annual, State-by-State DSH allotment
reduction amounts based on five factors: uninsured factor (UPF);
Medicaid volume factor (HMF); uncompensated care factor (HUF); low DSH
State factor (LDF); and the budget neutrality factor (BNF). The 2019
final rule assigned weights to the annual reduction amount for the
three core factors: UPF, HMF, and HUF. The remaining two factors, the
LDF and the BNF, affect the allocation of the reduction amounts within
the three core factors. The LDF accomplishes this allocation at the
front end of the calculations by shifting a portion of the reduction
amount specified under section 1923(f)(7)(A)(ii) of the Act to non-low
DSH States. Following this step, we determine the reduction
calculations prescribed by the three core factors. We then perform
additional reductions associated with the BNF within the HMF and HUF
for States that divert DSH allotment amounts under section 1115
demonstrations. We then reallocate these reduction amounts away from
States that do not divert DSH allotment amounts under section 1115
demonstrations, in order to comply with the aggregate reduction amounts
specified under statute at section 1923(f)(7)(A)(ii) of the Act. The
five factors are specified in section 1923(f)(7)(B) of the Act as
follows:
<bullet> UPF--The statute requires that States with lower
uninsurance rates receive higher percentage DSH reductions.
Calculations performed under this factor utilize Census Bureau data
that is subject to a 1-year lag.
<bullet> HMF--The statute requires that States that target DSH
payments to hospitals with high Medicaid volume receive a lower
percentage reduction in their DSH allotment. Calculations performed
under this factor utilize DSH audit data that is on a 3-year lag.
<bullet> HUF--As required by statute, States that target DSH
payments to hospitals with high levels of uncompensated care receive a
lower percentage reduction in their DSH allotment. Calculations
performed under this factor utilize DSH audit data that is on a 3-year
lag.
<bullet> Low DSH State factor--Section 1923(f)(7)(B)(ii) of the Act
requires that statutorily defined ``low DSH States'' receive a lower
overall DSH reduction percentage than non-low DSH States. To accomplish
this, low DSH States and non-low DSH States are separated into two
cohorts before applying the reduction methodology.
<bullet> BNF--DSH allotment amounts diverted for coverage expansion
under section 1115 demonstrations approved as of July 31, 2009, receive
a limited protection from reduction.
5. Modernizing the Publication of Annual DSH and CHIP Allotments
Section 447.297 provides a process and timeline for us to publish
preliminary and final annual DSH allotments and national expenditure
targets in the Federal Register. The current requirements specify that
we publish DSH preliminary allotments and national expenditure targets
by October 1 of each Federal fiscal year (FFY), and publish the final
allotments and national expenditure targets by April 1 of that FFY. We
have found the current regulatory Federal Register publication process
to be time consuming and administratively burdensome for us, and
ultimately unnecessary in light of more timely notification practices
already taking place.
Similarly, section 2104 of the Act provides appropriations for FY
CHIP allotments for FYs 1998 through 2027. Regulations at 42 CFR
457.609 describe the process for calculating State CHIP allotments for
a FY after FY 2008. Section 457.609(h) provides that CHIP allotments
for a FY may be published as preliminary or final allotments in the
Federal Register as determined by the Secretary. Similar to the current
DSH allotment publication process, we have found the current FY CHIP
allotment publication regulations administratively burdensome and less
efficient than other means of notification. We propose to codify the
process already taking place while eliminating inefficient and
duplicative publication requirements.
II. Provisions of the Proposed Rule
A. Proposed Provisions
1. When Discovery of Overpayment Occurs and Its Significance (Sec.
433.316)
Section 1903(d)(2)(C) of the Act provides that, when an overpayment
by a State is discovered, the State has a 1-year period to recover or
attempt to recover the overpayment before an adjustment is made to FFP
to account for the overpayment. Currently, regulations in Sec. 433.316
provide for determining the date of discovery of an overpayment to a
provider, which is necessary to determine the statutory 1-year period,
in three distinct cases: when the overpayment results from a situation
other than fraud, under Sec. 433.316(c); when the overpayment results
from fraud, under Sec. 433.316(d); and when the overpayment is
identified through a Federal review, under Sec. 433.316(e). It is not
explicitly clear in the current regulations how the date of discovery
is determined when an overpayment is discovered through the annual DSH
independent certified audit required under Sec. 455.304. Therefore, we
believe an amendment is appropriate to specify the date of discovery of
overpayments, as it relates to the annual DSH independent certified
audit.
Accordingly, we are proposing to redesignate paragraphs (f) through
(h) of Sec. 433.316 as paragraphs (g) through (i), respectively, and
to add a new proposed paragraph (f). In the new paragraph (f), we are
proposing that, in the case of an
[[Page 11869]]
overpayment identified through the DSH independent certified audit
required under part 455, subpart D, we will consider the overpayment as
discovered on the earliest of either the date that the State submits
the DSH independent certified audit report required under Sec.
455.304(b) to CMS, or of any of the dates specified in Sec.
433.316(c): paragraph (c)(1) (the date on which any Medicaid agency
official or other State official first notifies a provider in writing
of an overpayment and specifies a dollar amount that is subject to
recovery); paragraph (c)(2) (the date on which a provider initially
acknowledges a specific overpaid amount in writing to the Medicaid
agency); and paragraph (c)(3) (the date on which any State official or
fiscal agent of the State initiates a formal action to recoup a
specific overpaid amount from a provider without having first notified
the provider in writing). If finalized, this change will afford more
clarity concerning the independent certified DSH audit and the
requirements that will be imposed on States based on those audits.
2. DSH Health Reform Reduction Methodology (Sec. 447.294)
As discussed in section I.B.4 of this proposed rule, section
1923(f)(7)(B)(iii) of the Act requires that the methodology for
calculating each State's Medicaid DSH allotment reduction, as first
established by the ACA, consider the extent to which the DSH allotment
for a State was included in the budget neutrality calculation for a
coverage expansion approved under section 1115 (that is, a section 1115
demonstration to provide coverage to individuals not otherwise eligible
for Medicaid) as of July 31, 2009. In the 2019 final rule, we finalized
a policy to exclude from DSH allotment reductions the amount of DSH
allotment States had approved as of July 31, 2009, under a coverage
expansion section 1115 demonstration. Any DSH allotment amounts
included in budget neutrality calculations for non-coverage expansion
purposes (for example, where DSH allotment amounts included in budget
neutrality calculations have been used to match State expenditures for
approved delivery system reform initiatives) under approved 1115
demonstrations are still subject to reduction regardless of when they
were approved. Further, the preamble to the 2019 final rule indicates
that for any section 1115 demonstrations not approved as of July 31,
2009, these DSH allotment amounts included in budget neutrality
calculations, whether for coverage expansion or otherwise, would also
be subject to reduction. We note that all section 1115 demonstrations
approved as of or before July 31, 2009, have expired and the protection
does not apply to renewals or extensions of those 1115 demonstrations.
Therefore, there no longer exist any amounts related to coverage
expansion for us to exclude from future DSH allotment reductions
scheduled to begin in FY 2024.
In the absence of DSH audit data relating to how States expend DSH
allotment amounts diverted under section 1115 demonstrations, we
propose to assign average HUF and HMF reduction percentages to these
amounts.\6\ We believe this approach is a reasonable method to
determine reductions for the HUF and HMF factors, given the absence of
relevant, hospital-specific DSH payment data for these payments. We
considered using alternative percentages higher or lower than the
average but settled on average percentages over concerns that these
alternative percentages might provide an unintended benefit or penalty
to these States for DSH diversions approved under a demonstration under
section 1115 of the Act.
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\6\ 84 FR 50308 at 50328, wherein we discuss the policy to
assign average amounts in the 2019 final rule.
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While the provisions of Sec. 447.294(e)(12) are clear that we will
assign average reductions to amounts associated with non-coverage
expansion purposes in effect as of July 31, 2009, only the preamble to
the 2019 final rule addresses the amounts diverted under a section 1115
demonstration approved after July 31, 2009. Additionally, the
regulations are not specific regarding how these amounts are determined
and accounted for in the DSH allotment reduction methodology. As such,
we propose to update the regulations at Sec. 447.294(e)(12) to clearly
specify that amounts diverted under a section 1115 demonstration
approved after July 31, 2009, are subject to average reductions under
the HUF and HMF so that the regulation may better reflect the policy
finalized in the 2019 final rule preamble.
In addition, we propose to remove the language, ``for the specific
fiscal year subject to reduction'' in Sec. 447.294(e)(12) introductory
text and (e)(12)(i), because we are concerned that the current
regulatory language could lead to anomalous results, as discussed later
in this section. We propose that the determination of diverted amounts
that are subject to average reductions under the HUF and HMF would
align with the State plan rate year (SPRY) for the DSH audits utilized
in the DSH allotment reduction calculations, as specified in Sec.
447.294(d), rather than the fiscal year subject to reduction. For
example, when calculating the statutorily required DSH allotment
reductions for FY 2024 (the fiscal year subject to reduction), we would
utilize data from each State's SPRY 2019 DSH audit data because this
would be the most recent data available to us. For States that do not
divert their entire DSH allotment, we would include the amount of each
State's DSH allotment diverted under a section 1115 demonstration for
the time period that aligns with the associated SPRY (in this example,
SPRY 2019). A discussion of States that divert their entire DSH
allotment follows this proposal. Each State would then be assigned the
average HUF and HMF reduction amounts for the State's respective State
group based on this diverted amount.
Section 477.294(e)(12) introductory text and (e)(12)(i) currently
align the amount of DSH allotment diverted under a section 1115
demonstration for a fiscal year with the fiscal year of the DSH
allotment subject to reduction under section 1923(f)(7)(A)(ii) of the
Act. We recognize that this non-alignment between the SPRY 2019 DSH
audit data that we would use to determine the HUF and HMF, and the FY
2024 section 1115 demonstration budget neutrality calculation diversion
amount that would be used under the current regulation, could result in
inappropriate and illogical outcomes. For example, in a case where a
State claimed all or almost all of its DSH allotment amount for DSH
expenditures for the SPRY DSH audit utilized in the DHRM (here, SPRY
2019), but later diverted a large portion of its DSH allotment amount
under a section 1115 demonstration during a year subject to DSH
allotment reductions (here, FY 2024), the State could receive a
reduction on an amount (including both DSH payments and DSH allotment
diverted under a section 1115 demonstration) that is excess of the
amount available under its current DSH allotment subject to reductions.
Therefore, we believe our proposed approach is reasonable because in
the absence of DSH audit data relating to how States expend DSH
allotment amounts diverted under section 1115 demonstrations, CMS will
assign average HUF and HMF reduction percentages to these diverted
amounts. As such, it is appropriate that the amounts diverted under
section 1115 demonstrations should align with the SPRY of the DSH audit
used in the DHRM and that the amounts subject to reduction do not
exceed what States
[[Page 11870]]
could have expended, either through DSH payments or diverted DSH
allotment amounts, during the associated SPRY. We considered leaving
the current regulatory text unchanged. However, we believe it is
important to update the current regulation in the interest of clarity
and transparency and to avoid this potential outcome wherein a State
might receive an inappropriately large reduction due to a misalignment
of time periods for elements of the reduction methodology. Accordingly,
we are proposing to revise Sec. 477.294(e)(12) to remove language
indicating that the BNF and budget neutrality calculations are applied
to each State's amount of DSH allotment diverted under a section 1115
demonstration ``for the specific fiscal year subject to reduction.''
Further, we are proposing to amend Sec. 477.294(e)(12)(ii) to specify
that the budget neutrality calculations are performed on the amount of
each State's DSH allotment diverted under an approved 1115
demonstration during the period that aligns with the associated SPRY
DSH audit utilized in the DSH allotment reductions.
For States that divert their entire DSH allotment, and as such do
not complete DSH audits, we are unable to use a DSH audit SPRY.
Therefore, we are proposing to apply reductions under the HMF and HUF
to the DSH allotment that the State would have had available during the
demonstration year (DY) coinciding with the SPRY DSH audits utilized in
the DHRM. We are also proposing to prorate the FFY allotment amount to
determine this reduction in cases where the DY of the section 1115
demonstration crosses two FFYs. For example, as stated previously we
would use SPRY 2019 DSH audit data for FFY 2024 DSH allotment
reductions. However, if a State that diverts its entire DSH allotment
has a DY that begins July 1, 2018, and ends June 30, 2019, we would
have to determine the reduction amount associated with the diverted DSH
allotment to reflect the amount of the FFY 2018 DSH allotment available
from July 1, 2018, through September 30, 2018, and the amount of FFY
2019 DSH allotment available from October 1, 2018, through June 30,
2019. We do not believe it would be appropriate to calculate the
reduction associated with the diverted DSH allotment using the full FFY
2019 DSH allotment because the diverted DSH funds would not have been
available for the full DY ending June 30, 2019. For a State that
diverts part of its DSH allotment, it would have a SPRY DSH audit
already utilized in the DHRM. We would use the diverted DSH amount from
the same SPRY, which may also involve prorating diverted DSH amounts
from a DY, depending on whether the DY as specified in the section 1115
demonstration aligns with the SPRY. In previous rulemaking, we proposed
and finalized a policy to utilize the most recent year available for
all data sources and to align the SPRY of data sources whenever
possible.\7\ Providing this clarification in regulation through this
rulemaking would accomplish this goal.
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\7\ 82 FR 35155 at 35157; 84 FR 50308 at 50322.
---------------------------------------------------------------------------
3. Hospital-Specific Disproportionate Share Hospital Payment Limit
(Sec. 447.295)
Effective October 1, 2021, the amendments to section 1923(g) of the
Act made by section 203 of the CAA change the methodology for
calculating the Medicaid shortfall portion (Medicaid costs less
Medicaid payments) of the hospital-specific DSH limit to only include
costs and payments for hospital services furnished to beneficiaries for
whom Medicaid is the primary payer. From June 2, 2017, to the effective
date of the CAA, costs and payments for hospital services furnished to
beneficiaries who were eligible for Medicaid, even when there was a
third-party payer such as Medicare or other insurer, that pays primary
to Medicaid for inpatient and outpatient hospital services, would all
be included in the calculation of Medicaid shortfall portion of the
hospital-specific DSH limits in accordance with the ``DSH Payments--
Treatment of Third-Party Payers in Calculating Uncompensated Care
Costs'' final rule in the April 3, 2017 Federal Register. Additionally,
the CAA amended section 1923(g)(2) of the Act to provide an exception
for certain hospitals that are in the 97th percentile or above of all
hospitals with respect to the number of Medicare SSI days (that is,
inpatient days made up of patients who, for such days, were entitled to
Medicare Part A benefits and to SSI benefits) or percentage of Medicare
SSI days to total inpatient days. In Sec. 447.295(b), we are proposing
to add the definition of ``97th percentile hospital'' to mean a
hospital that is in at least the 97th percentile of all hospitals
nationwide with respect to the hospital's number of Medicare SSI days
or percentage of inpatient days that are Medicare SSI days, for the
hospital's most recent cost reporting period. For hospitals that meet
this criteria, section 1923(g)(2)(A) of the Act specifies that the
hospital-specific DSH limit is the higher of the amount determined
under the methodology as amended by section 203 of the CAA or the
amount determined under the methodology in effect on January 1, 2020
(described previously), which we propose to implement in paragraph
(d)(3) of the definition of ``Hospital-specific DSH limit calculation''
in Sec. 447.295. As further discussed below, we also propose in the
definition of 97th percentile hospital that CMS would identify the 97th
percentile hospitals, for each Medicaid SPRY beginning on or after
October 1, 2021, using Medicare cost reporting and claims data sources,
as well as supplemental security income eligibility data provided by
the Social Security Administration. CMS would publish lists identifying
each 97th percentile hospital annually in advance of October 1 of each
year and would revise a published list only to correct a mathematical
or other similar technical error that is identified to CMS during the
one-year period beginning on the date the lists are published.
For the October 1, 2021, effective date of the amendments to
section 1923(g) of the Act made by section 203 of the CAA, we interpret
these new requirements to be applicable for SPRYs ``beginning on or
after'' the October 1, 2021, effective date. Previously, certain
statutory references to ``fiscal year,'' such as in section 1923(g)(1)
and (2) and (j)(1) of the Act, have also been interpreted as referring
to each State's SPRY, instead of the FFY, when establishing
requirements for the hospital-specific DSH limit (and audit
requirements to ensure that payments comply with hospital-specific DSH
limits). In the 2008 DSH audit final rule, CMS indicated that this
interpretation was in ``recognition of varying fiscal periods between
hospitals and States'' and that ``[t]he Medicaid [SPRY] is the period
which each State has elected to use for purposes of DSH payments and
other payments made in reference to annual limits.'' Further, we
believe interpreting this provision to be applicable on an FFY basis
would impose an excessive burden on States and hospitals. In
particular, we believe such an interpretation would create a
significant burden in situations when a hospital would qualify to meet
the exception for 97th percentile hospitals for a portion of its SPRY,
but not for the full SPRY, if qualification were determined on the
basis of the FFY. This result would be likely to occur, given that the
majority of States have SPRYs that do not align with the FFY. In these
instances, States would need to prorate the uncompensated care costs,
for affected hospitals, within a SPRY accordingly
[[Page 11871]]
since the methodology for calculating the Medicaid shortfall portion of
the hospital-specific DSH limit may not be consistent for the entire
SPRY if the hospital qualified as a 97th percentile hospital for only a
portion of the SPRY. As such, we are proposing that section 203 of the
CAA 2021, including the 97th percentile exception, be effective
starting with each State's first SPRY beginning on or after October 1,
2021. For example, if a State's SPRY begins July 1, then the amendments
made by section 203 of the CAA would be effective starting with the
SPRY beginning July 1, 2022. Conversely, if a State's SPRY begins each
year on October 1, then such amendments would be effective starting
with the SPRY beginning October 1, 2021.
Hospitals meeting the definition of a 97th percentile hospital, and
therefore, qualifying for the 97th percentile exception will, by
statute, calculate their hospital-specific DSH limit using the higher
value of either the hospital-specific DSH limit amount determined for
the hospital under section 1923(g)(1)(A) of the Act as amended by
section 203 of the CAA 2021, or the amount determined for the hospital
under section 1923(g)(1)(A) of the Act as in effect on January 1, 2020.
Where section 1923(g)(2)(A)(ii) of the Act, as amended by section 203
of the CAA, refers to ``the amount determined for the hospital under
paragraph (1)(A) as in effect on January 1, 2020,'' we interpret this
to refer to the hospital-specific limit calculation methodology that
was in effect on January 1, 2020, and not the specific dollar amount
that was applicable on that date.
We are proposing to revise Sec. 447.295(d) to reflect the
statutory changes made by section 203 of the CAA to update the
methodology for the calculation of the hospital-specific DSH limit to
only include costs and payments for hospital services furnished to
beneficiaries for whom Medicaid is the primary payer. In addition, we
are proposing to revise Sec. 447.295(d) to specify the methodology
that hospitals meeting the exception for 97th percentile hospitals will
utilize in the calculation of the hospital-specific DSH limit.
Specifically, in Sec. 447.295(d)(1), we propose to specify that for
each State's Medicaid SPRYs beginning prior to October 1, 2021 and
subject to proposed paragraph (d)(3), only costs incurred in providing
inpatient hospital and outpatient hospital services to Medicaid
individuals, and revenues received with respect to those services, and
costs incurred in providing inpatient hospital and outpatient hospital
services, and revenues received with respect to those services, for
which a determination has been made in accordance with Sec. 447.295(c)
that the services were furnished to individuals who have no source of
third-party coverage for the specific inpatient hospital or outpatient
hospital service are included when calculating the costs and revenues
for Medicaid individuals and individuals who have no health insurance
or other source of third-party coverage for purposes of section
1923(g)(1) of the Act. In Sec. 447.295(d)(2), we propose to specify
that for each State's first Medicaid SPRY beginning on or after October
1, 2021, and thereafter, subject to proposed paragraph (d)(3), only
costs incurred in providing inpatient hospital and outpatient hospital
services to Medicaid individuals when Medicaid is the primary payer for
such services, and revenues received with respect to those services,
and costs incurred in providing inpatient hospital and outpatient
hospital services, and revenues received with respect to those
services, for which a determination has been made in accordance with
Sec. 447.295(c) that the services were furnished to individuals who
have no source of third-party coverage for the specific inpatient
hospital or outpatient hospital service are included when calculating
the costs and revenues for Medicaid individuals and individuals who
have no health insurance or other source of third-party coverage for
purposes of section 1923(g)(1) of the Act. As noted above, we propose
to implement the 97th percentile hospital exception in proposed Sec.
447.295(d)(3), which would specify that, effective for each State's
first Medicaid SPRY beginning on or after October 1, 2021, and
thereafter, the hospital-specific DSH limit for a 97th percentile
hospital defined in proposed paragraph (b) is the higher of the values
from the calculations described in proposed paragraphs (d)(1) and (2).
We are also proposing to develop a data set, compiling cost report,
claims, and eligibility data, to determine which hospitals, ranked on a
national level, qualify to meet the statutory 97th percentile hospital
exception. We are proposing to publish these data for use in
determining which hospitals qualify as a 97th percentile hospital on an
annual basis, electronically or in another format as determined by CMS,
prior to the SPRY to which it will apply. We would determine these
hospitals on an annual basis prior to each SPRY beginning on or after
October 1. In this way, we would be able to qualify hospitals on the
basis of SPRYs, while also accounting for non-alignment of SPRYs across
States. Again, this would not be done on the basis of the FFY, but
rather would be an annual process to qualify hospitals for each SPRY.
We would publish these data once a year, prior to October 1. Each State
would use these data to determine which hospitals qualify for the 97th
percentile hospital exception for the State's SPRY that begins between
that October 1 and September 30 of the following calendar year.
We are proposing to determine a hospital's qualification for the
97th percentile exception for each SPRY on a prospective basis. We
believe this to be a reasonable interpretation in that the statute
specifically refers to the ``most recent cost reporting period'' in
determining a hospital's qualification ``for the fiscal year,'' which,
as noted, we interpret to mean SPRY. That is, we believe it is
reasonable to interpret the reference to the ``most recent cost
reporting period'' in section 1923(g)(2)(B) of the Act to mean the most
recent cost reporting period for which there is a cost report available
before the beginning of the SPRY for which the 97th percentile
hospitals are being identified.
By applying this exception prospectively, we eliminate the need to
retroactively rank and qualify hospitals based on actual Medicare SSI
days and ratios for services furnished during the SPRY. This
application would allow for States and hospitals to know prior to the
beginning of the SPRY which hospitals qualify for the exception. That
knowledge would allow States and hospitals to gauge how payments should
be made and measured against hospital-specific DSH limits and provide
greater payment predictability than a retroactive application. We
believe this interpretation to also be the most feasible from an
operational standpoint.
To compile this source of data, we would use data originating from
various systems and sources, including the Healthcare Cost Report
Information System (HCRIS) and Medicare Provider Analysis and Review
(MEDPAR) files, and SSI eligibility data from the Social Security
Administration (SSA). Utilizing HCRIS, we would identify the universe
of hospitals that have filed a Medicare cost report and each hospital's
most recent cost reporting period, including acute care hospitals paid
under the inpatient prospective payment system (IPPS), critical access
hospitals, inpatient rehabilitation facilities, and inpatient
psychiatric facilities.
We would determine each hospital's Medicare SSI days for discharges
[[Page 11872]]
occurring in the hospital's most recent cost reporting period,
regardless of the length of that cost reporting period, using a data
set that combines MEDPAR claims data and SSI eligibility data. We would
utilize Medicare SSI days for discharges occurring in the cost
reporting period, rather than Medicare SSI days occurring within the
cost reporting period because the data source shows the Medicare SSI
day count for each inpatient stay as a whole. This approach is
consistent with how Medicare uses this data to develop the Medicare SSI
days ratios for Medicare DSH purposes. Section 1886(d)(5)(F)(vi) of the
Act, in describing the Medicare SSI percentage within the Medicare
``disproportionate patient percentage,'' refers to the ``number of such
hospital's patient days for such period.'' Then the implementing
regulations at 42 CFR 412.106 describe the Medicare SSI days used for
Medicare DSH as patient days that ``are associated with discharges that
occur during that period.'' This approach means if an inpatient stay
begins in one cost reporting period but ends in the next cost reporting
period, we would not count any of the inpatient stay's days toward the
day count for the first cost reporting period, but instead count all of
this inpatient stay's days toward the day count for the second cost
reporting period. This approach would not favor the counting of days in
one cost reporting period over others. On average, exclusion of days
for inpatient stays that straddle between one cost reporting period and
the hospital's next cost reporting period will be offset by any
inclusion of days for inpatient stays that straddle between that one
cost reporting period and the hospital's previous cost reporting
period. Therefore, we can ensure we do not overinclude or underinclude
Medicare SSI days for inpatient stays that straddle two cost-reporting
periods.
To determine each hospital's percentage of Medicare SSI days to
total inpatient days, we would divide the Medicare SSI days by each
hospital's total inpatient days for that same cost reporting period
from HCRIS to obtain a percentage. We would then compile two lists,
ranking the hospitals based on the absolute number of Medicare SSI
days, and the percentage of inpatient days that are Medicare SSI days,
respectively. A hospital may qualify to meet the 97th percentile
exception on the basis of either of the two lists.
We are proposing to utilize the Medicare SSI days and total
inpatient days data to mathematically determine a threshold of
acceptance to identify hospitals meeting the 97th percentile exception.
The array includes either the values of Medicare SSI days or the
percentage of inpatient days that are Medicare SSI days, for the
universe of hospitals nationwide identified through this data process.
For the Medicare SSI days, the 97th percentile threshold would be
rounded to the nearest whole number, with x.5 or higher rounded up, and
less than x.5 rounded down. Any hospital with Medicare SSI days for its
most recent cost reporting period greater than or equal to the 97th
percentile threshold would qualify as a 97th percentile hospital. For
the percentage of inpatient days that are Medicare SSI days, all values
would be rounded to the fourth decimal place (0.xxxx, alternatively
stated as xx.xx percent), including each hospital's own percentage and
the 97th percentile threshold. Values of 0.xxxx5 or higher would be
rounded up, and less than 0.xxxx5 would be rounded down. Any hospital
that has a percentage of total inpatient days that are Medicare SSI
days from its most recent cost reporting period that is greater than or
equal to the 97th percentile threshold would qualify as a 97th
percentile hospital. The ranking will be on a national level, as the
statutory language under section 203 of the CAA refers to ``97th
percentile of all hospitals,'' which we believe is most consistent with
a national, rather than a State-level ranking.
To follow the statutory requirement to utilize information from the
most recent cost reporting period, we are proposing to utilize each
hospital's most recent cost reporting period for which there is a filed
cost report in HCRIS, at a particular point in time in advance of the
SPRY to which the 97th percentile qualification would apply. A filed
cost report would first have an ``as submitted'' status in HCRIS, which
subsequently would change to ``amended,'' ``settled without audit,''
``settled with audit,'' or ``reopened'' status, which indicates a final
report that was previously reopened and re-settled. We considered
utilizing the most recent settled cost reporting period, but we have
determined that the use of the as-submitted cost report will result in
the use of more current and more consistent reporting periods across
hospitals, consistent with the statutory directive to rely on ``the
most recent cost reporting period.'' Moreover, we have determined that
the total inpatient days seldom change between the as-submitted and the
settled cost reports. The total inpatient days count is the primary
data element needed from the cost report in order for us to determine
which hospitals meet the 97th percentile exception. However, if that
most recent cost reporting period for which there is an as-submitted
cost report happens to already have an amended cost report, a settled
cost report, or a reopened cost report as of the date that CMS obtains
data from HCRIS for use in determining which hospitals meet the 97th
percentile hospital exception, we propose that we would use the total
inpatient day count from the amended cost report, settled cost report,
or reopened cost report for that period because that is the most
updated information available for that period. We will elaborate on the
timing of this process in more detail later in this section.
We are proposing to utilize both covered and non-covered Medicare
Part A days when collecting data and calculating hospital percentiles.
The statutory language in section 1923(g)(2)(B)(i) of the Act as
modified by section 203 of the CAA specifically refers to patients who
were entitled to benefits under part A of title XVIII. A patient's
status as entitled to benefits under part A of title XVIII does not
depend on whether payment for a particular inpatient day was available
under Medicare Part A payment principles, and a qualifying Medicare
beneficiary remains entitled to benefits under Part A even if Medicare
payment is not available with respect to a particular inpatient day.\8\
As such, we believe the calculations must include all Medicare Part A
inpatient days, whether covered or non-covered, in the associated
calculations. Further, this is consistent with CMS' use of covered and
non-covered days in the Medicare SSI days ratio calculations for
Medicare DSH payment purposes under section 1886(d)(5)(F)(vi)(I) of the
Act, which describes a hospital's inpatient days for patients who were
entitled to benefits under part A of title XVIII and were entitled to
SSI benefits under title XVI of the Act.
---------------------------------------------------------------------------
\8\ See Becerra v. Empire Health Found., for Valley Hosp. Med.
Ctr., 142 S. Ct. 2354 (2022).
---------------------------------------------------------------------------
Hospitals may provide acute inpatient hospital services, as well as
other inpatient hospital services in distinct part units of the
hospital. The distinct part units of a hospital that provide inpatient
hospital services which are reported separately on the hospital's
Medicare cost report are rehabilitation distinct part units and
psychiatric distinct part units. We are proposing to include all
inpatient days for inpatient hospital services reported on each
hospital's Medicare cost report, including days furnished in distinct
part units of the hospital that provide
[[Page 11873]]
inpatient hospital services, for purposes of determining a hospital's
Medicare SSI days and total inpatient days. We note that Medicare pays
for services furnished in these distinct part units under different
payment systems from the acute care inpatient hospital services
provided by the hospitals. However, for Medicaid purposes, the DSH
uncompensated care costs of the hospital are inclusive of the costs of
inpatient and outpatient hospital services furnished by the hospital,
including those furnished in these distinct parts. Therefore, we
believe the hospital's Medicare SSI days and total inpatient days
should be inclusive of these distinct part unit days and not limited to
acute inpatient hospital days.
In determining when we can begin to collect and assemble the
necessary data prior to the beginning of each upcoming SPRY that begins
on or after October 1 each year, we are proposing to use HCRIS data as
it exists as of March 31, in advance of October 1 of that same calendar
year. Using the HCRIS data as of March 31, we will identify each
hospital's most recent cost reporting period for which the hospital has
an available cost report, and also identify the total inpatient days
from the latest cost report available for that most recent cost
reporting period. We are also proposing to use the latest available
MEDPAR files and SSI eligibility data, as of the same March 31 date, to
determine the Medicare SSI days data that correspond to that same most
recent cost reporting period for each hospital.
For example, for the 97th percentile determination applicable to
SPRYs beginning October 1, 2023 through September 30, 2024, (that is,
SPRYs beginning during FFY 2024), we would determine a hospital's most
recent cost reporting period in which it has a cost report in HCRIS as
of March 31, 2023. For instance, if a hospital's most recent cost
reporting period with a cost report in HCRIS as of March 31, 2023, is
for the cost reporting period of July 1, 2021 to June 30, 2022, we
would take the total inpatient day count from that cost report. Then we
would utilize the MEDPAR files and SSI eligibility data available as of
March 31, 2023, to determine the hospital's Medicare SSI days for the
discharges occurring in that same cost reporting period of July 1,
2021, to June 30, 2022.
Using the most recently available data as of March 31 in advance of
October 1 each year would allow us a reasonable 6-month timeframe to
pull data from each of these data sources, address any potential data
issues, complete the necessary compiling and calculations, perform any
data integrity checks, determine the 97th percentile and the hospitals
meeting the threshold based either on the Medicare SSI days or the
percentage of total inpatient days that are Medicare SSI days, and make
the results available prior to October 1. States would then have the
97th percentile results applicable to the State's SPRY that begins
between October 1 of that calendar year and September 30 of the
following calendar year. The proposed March 31 date establishes a
snapshot for a point in time each year that is reasonably close to
October 1 of that same calendar year that we would use to determine
what is the ``most recent'' data available for application to the
upcoming SPRYs, while allowing us sufficient time to process the data
and make the results available before the start of those SPRYs.
Given the timing of this rulemaking and the October 1, 2021
effective date of the amendments made by section 203 of the CAA, we are
proposing to produce the 97th percentile hospital data for both SPRYs
beginning during FFY 2022 and SPRYs beginning during FFY 2023 using the
necessary Medicare SSI days and cost report information as it would
have been available to us under the timelines proposed herein. For
example, for the data necessary to determine hospitals meeting the 97th
percentile exception for SPRYs beginning during FFY 2022, we would
obtain a snapshot of the HCRIS, MEDPAR, and SSI eligibility data as
would have been available on March 31, 2021.
While we propose to include all hospitals that provide Medicaid-
covered inpatient services and file a Medicare cost report in our data
set, there will be circumstances that will result in some hospitals
being omitted from the data set. We will begin gathering all necessary
data after March of each year, based on the data availability described
previously, in order to develop the data set that will be used to rank
and indicate which hospitals qualify to meet the 97th percentile
hospital exception for each State's upcoming SPRY that begins on or
after October 1 of that year. In accordance to 42 CFR 413.24(f)(2),
cost reports are generally due 5 months from the end of each hospital's
cost-reporting period. For example, a hospital with a cost reporting
year end of September 30th would generally be expected to file a cost
report by the end of February the following year, while a hospital with
a cost reporting year end of June 30 would generally be expected to
file its cost report by the end of November of that year. However, we
also want to build in a reasonable window for late filing and cost
report processing into HCRIS. Therefore, we are proposing to include in
the data set any hospital that has filed a cost report dating back to
at least September 30, 3 years prior in order to capture as many
hospitals as possible in our data set. It is unlikely that there would
be a delay greater than 3 years from when a hospital's cost report is
generally due to when that cost report is captured in HCRIS. For
example, when we begin the data-development process for data available
through March 2023, we would exclude a hospital from the data set that
does not have a cost report in HCRIS from a cost-reporting period
ending by September 30, 2020, or later. We are proposing this cutoff in
order to capture as many hospitals in our data set as possible, but to
also prevent significant variability in the cost-reporting periods by
excluding Medicare hospitals whose most recent cost-reporting period
for which there is a cost report in HCRIS dates back more than 3 years.
This cutoff is intended to help exclude hospitals that may be inactive
or terminated from our data set.
As noted earlier in this section, we are also proposing to include
in the data set only hospitals that file a Medicare cost report.
Because the Medicare cost report data are the source of total inpatient
days, it is necessary for a hospital to file a Medicare cost report to
calculate a hospital's Medicare SSI day as a percentage of total
inpatient days. We cannot perform the calculations without this cost
report information. Therefore, we propose to include only hospitals
that file a Medicare cost report in the data set. Section 1923(g)(2)(B)
of the Act recognizes the necessity of the Medicare cost report for the
implementation of the 97th percentile exception by basing the
qualification for the exception on the number or percentage of Medicare
SSI days ``most recent cost reporting period.'' Therefore, we believe
it is appropriate and consistent with the statutory requirements to
include only these hospitals that have submitted Medicare cost reports
in the data set for both 97th percentile exception lists. We do not
anticipate this to be a problem, since any hospital serving Medicaid
patients, but that does not file a Medicare cost report, would not
qualify for the 97th percentile hospital exception. In accordance with
Sec. 413.24(f), Medicare-participating hospitals are required to file
cost reports, which are generally due 5 months after the close of each
cost reporting period. In accordance with Medicare Provider
Reimbursement Manual, Part II, Section 110, hospitals with no Medicare
utilization do not
[[Page 11874]]
need to file a cost report, and hospitals meeting low Medicare
utilization thresholds may file a less than full cost report with
limited information. Because a hospital would only qualify for the 97th
percentile hospital exception with a relatively high volume of Medicare
SSI days, a hospital with no or low Medicare utilization, and
therefore, with no cost report or with a less than full cost report
which would not have inpatient days data, would not qualify for the
97th percentile hospital exception.
Given that we are proposing to use snapshot cost report, claims,
and eligibility data in advance of October 1 each year to produce
nationwide lists applicable for each State's upcoming SPRY beginning on
or after that October 1, we would not modify the 97th percentile
qualification results based on a request by one or more individual
hospitals (or by one or more States, with respect to one or more
individual hospitals) to update or reconsider hospital cost report,
claims, or eligibility data. The proposed snapshot approach recognizes
that, at a given point in time, a hospital's most recent cost reporting
period for which there is a cost report available in HCRIS, as well as
the hospital's number of total inpatient days as reported in that most
recent cost report and number of Medicare SSI days as determined from
MEDPAR and SSI eligibility data sources, may be subject to future
revision. However, to determine qualification for the 97th percentile
hospital exception, we must select a point in time to capture snapshot
data, and the resulting lists must provide reasonable certainty to
hospitals and States nationwide regarding which hospitals qualify for
the exception. This proposed rule would specify the snapshots (and
their timing) that we would use in qualifying 97th percentile hospitals
for each SPRY. It would not be prudent or reasonable to continuously
revisit the 97th percentile hospital qualifications based on changing
cost report, claims, or eligibility data, outside of those established
snapshot parameters.
Nonetheless, we recognize there is a possibility of a mathematical
or other similar technical error by CMS that could lead to a
misidentification of the hospitals that qualify for the 97th percentile
exception. In such a circumstance, we believe that it would be
appropriate for us to correct our error, recognizing that this could
result in some hospitals being determined eligible for the 97th
percentile hospital exception that previously (erroneously) were not so
listed, and other hospitals losing their previous (erroneous)
designation as qualifying for the exception. At the same time, we must
balance this consideration with the recognition that the published
lists will be relied upon by States and hospitals for identifying which
hospitals qualify for the exception, hospital-specific limits will be
set accordingly, and DSH payments will be made; all interested parties
(including hospitals, the States, and CMS) have an interest in finality
for these payments after a reasonable time. Accordingly, we are
proposing to allow 1 year from the posting of the 97th percentile
hospital lists for States, hospitals, CMS, or other interested parties
to identify any mathematical or other similar technical error,
according to instructions that would appear on the published lists.
Upon CMS verification that an error occurred that affected the
hospitals appearing on a list of 97th percentile hospitals for a given
year, we would determine and publish a revised list as soon as
practicable. We believe 1 year is a reasonable timeline for identifying
any mathematical or other similar technical error made by CMS, and
would also allow a corrected qualifying list to be available in advance
of the start of the independent DSH audit for the respective SPRY in
most instances. For example, if this rule is finalized as proposed and
we publish the qualifying lists in 2023 for application retroactively
to a SPRY that begins October 1, 2021 (that is, SPRY 2022), we could
post a corrected qualifying list, if necessary, sometime in 2024. Then,
when the independent audit is performed for that SPRY in 2025, the
final 97th percentile qualification lists would be available and not
subject to any further changes. Accordingly, in paragraph (2) of the
proposed definition of ``97th percentile hospital'' in Sec.
447.295(b), we propose that CMS would publish lists identifying each
97th percentile hospital annually in advance of October 1 of each year.
We propose that CMS would revise a published list only to correct a
mathematical or other similar technical error that is identified to CMS
during the one-year period beginning on the date the list is published.
We propose that the effective date for this and other CAA-related
proposals, noted in the respective sections, be applicable to fiscal
years beginning on or after October 1, 2021, to align with the
effective date of the CAA.
4. Limitations on Aggregate Payments for DSHs Beginning October 1, 1992
(Sec. 447.297)
We are proposing to eliminate the Sec. 447.297(c) requirement to
publish annual DSH allotments in the Federal Register and to provide
that the Secretary will post preliminary and final national expenditure
targets and State DSH allotments in the Medicaid Budget and Expenditure
System/State Children's Health Insurance Program Budget and Expenditure
System (MBES/CBES) and at <a href="http://Medicaid.gov">Medicaid.gov</a> (or similar successor system or
website). Current regulations require us to publish the annual DSH
allotments in the Federal Register. We have found this process to be
time consuming and administratively burdensome for us, and are
concerned that it makes providing the information to States and other
interested parties less timely and accessible. Additionally, because we
currently notify States directly regarding annual allotment amounts and
make such information publicly available outside of the Federal
Register on a routine basis, we find that it is duplicative and
unnecessary to go through the process of publishing in the Federal
Register. Therefore, by proposing to eliminate the Sec. 447.297(c)
requirement to publish annual DSH allotments in the Federal Register
notice, we would be removing the administratively burdensome task,
which would allow us to focus our efforts on providing the information
in a timely and easily accessible manner through the MBES/CBES and at
<a href="http://Medicaid.gov">Medicaid.gov</a> (or similar successor system or website).
Additionally, we are proposing in Sec. 447.297(b) and (d)(1) to
remove the date on which final national targets and allotments are
published, currently specified as April 1, and revise this timeframe to
as soon as practicable. In Sec. 447.297(d)(1), we are also proposing
to remove the phrase ``prior to the April 1 publication date,'' and to
add in its place the phrase, ``prior to the posting date'' for
consistency with the new timeframe. We are proposing to remove the
April 1 publication date to allow for Medicaid expenditures associated
with the FFY DSH allotment to be finalized. CMS utilizes these amounts
in the calculations of the 12 percent limit under section
1923(f)(3)(B)(ii) of the Act. Finally, we are proposing to remove Sec.
447.297(e), which consists of redundant publication requirements
already identified in Sec. 447.297(b) through (d), in its entirety, to
align with our proposed changes Sec. 447.297(c).
5. Reporting Requirements (Sec. 447.299)
a. Calculating Medicaid Shortfall
We are proposing to revise Sec. 447.299(c)(6), (7), (10), and (16)
to reflect the statutory changes made by section 203 of the CAA to
update the methodology for calculating the
[[Page 11875]]
Medicaid shortfall portion (Medicaid costs less Medicaid payments) of
the hospital-specific DSH limit to only include costs and payments for
hospital services furnished to beneficiaries for whom Medicaid is the
primary payer, effective for the SPRY beginning on or after October 1,
2021, and to include the statutory exception for 97th percentile
hospitals. Hospitals meeting this exception will calculate their
hospital-specific DSH limit using the higher value of either the
hospital-specific DSH limit calculated per methodology which includes
only costs and payments associated with beneficiaries for whom Medicaid
is the primary payer, or the hospital-specific DSH limit calculated per
the methodology in effect on January 1, 2020. We reviewed the other
data elements in Sec. 447.299(c) to determine if additional updates
were necessary to account for the changes made by section 203 of the
CAA. However, we believe these are the only data elements requiring
updates because these are the only elements that will differ based on
whether statutory requirements provide for the consideration of all
Medicaid eligible individuals, or only those for whom Medicaid is the
primary payer. Therefore, it is only necessary to revise Sec.
447.299(c)(6), (7), (10), and (16) in order to account for the
statutory changes made by section 203 of the CAA.
Accordingly, we are proposing to revise Sec. 447.299(c)(6), which
specifies that this data element should include inpatient and
outpatient Medicaid fee-for-service (FFS) basic rate payments paid to
hospitals, ``not including DSH payments or supplemental/enhanced
Medicaid payments, for inpatient and outpatient services furnished to
Medicaid eligible individuals.'' We are proposing this change because,
for most hospitals, for SPRYs beginning on or after October 1, 2021,
only those FFS payments for Medicaid eligible individuals for whom
Medicaid is the primary payer will be counted in the calculation of the
hospital-specific DSH limit. Therefore, we are proposing to revise
Sec. 447.299(c)(6) to remove the reference to Medicaid eligible
individuals and update the regulatory text to indicate that FFS
payments for inpatient and outpatient hospital services furnished to
Medicaid individuals in accordance with Sec. 447.295(d) should be
included in this data element.
We are also proposing to revise Sec. 447.299(c)(7), which
specifies that this data element includes payments made to the
hospitals ``by Medicaid managed care organizations for inpatient
hospital and outpatient hospital services furnished to Medicaid
eligible individuals.'' We are proposing this change because for most
hospitals, for SPRYs beginning on or after October 1, 2021, only
payments made by Medicaid managed care organizations for Medicaid
eligible individuals for whom Medicaid is the primary payer will be
counted in the calculation of the hospital-specific DSH limit.
Therefore, we are proposing to revise Sec. 447.299(c)(7) to remove the
reference to Medicaid eligible individuals and update the regulatory
text to indicate that Medicaid managed care payments for inpatient and
outpatient hospital services furnished to Medicaid individuals in
accordance with Sec. 447.295(d) should be included in this data
element.
We are also proposing to revise Sec. 447.299(c)(10), which
specifies that this data element includes ``costs incurred by each
hospital for furnishing inpatient hospital and outpatient hospital
services to Medicaid eligible individuals.'' We are proposing this
change because for most hospitals, for SPRYs beginning on or after
October 1, 2021, only costs incurred on behalf of Medicaid eligible
individuals for whom Medicaid is the primary payer will be counted in
the calculation of the hospital-specific DSH limit. Therefore, we are
proposing to revise Sec. 447.299(c)(10) to remove the reference to
Medicaid eligible individuals and update the regulatory text to
indicate that costs incurred by each hospital for furnishing inpatient
hospital and outpatient hospital services to Medicaid individuals as
determined pursuant to Sec. 447.295(d) should be included in this data
element.
Finally, we are proposing to revise Sec. 447.299(c)(16), which
specifies the calculation of uncompensated care costs, which include
``the total cost of care for furnishing inpatient hospital and
outpatient hospital services to Medicaid eligible individuals'' and the
uninsured, which are to be offset by ``Medicaid FFS rate payments,
Medicaid managed care organization payments, supplemental/enhanced
Medicaid payments, uninsured revenues, and section 1011 payments for
inpatient and outpatient hospital services.'' Therefore, we are
proposing to revise Sec. 447.299(c)(16) to remove the reference to
Medicaid eligible individuals and update the regulatory text to
indicate that total annual uncompensated care cost equals the total
cost of care for furnishing inpatient hospital and outpatient hospital
services to Medicaid individuals, as determined in accordance with
Sec. 447.295(d), and to individuals with no source of third-party
coverage for the hospital services they receive, less the sum of
payments received on their behalf, should be included in this data
element.
We propose that the effective date for this and other CAA-related
proposals, noted in the respective sections, be applicable to fiscal
years beginning on or after October 1, 2021, to align with the
effective date of the CAA.
b. Reporting DSH Overpayments
To improve the accuracy of identification of provider overpayments
discovered through the DSH audit process, we are proposing to add an
additional reporting requirement for annual DSH audit reporting
required by Sec. 447.299. We are proposing to redesignate Sec.
447.299(c)(21) as paragraph (c)(22) of that section, and to add a
proposed new Sec. 447.299(c)(21) to require an additional data element
for the required annual DSH audit reporting. The new data element we
are proposing would require auditors to quantify the financial impact
of any finding, including those resulting from incomplete or missing
data, lack of documentation, non-compliance with Federal statutes or
regulations, or other deficiencies identified in the independent
certified audit, which may affect whether each hospital has received
DSH payments for which it is eligible within its hospital-specific DSH
limit.
Currently, audits may include a caveat indicating the auditors are
unable to quantify the financial impact of an identified audit finding.
We propose that, for purposes of this section, audit finding means an
issue identified in the independent certified audit required under
Sec. 455.304 concerning the methodology for computing the hospital-
specific DSH limit or the DSH payments made to the hospital, including
compliance with the hospital-specific DSH limit as defined in Sec.
447.299(c)(16). For example, an audit may identify that a hospital was
unable to satisfactorily document the outpatient services it provided
to Medicaid-eligible patients, resulting in the exclusion of associated
costs and payments from the Medicaid shortfall calculation. Based on
this lack of documentation, the audit may include a caveat noting the
auditor's finding that the hospital's total uncompensated care cost may
be misstated as a result of this exclusion, with unknown impact on the
hospital-specific DSH limit. Given this lack of quantification of the
financial impact of this finding, CMS and the State would be unable to
determine whether an overpayment has resulted related to this
[[Page 11876]]
audit finding, and if so, the amount. We believe that requiring the
quantification of such findings would limit the burden on States and
CMS of performing follow-up reviews or audits. Specifically, conducting
a secondary review or audit after the independent auditors have
completed theirs would lengthen the review process, and therefore,
delay the results of the audit. It would also require additional time,
personnel, and resources by CMS, States, and hospitals to participate
in a secondary review or audit, which would largely duplicate aspects
of the audit already conducted by the independent auditor. If
finalized, the new data element would help ensure appropriate recovery
and redistribution, as applicable, of all DSH overpayments in excess of
the hospital-specific limit. Adding this requirement to the submission
will also ensure auditors provide the additional information at the
time they are already reviewing the applicable data, reducing the labor
burden as opposed to a later, secondary audit.
Auditors would be afforded the professional discretion and the
flexibility to determine how to best quantify these amounts in the
audit findings. For example, auditors would be able to use alternative
source documentation, utilize a methodology to estimate the financial
impact in terms of the dollar amount at risk, or provide an estimated
range of financial impact if a determination of an exact dollar amount
is not possible. However, we also understand that, due to the
complexity of issues that may arise, the actual financial impact of an
audit finding may not always be calculable. Therefore, we propose that,
in the expectedly rare event that the actual financial impact cannot be
calculated, a statement of the estimated financial impact for each
audit finding identified in the independent certified audit that is not
reflected in the other data elements identified in Sec. 447.299(c)
would be required. We propose that actual financial impact means the
total amount associated with audit findings calculated using the
documentation sources identified in Sec. 455.304(c). Estimated
financial impact means the total amount associated with audit findings
calculated on the basis of the most reliable available information to
quantify the amount of an audit finding in circumstances where complete
and accurate information necessary to determine the actual financial
impact is not available from the documentation sources identified in
Sec. 455.304(c). The estimated financial impact would use the most
reliable available information (for example, related source
documentation such as data from State systems, hospitals' audited
financial statements, and Medicare cost reports) to quantify an audit
finding as accurately as possible. We believe this additional data
reporting element is necessary to better enable our oversight of the
Medicaid DSH program to better ensure compliance with the hospital-
specific DSH limit in section 1923(g) of the Act.
Additionally, we are proposing to add Sec. 447.299(f), which would
codify our existing policy for how overpayments identified through the
annual independent certified DSH audits required under part 455,
subpart D, must be handled and reported to CMS. Specifically, we
propose that DSH payments found in the independent certified audit
process under part 455, subpart D to exceed hospital-specific cost
limits are provider overpayments which must be returned to the Federal
Government in accordance with the requirements in 42 CFR part 433,
subpart F, or redistributed by the State to other qualifying hospitals,
if redistribution is provided for under the approved State plan. We
propose that overpayment amounts returned to the Federal Government
must be separately reported on the Form CMS-64 as a decreasing
adjustment which corresponds to the fiscal year DSH allotment and
Medicaid SPRY of the original DSH expenditure claimed by the State.
We further propose to add Sec. 447.299(g), which would establish
reporting requirements concerning the redistribution of DSH
overpayments in accordance with a State's redistribution methodology in
its Medicaid State plan, as applicable. Specifically, we propose that,
as applicable, States would be required to report any overpayment
redistribution amounts on the Form CMS-64 within 2 years from the date
of discovery that a hospital-specific limit has been exceeded, as
determined under Sec. 433.316(f) in accordance with a redistribution
methodology in the approved Medicaid State plan. The State must report
redistribution of DSH overpayments on the Form CMS-64 as separately
identifiable decreasing adjustments reflecting the return of the
overpayment as specified in Sec. 447.299(f) and increasing adjustments
representing the redistribution by the State. Both adjustments must
correspond to the fiscal year DSH allotment and Medicaid SPRY of the
related original DSH expenditure claimed by the State. These proposed
additions of paragraphs (f) and (g) to Sec. 447.299 would memorialize
our current policy concerning the return of FFP in or redistribution of
Medicaid DSH payments in excess of the hospital-specific limit in
regulation, and thereby promote clarity and transparency, avoid
misunderstanding, and enhance oversight of the Medicaid DSH program.
These proposals for the independent certified audit and DSH-related
claims reporting would enhance Federal oversight of the Medicaid DSH
program and improve the accuracy of DSH audit overpayments identified
and collected through annual DSH audits. We invite comments on these
proposals.
6. Definitions (Sec. 455.301)
We are proposing to revise the definition of the ``independent
certified audit'' to include the requirement for auditors to quantify
the financial impact of each audit finding, or caveat, on an individual
basis, for each hospital, per the reporting requirement in proposed
Sec. 447.299(c)(21) and under section 1923(j)(1)(B) of the Act.
Updating this definition is consistent with the goals of the updates to
Sec. 447.299(c)(21) to facilitate our determination of whether the
State made DSH payments that exceeded any hospital's specific DSH limit
in the Medicaid SPRY under audit. Specifically, as discussed in item
five of the proposed provisions, we are proposing to add to annual DSH
reporting required under Sec. 447.299(c) a requirement for States to
report the financial impact of audit findings identified by the State's
independent auditor. To align with this proposal, we propose to revise
the definition of the independent certified audit under Sec. 455.301
an inclusion of the auditor's certification of ``a quantification of
the financial impact of each audit finding on a hospital-specific
basis.'' As previously discussed, based on current independent
certified DSH audit submissions, we are at times unable to determine
whether a DSH overpayment to a provider has occurred, the underlying
cause of any overpayment, and the amount of the overpayment(s)
associated with each cause. This is the result of an auditor including
audit findings or caveats indicating that missing information or other
issues may have an impact on the calculation of total uncompensated
care costs (that is, the DSH hospital-specific limit), while not making
a determination of the actual (or estimated) financial impact of the
identified issue. As such, we believe that revising the definition to
include a quantification of the financial impact of any issues
identified in the audit is necessary to better ensure proper oversight
and integrity of the DSH program.
[[Page 11877]]
We are soliciting comments related to this proposed change.
7. Condition for Federal Financial Participation (FFP) (Sec. 455.304)
We are proposing to revise Sec. 455.304(d)(1), (3), (4), and (6)
to reflect the proposed revisions to the independent certified data
elements at Sec. 447.299(c)(6), (7), (10), and (16). The revisions
would reflect the statutory changes made by section 203 of the CAA,
updating the independent certified audit verifications as they relate
to the treatment of Medicaid eligibles and third-party payers. We
reviewed the other independent certified audit verifications in Sec.
455.304(d) to determine if additional updates were necessary to account
for the changes made by section 203 of the CAA. However, we believe
these are the only verifications requiring updates because these are
the verifications that consider the treatment of Medicaid eligibles for
purposes of the independent certified audit. Therefore, it is only
necessary to revise Sec. 455.304(d)(1), (3), (4), and (6) in order to
account for the statutory changes made by section 203 of the CAA.
Accordingly, we are proposing to revise Sec. 455.304(d)(1), which
specifies that auditors should verify that each qualifying hospital
that receives DSH payments, associated with the provisions of services
to ``Medicaid eligible individuals and individuals with no source of
third-party coverage,'' is allowed to retain that payment. We are
proposing this change because for most hospitals, for SPRYs beginning
on or after October 1, 2021, the methodology by which these DSH
payments were calculated and paid will be reflective of Medicaid costs
and payments associated with Medicaid eligible individuals for whom
Medicaid is the primary payer. Therefore, we are proposing to revise
Sec. 455.304(d)(1) to remove the reference to Medicaid eligible
individuals and update the regulatory text to indicate that the DSH
payments are associated with inpatient hospital and outpatient hospital
services provided to Medicaid individuals as determined in accordance
with Sec. 447.295(d).
We are also proposing to revise Sec. 455.304(d)(3), which
specifies that ``Only uncompensated care costs of furnishing inpatient
and outpatient hospital services to Medicaid eligible individuals'' and
the uninsured should be included in the calculation of the hospital-
specific DSH limit. We are proposing this change because for most
hospitals, for SPRYs beginning on or after October 1, 2021, only costs
incurred on behalf of Medicaid eligible individuals for whom Medicaid
is the primary payer will be counted in the calculation of the
hospital-specific DSH limit. Therefore, we are proposing to revise
Sec. 455.304(d)(3) to remove the reference to Medicaid eligible
individuals and update the regulatory text to indicate that
uncompensated care costs for furnishing inpatient hospital and
outpatient hospital services to Medicaid individuals is determined in
accordance with Sec. 447.295(d). We are also proposing to revise Sec.
455.304(d)(3) to streamline this provision by removing a redundant
reference to section 1923(g)(1)(A) of the Act.
Further, we are proposing to revise Sec. 455.304(d)(4), which
specifies that Medicaid payments, including FFS, supplemental/enhanced,
and Medicaid managed care payments made to a hospital ``for furnishing
inpatient hospital and outpatient hospital services to Medicaid
eligible individuals,'' should be included in the calculation of the
hospital-specific DSH limit. We are proposing this change because for
most hospitals, for SPRYs beginning on or after October 1, 2021, only
costs incurred on behalf of Medicaid eligible individuals for whom
Medicaid is the primary payer will be counted in the calculation of the
hospital-specific DSH limit. Therefore, we are proposing to revise
Sec. 455.304(d)(4) to remove the reference to Medicaid eligible
individuals and update the regulatory text to indicate that the DSH
payments associated with inpatient hospital and outpatient hospital
services provided to Medicaid individuals as determined in accordance
with Sec. 447.295(d) are included in the calculation of hospital-
specific DSH limit.
Finally, we are proposing to revise Sec. 455.304(d)(6), which
requires that auditors include a description of the methodology for
calculation each hospital's hospital-specific DSH limit, including
``how the State defines incurred inpatient hospital and outpatient
hospital costs for furnishing inpatient hospital and outpatient
hospital services to Medicaid eligible individuals.'' We are proposing
this change because for most hospitals, for SPRYs beginning on or after
October 1, 2021, the methodology by which these DSH payments were
calculated and paid will be reflective of Medicaid costs and payments
associated with Medicaid eligible individuals for whom Medicaid is the
primary payer. Therefore, we are proposing to revise Sec.
455.304(d)(6) to remove the reference to Medicaid eligible individuals
and update the regulatory text to indicate that inpatient hospital and
outpatient hospital services provided to Medicaid individuals are
determined in accordance with Sec. 447.295(d).
We propose that the effective date for this and other CAA-related
proposals, noted in the respective sections, be applicable to fiscal
years beginning on or after October 1, 2021, to align with the
effective date of the CAA.
8. Process and Calculation of State Allotments for FYs After FY 2008
(Sec. 457.609)
We have not published CHIP allotments in the Federal Register since
the FY 2013 CHIP allotments. Each year following FY 2013, States have
been notified of their CHIP allotments through email notifications or
MBES/CBES. We propose to remove from Sec. 457.609(h), which references
our discretionary option to publish in the Federal Register the
national CHIP allotment amounts as determined on an annual basis for
the FYs specified in statute. Instead, we are proposing to post CHIP
allotments in the MBES/CBES and at <a href="http://Medicaid.gov">Medicaid.gov</a> (or similar successor
systems or websites) annually. We believe that posting the CHIP
allotment amounts at <a href="http://Medicaid.gov">Medicaid.gov</a> and in the MBES/CBES is an efficient
way to increase transparency by making the information more easily
accessible to interested parties and would be less administratively
burdensome for us.
We are soliciting any comments related to these proposed changes.
III. Retroactive Application of the Rule
The amendments made by section Division CC, Title II, section 203
of the Consolidated Appropriations Act, 2021, require that the changes
to the calculations of Medicaid hospital-specific DSH limits take
effect on October 1, 2021, and apply to payment adjustments made under
section 1923 of the Act during fiscal years beginning on or after that
date. Accordingly, these provisions of this proposed rule, if
finalized, will apply retroactively as set out in statute.
IV. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et
seq.) we are required to provide 60-day notice in the Federal Register
and solicit public comment before a ``collection of information''
requirement is submitted to the Office of Management and Budget (OMB)
for review and approval. For the purpose of the PRA and this section of
the preamble, collection of information is defined under 5 CFR
1320.3(c) of the PRA's implementing regulations.
[[Page 11878]]
To fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the PRA requires that we
solicit comment on the following issues:
<bullet> The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
<bullet> The accuracy of our estimate of the information collection
burden.
<bullet> The quality, utility, and clarity of the information to be
collected.
<bullet> Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We are soliciting public comment on each of these issues for the
following sections of this document that contain information collection
requirements. Comments, if received, will be responded to within the
subsequent final rule.
A. Wage Estimates
To derive average costs, we used data from the U.S. Bureau of Labor
Statistics' (BLS) May 2021 National Occupational Employment and Wage
Estimates for all salary estimates (<a href="https://www.bls.gov/oes/current/oes_nat.htm">https://www.bls.gov/oes/current/oes_nat.htm</a>). In this regard, Table 1 presents BLS' mean hourly wage,
our estimated cost of fringe benefits and overhead (calculated at 100
percent of salary), and our adjusted hourly wage.
Table 1--National Occupational Employment and Wage Estimates
----------------------------------------------------------------------------------------------------------------
Fringe benefits
Occupation title Occupation code Mean hourly wage and overhead ($/ Adjusted hourly
($/hr) hr) wage ($/hr)
----------------------------------------------------------------------------------------------------------------
Accountants and auditors............ 13-2011 40.37 40.37 80.74
Financial Specialist all other...... 13-2099 38.64 38.64 77.28
Managers all other.................. 11-9199 62.36 62.36 124.72
----------------------------------------------------------------------------------------------------------------
As indicated, we are adjusting our employee hourly wage estimates
by a factor of 100 percent. This is necessarily a rough adjustment,
both because fringe benefit and overhead costs vary significantly from
employer to employer, and because methods of estimating these costs
vary widely from study to study. Nonetheless, we believe that doubling
the hourly wage to estimate total cost is a reasonably accurate
estimation method.
B. Proposed Information Collection Requirements
The following regulatory sections of this rule contain proposed
collection of information requirements (or ``ICRs'') that are subject
to OMB review and approval under the authority of the PRA. Our analysis
of the proposed requirements and burden follow.
The remaining provisions are not associated with any information
collection requirements. In that regard they are not subject to the
requirements of the PRA and are not addressed under this section of the
preamble. For this rule's full burden implications, please see the
Regulatory Impact Analysis under section V. of this preamble.
1. ICRs Regarding DSH Reporting Requirements (Sec. 447.299)
The following proposed changes will be submitted to OMB for review
under control number 0938-0746 (CMS-R-266).
Under Sec. 447.299, this proposed rule would require States to
provide an additional data element as part of its annual DSH audit
report. This additional element would require a State auditor to
quantify the financial impact of any audit finding not captured within
any other data element under Sec. 447.299(c), which may affect whether
each hospital has received DSH payments for which it is eligible within
its hospital-specific DSH limit.
The proposed additional data element would require auditors to
indicate the financial impact of all findings rather than indicating
that the financial impact of any finding is unknown.
The burden consists of the time it would take each of the States to
quantify any audit finding identified during the independent certified
audit required under section 1923(j)(2) of the Act. As we rarely
receive audits with no identified findings, we will assume for the
purposes of this estimate that all applicable States will complete this
work. The territories have been excluded from this proposed requirement
since they do not receive a DSH allotment under section 1923(f) of the
Act. We have also excluded Massachusetts from the total burden
estimate, as it currently does not complete DSH audits because its
entire DSH allotment amount is diverted for payments under a section
1115 demonstration project.
We believe the additional burden associated with the new data
element would be 2 hours given that auditors are already engaged in a
focused review of available documentation to quantify the aggregate
amounts that comprise each of the existing data elements required under
Sec. 447.299(c). We also estimate that the additional 2 hours would
consist of 1 hour at $77.28/hr. for a financial specialist to add the
additional data to the report and 1 hour at $124.72/hr for management
and professional staff to review the additional data in the report. In
aggregate we estimate an annual burden of 102 hours (50 States x 2 hr/
response x 1 response/year) at a cost of $10,100 (50 States x [(1 hr x
$124.72/hr) + (1 hr x $77.28/hr)]).
If the auditor is unable to determine the actual financial impact
amount of an audit finding, the auditor would be required to provide a
statement of the estimated financial impact for each audit finding
identified in the independent certified audit. For the purposes of this
burden estimate, we will assume every State may have some quantifiable
findings and some unquantifiable findings. As such, we anticipate that
a State auditor would have to spend an additional 1 hour at $80.74/hr
quantifying the financial impact of DSH findings that are classified as
unknown. The estimated annual burden would be 50 hours (50 States x 1
hr) at a cost of $4,037 (50 hr x $80.74/hr).
C. Summary of Annual Burden Estimates for Proposed Requirements
Table 2 summarizes the burden for the proposed provisions.
[[Page 11879]]
Table 2--Proposed Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Time per Total
Regulation section(s) under title 42 OMB control No. (CMS ID Respondents Responses Total response annual time Labor costs Total cost
of the CFR No.) (per state) responses (hours) (hours) ($/hr) ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 447.299 DSH audit............ 0938-0746 (CMS-R-266).. 50 1 51 2 102 varies 10,100
50 1 51 1 51 80.74 4,037
------------------------------------------------------------------------------------------
Total........................... ....................... 50 2 102 varies 153 varies 14,137
--------------------------------------------------------------------------------------------------------------------------------------------------------
The audit requirement proposal represents the only information
collection provision of this rule. As such, we estimate there would be
a total annual burden of 153 hours at a cost of $14,420 and an average
per State burden of 3 hours (153 hr/51 States) and $282.75 ($14,420/51
States).
D. Submission of PRA-Related Comments
We have submitted a copy of this proposed rule to OMB for its
review of the rule's ICRs. The requirements would not be effective
until they have been approved by OMB.
To obtain copies of the supporting statement and any related forms
for the proposed collections discussed in this rule, please visit the
CMS website at <a href="http://www.cms.hhs.gov/PaperworkReductionActof1995">www.cms.hhs.gov/PaperworkReductionActof1995</a>, or call the
Reports Clearance Office at 410-786-1326.
We invite public comments on this potential ICR. If you wish to
comment, please submit your comments electronically as specified in the
DATES and ADDRESSES section of this proposed rule and identify the rule
(CMS-2445-P), the ICR's CFR citation, and the OMB control number.
IV. Response to Comments
Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We would consider all comments we receive
by the date and time specified in the DATES section of this preamble,
and, when we proceed with a subsequent document, we would respond to
the comments in the preamble to that document.
V. Regulatory Impact Analysis
A. Statement of Need
This proposed rule would codify in Federal regulations the
statutory requirements of Division CC, Title II, section 203 of the
CAA, which relate to Medicaid shortfall and third-party payments. These
changes are necessary to align with Federal statute, and to provide
States and hospitals an understanding of how qualifying hospitals' DSH
payments may be impacted by the legislation. These changes are
necessary in order to reflect the statutory changes to section 1923(g)
of the Act to update the methodology for calculating the Medicaid
shortfall portion of the hospital-specific DSH limit to only include
costs and payments for hospital services furnished to beneficiaries for
whom Medicaid is the primary payer, and to codify the exception for
certain hospitals that are in the 97th percentile or above of all
hospitals with respect to the number of Medicare SSI days or percentage
of Medicare SSI days to total inpatient days.
Since we were required to engage in rulemaking in order to codify
the statutory changes made under the CAA, we are also taking the
opportunity to update certain DSH regulations in order to provide
additional clarity and efficiency. The proposed changes to the BNF and
associated calculations performed under the DHRM will provide better
clarity for States that divert all or a portion of their DSH allotment
under an approved section 1115 demonstration.
Additional Medicaid DSH payments and requirements are addressed in
this proposed rule. We propose to add additional specificity to the
reporting requirements of the annual DSH audit conducted by an
independent auditor to enhance Federal oversight of the Medicaid DSH
program. Additionally, we seek to improve the accurate identification
of and collection efforts related to overpayments identified through
the annual DSH independent certified audits by specifying the date of
discovery and standards for return of FFP or redistribution of DSH
payments made to providers in excess of the hospital-specific limit.
The proposed rule also seeks to alleviate the administrative burden of
publishing the annual DSH and CHIP allotments in the Federal Register,
of which we also notify States directly by providing notification
through other, more practical means.
B. Overall Impact
We have examined the impacts of this proposed rule as required by
Executive Order 12866 on Regulatory Planning and Review (September 30,
1993), Executive Order 13563 on Improving Regulation and Regulatory
Review (January 18, 2011), the Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act,
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22,
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4,
1999), and the Congressional Review Act (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Section
3(f) of Executive Order 12866 defines a ``significant regulatory
action'' as an action that is likely to result in a rule: (1) having an
annual effect on the economy of $100 million or more in any 1 year, or
adversely and materially affecting a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local or tribal governments or communities (also
referred to as ``economically significant''); (2) creating a serious
inconsistency or otherwise interfering with an action taken or planned
by another agency; (3) materially altering the budgetary impacts of
entitlement grants, user fees, or loan programs or the rights and
obligations of beneficiaries thereof; or (4) raising novel legal or
policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive order.
Based on our estimates using a ''no action'' baseline, OMB's Office
of Information and Regulatory Affairs has determined that this
rulemaking is ``economically significant,'' as discussed in more detail
in this section.
C. Detailed Economic Analysis
Some amendments made by the CAA required us to propose regulatory
updates, but there are statutory changes that are effective regardless
of our actions. Typically, under OMB Circular
[[Page 11880]]
A-4, our analysis for instances such as this would utilize a ``pre-
statute'' baseline. However, we are unable to assess the impact of the
statutory changes in a meaningful way. Therefore, for the purposes of
assessing the incremental economic impact, we determined the most
appropriate analysis is to compare the effects of this rulemaking
against a ``no action'' baseline in accordance with OMB Circular A-4.
This baseline incorporates the statutory changes made by the CAA that
do not require rulemaking to be in effect, such as the change to the
definition of Medicaid shortfall. This will be the focus of our
analysis. Similarly, for the non-CAA-required or related DSH provisions
in this proposed rule, our analytical baseline is a direct comparison
between the proposed provisions and not proposing the rule.
Because the impact of our rule depends on downstream impacts of
changes created in statute unaffected by this rulemaking, such as the
change to only include Medicaid costs and payments in the hospital-
specific DSH limit when Medicaid is the primary payer, calculating
financial cost and transfer impacts specific to this rulemaking
presents challenges which we will discuss further in those sections.
1. Benefits
The policies in this proposed rule, if finalized, would enhance
Federal oversight of the Medicaid DSH program, improve the accuracy of
DSH audit overpayments identified through and collected as a result of
annual DSH audits, and provide clarity on certain existing Medicaid DSH
policies. This proposed rule would clarify existing CMS policy by
codifying that the date of discovery of DSH overpayments is determined
according to the date on which the State submits its annual DSH
independent certified audit to CMS, or any of the dates specified in
Sec. 433.316(c). Further, this proposed rule would provide additional
transparency regarding the DSH allotment reductions calculated under
the DHRM, specifically regarding the BNF, by updating the applicable
regulations to specify that amounts diverted under a section 1115
demonstration approved after July 31, 2009, or approved as of that date
but for a purpose other than coverage expansion, are subject to
reduction under the HMF and HUF. Further, these regulatory updates
would provide transparency regarding how the amounts diverted under a
section 1115 demonstration are to be determined and applied in the
DHRM. In addition, this proposed rule includes specific details related
to the development and application of the data set used to determine
the qualification for the exception for 97th percentile hospitals. This
proposed rule details how hospital-specific DSH limits should be
calculated under section 1923(g) of the Act and reported in the
independent certified audit, as specified in Sec. 447.299(c). Further,
the proposed additional data reporting element in Sec. 447.299(c)(21)
would strengthen CMS oversight of the Medicaid DSH program and better
ensure compliance with the hospital-specific DSH limit under section
1923(g) of the Act. Finally, this proposed rule would also allow CMS to
provide annual DSH and CHIP allotment information in a timely and
assessible manner while reducing unnecessary administrative burden by
eliminating the Sec. Sec. 447.297(c) and 457.609 requirement and
option, respectively, to publish these annual allotments in a Federal
Register notice.
2. Costs
Under Sec. 447.299, this proposed rule would require States to
determine the hospital-specific DSH limit for hospitals meeting the
exception for 97th percentile hospitals. For these hospitals, the
hospital-specific DSH limit is calculated using the higher value of
either the hospital-specific DSH limit amount determined for the
hospital under section 1923(g)(1)(A) of the Act as amended by section
203 of the CAA or the amount determined for the hospital under section
1923(g)(1)(A) of the Act as in effect on January 1, 2020. This amount
will be captured under the reporting element at Sec. 447.299(c)(10).
While we propose that CMS will produce the source of data used to
identify hospitals qualifying to meet the exception for 97th percentile
hospitals, this will require a State auditor to calculate two separate
hospital-specific DSH limits and determine the higher value thereof for
hospitals meeting this exception. Given this exception applies to a
limited number of hospitals and that the identity of these hospitals
and the information required to determine their hospital-specific DSH
limit amounts under both calculations would be based on readily
available information, we believe the additional burden associated with
determining the hospital-specific DSH limit for hospitals qualifying
under this exception to be minimal.
To estimate the overall burden of adding this requirement for the
calculation of the hospital-specific DSH limit for hospitals meeting
the exception for 97th percentile hospitals, we considered the number
of annual independent certified audits received by CMS in addition to
the limited number of hospitals that will qualify under this exception.
In order for States to assess which hospitals meet the exception, we
estimate that it would take approximately 2 hours, consisting of: 1
hour at $77.28/hr for a financial specialist to prepare the
aforementioned spreadsheet report, and 1 hour at $124.72/hr for
management and professional staff to review the report. In the
aggregate, we estimate an ongoing annual burden of 102 hours (51 States
x 2 hr/response x 1 response/year) at a cost of $10,302 ((51 States x
[(1 hr $124.72/hr) + (1 hr x $77.28/hr)] or $202 per State ($10,302/51
States). Additionally, we anticipate that a State auditor would have to
spend an additional hour verifying the hospital-specific DSH limits for
hospitals meeting the exception for 97th percentile hospitals. The
estimated annual burden would be 1 hour per State (51 States x 1 hour)
51 hours x $80.74/hr for auditors to complete the audit at a cost of
$4,118 per year (51 States x 1 hour x $80.74 per hour). The total cost
of this provision of the proposed rule would be $14,420 ($10,302 +
$4,118) and 153 hours, or $282.74 and 3 hours per State.
The additional DSH audit data reporting element creates a burden of
153 hours at a cost of $14,420, with an average of 3 hours ($282.74 hr/
51 States) at a cost of $282.74 per State Medicaid agency per year
($14,420/51 States).
We do not estimate there will be a cost impact related to the DHRM
BNF proposal. This proposal merely provides clarification regarding how
amounts are determined, and the impact of the policy itself was
accounted for the in the 2019 final rule that finalized the factor
amounts. Therefore, the only costs would be associated with review of
this rule, which are accounted for in Part 4 of this section.
Similarly, there will be no cost impact related to the proposals to
publish DSH and CHIP allotments through an alternative means. Under
current CMS practice, States are already informed of their allotment
amounts prior to the Federal Register publication, so the removal of
that step will not require a change in entities' practices or systems.
3. Transfers
Although the policies discussed in this proposed rule would affect
the calculation of the hospital-specific DSH limit established at
section 1923(g) of the Act and some providers may see a decrease in
their historic hospital-specific DSH limits, these effects are a direct
result of statutory changes rather
[[Page 11881]]
than the proposals in this rule. In addition, some providers may see an
increase in their historic hospital-specific DSH limits, again as a
result of the changes made by statute. Further, lower hospital-specific
DSH limits for some hospitals may result in States choosing to
distribute higher DSH payments to hospitals that historically had not
been paid at higher levels. We note that this rule would not affect the
considerable flexibility afforded States in setting DSH State plan
payment methodologies to the extent that these methodologies are
consistent with section 1923(c) of the Act and all other applicable
statutes and regulations. Therefore, we cannot predict whether and how
States would exercise their flexibility in setting DSH payments to
account for changes in historic hospital-specific DSH limits and how
this would affect individual providers or specific groups of providers.
We invite comments from State agencies and hospitals providing
information or data for the calculation of these estimates.
4. Regulatory Review Cost Estimation
If regulations impose administrative costs on private entities,
such as the time needed to read and interpret this proposed rule, we
estimate the cost associated with regulatory review. Due to the
uncertainty involved with accurately quantifying the number of entities
that will review the rule, we assume that States, Medicaid DSH
hospitals, and independent auditors will be likely reviewers of this
proposed rule. We acknowledge that this assumption may understate or
overstate the costs of reviewing this rule. It is possible that not all
Medicaid DSH hospitals will choose to review individually, or that
State agencies will have multiple people in different roles review.
Nevertheless, we thought the entities directly or indirectly impacted
by this rule served as the best basis. As such, we will assume half of
the approximately 2,700 Medicaid DSH hospitals will review the rule, in
addition to at least one person from each of the 51 State agencies
impacted by this rule, and at least one person from the independent DSH
auditor for each of the 51 States, resulting in 1,502 total entities.
We welcome any comments on the approach in estimating the number of
entities which will review this proposed rule.
Although this rule has a number of provisions, they more or less
all relate to DSH, and we assume entities with DSH equities will review
the entire rule. Using the wage information from the BLS, <a href="https://www.bls.gov/oes/current/oes119111.htm">https://www.bls.gov/oes/current/oes119111.htm</a>, for medical and health service
managers (Code 11-9111), we estimate that the cost of reviewing this
rule is $115.22 per hour, including overhead and fringe benefits. We
estimate that it would take approximately 2 hours for the staff to
review this proposed rule. For each entity that reviews the rule, the
estimated cost is $230.44 (2 hours x $115.22). Therefore, we estimate
that the total one-time cost of reviewing this regulation is $346,121
($230.44 x 1,502).
D. Alternatives Considered
In developing this proposed rule, the following alternatives were
considered:
1. Not Proposing the Rule
Before undertaking this rulemaking, we examined if States and
hospitals could have the necessary information regarding the changes
made by the CAA through alternative sub-regulatory guidance. However,
upon review we concluded that, due to the changes to regulatory
language necessitated by the legislation, rulemaking was necessary.
Apart from that, we considered not including the additional DSH
proposals and maintaining the status quo. However, based on the
generally favorable response these proposals received in prior
rulemaking that was not finalized, we determined it the best use of our
time and resources to include them once the need for rulemaking was
identified.
2. The 97th Percentile Hospital Qualification Data Source
We considered using a readily existing data source to determine the
application of this exception. In State Medicaid Director letter #21-
006, we indicated that we assessed the ability to utilize the Medicare
SSI days and ratio information for use in the Medicare DSH adjustment
calculation for IPPS hospitals. However, we determined that this data
source is not appropriate because the Medicare SSI ratio is determined
using total Medicare Part A days in the denominator, while section
1923(g)(2)(B) of the Act specifies that a hospital must be at least in
the 97th percentile of all hospitals with respect to its percentage of
total inpatient days made up of patients who are both entitled to
Medicare Part A and entitled to SSI benefits. In addition, the Medicare
SSI days and ratio information made available by CMS for the Medicare
DSH adjustment calculations does not include all types of hospitals
that receive Medicaid DSH payments, including critical access hospitals
and inpatient psychiatric facilities. Finally, the Medicare SSI days
and ratio data made available by CMS for the Medicare DSH adjustment
calculations are calculated based on the FFY, while the 97th percentile
determination under section 1923(g)(2)(B) of the Act is based on the
hospitals' most recent cost reporting periods. As such, we determined
that it is necessary for CMS to develop an appropriate source of data
that both featured a broader, although not exhaustive, universe of
hospitals and aligned with statutory definition for the exception as
set forth in section 1923(g)(2)(B) of the Act. The data we are using
for the 97th percentile determination is inclusive of all hospital
types; however, an individual hospital would be excluded if it does not
have a Medicare cost report in the most recent cost reporting period
that meets our selection parameters as discussed in this proposed rule.
We considered that the October 1, 2021 statutory effective date of
section 203 of the CAA would apply to the FFY beginning October 1,
2021. However, we believe that this application does not align with
how, for purposes of the DSH program, FY has been interpreted to refer
to the applicable to the SPRY in prior rulemaking. Further, we believe
an FFY application would be burdensome on States and hospitals. For
example, if a State has a SPRY that does not align with the FFY and a
hospital qualifies for the 97th percentile hospital exception for one
FFY but not the next, the State would potentially need to prorate the
total uncompensated care costs within a SPRY to account for this
scenario. This process would need to be performed for each hospital and
in each SPRY when this scenario occurs.
We considered proposing that the exception for 97th percentile
hospitals be applied on a Statewide rather than a national level.
However, the statutory language under section 203 of the CAA refers to
``97th percentile of all hospitals,'' which we believe is most
consistent with a national, rather than a State-level ranking.
We considered determining a hospital's qualification for the 97th
percentile exception for each SPRY on a retroactive basis in order to
better align the time periods associated with the cost report and SSI
eligibility data with the SPRY subject to qualification. However, this
application would require CMS to retroactively rank and qualify
hospitals for a SPRY based on actual Medicare SSI days and ratios for
services furnished during that SPRY. This application would create
uncertainty for States and hospitals in making DSH payments and
calculating hospital-specific DSH limits, given the time delay inherent
in a retroactive application of the exception. This
[[Page 11882]]
approach also likely would require more financial transactions to
return payments to hospitals in excess of the hospital-specific DSH
limits to the State, which would then be required to return associated
FFP to CMS or redistribute the returned overpayment amounts to other
qualifying hospitals. Similar increases in financial transactions would
occur in a State that paid below its hospital-specific DSH limits.
These additional transactions would be administratively burdensome, and
potentially financially burdensome in particular for the hospitals
required to return additional amounts.
With respect to rounding, for performing the calculations necessary
for the determination of hospitals qualifying for the 97th percentile
exception, we considered various mathematical approaches. We considered
an approach of rounding down the 97th percentile threshold while
rounding up each hospital's own value in order to be more generous to
potentially allow additional hospitals qualify for the exception.
However, we believe this would create an inconsistent rounding policy
and could be viewed as arbitrary. Therefore, we proposed what we
believe to be a more consistent mathematical approach.
We considered utilizing only most recent audited or settled cost
reporting period, but have determined that the use of as-submitted cost
reporting period would result in more current and more consistent
reporting periods across hospitals. Further, we considered using the
total patient day count from only the ``as submitted'' cost report from
the most recent cost reporting period even if there happens to be a
later status (such as amended or settled or reopened) on that same cost
report. However, we have determined that even though the total patient
days seldom change between the as-submitted, amended, settled, and
reopened cost reports, we should still use the latest available data.
As such, we have proposed to use the total inpatient days from the cost
report with the most updated cost report status, for the most recent
cost reporting period, available on the day that the data are pulled,
in determining the hospitals that meet the 97th percentile threshold.
We are proposing to use Medicare SSI days associated with
discharges occurring within each hospital's most recent cost reporting
period. We did consider identifying Medicare SSI days for the inpatient
days occurring within each hospital's most recent cost reporting period
instead. However, the claims data that we are using identifies the
number of Medicare SSI days for each inpatient hospital stay as a
whole. We do not believe it is practical or necessary to attempt to
allocate Medicare SSI days between two cost reporting periods for those
inpatient hospital stays that straddle between two cost reporting
periods, when using days associated with discharges occurring within a
cost reporting also results in an equitable counting of days and is
consistent with how Medicare identifies Medicare SSI days for Medicare
DSH purposes, as explained earlier in this rule.
We considered proposing to utilize only covered Medicare Part A
days when collecting data and calculating hospital percentiles. Using
only covered Medicare Part A days would have meant in determining the
Medicare SSI days for each inpatient stay, we would have to limit the
Medicare SSI days to no more than the covered Medicare Part A days for
that stay. The statutory language set forth in law by section 203 of
the CAA specifically describes the Medicare SSI days as relating to
patients who were entitled to benefits under part A of title XVIII and
were entitled to SSI benefits under title XVI. As such, we believe the
calculations must include all Medicare Part A inpatient days, whether
covered or non-covered, in the associated calculations. As discussed
previously, the use of covered and non-covered days is also consistent
with Medicare's DSH adjustment calculation for IPPS hospitals.
We considered not including the distinct part unit days reported on
each hospital's Medicare cost report where the hospital has
rehabilitation distinct part units and psychiatric distinct part units,
in addition to the hospital's acute inpatient days. However, for
Medicaid purposes, the DSH uncompensated care costs of the hospital
would be inclusive of the costs of these rehabilitation and psychiatric
distinct part units that provide inpatient hospital services;
therefore, the hospital's Medicare SSI days and total inpatient days
should be inclusive of these distinct part unit days in our
calculations of hospitals that meet the 97th percentile threshold.
In determining when we can begin to collect and assemble the
necessary data prior to the beginning of each upcoming SPRY that begins
on or after October 1 each year, we are proposing to use HCRIS, MEDPAR,
and SSI eligibility data as they exist as of March 31, in advance of
October 1 of that same calendar year. We considered using a date closer
to October 1, such as June 30, as the point in time to pull the ``most
recent'' data available for application to the upcoming SPRYs. However,
we selected March 31 to ensure there is sufficient time to gather the
data, work through any potential data issues, perform the necessary
calculations, and make the 97th percentile results available in advance
of October 1. We also considered using a date in the preceding calendar
year for the HCRIS snapshot while using a date in the current calendar
year for the MEDPAR and SSI eligibility data snapshot. This alternative
would allow greater assurance that for all the most recent cost
reporting periods as of that HCRIS snapshot date, the claims data for
services furnished in those identified cost reporting periods from a
later MEDPAR and SSI eligibility snapshot date would include a longer
claims run out period. However, we are not proposing this approach
because we would no longer be utilizing ``the most recent cost
reporting period'' for which there is a cost report available in HCRIS
at the time we are performing this data extract and 97th percentile
determination each year, as required by the amendments made by section
203 of the CAA.
Given the delay in developing a data set to implement section 203
of the CAA, we have proposed to determine the annual 97th percentile
qualification using data available as it would have been available at
the time it would have otherwise been collected and assembled prior to
the SPRY to which it would apply, for SPRYs beginning during FFY 2022
and FFY 2023. We considered utilizing the most recently available cost
report data available following the finalization of this rule in order
to produce the source of data to qualify 97th percentile hospitals for
both the current and past periods affected by section 203 of the CAA.
However, we believe that the approach would result in some hospitals
that would have otherwise qualified to meet the exception based on CMS'
proposed data set timelines to not qualify if this more recent data are
utilized. This could disqualify and penalize hospitals, that would have
met the exception at that time, for a reason that was beyond their
control. Conversely, some hospitals could qualify for the exception for
SPRYs 2022 and 2023 based on the more recent data but would not have
qualified using CMS' proposed data timelines. We believe it is more
equitable to use the proposed data timeline consistently for all SPRYs
beginning on or after October 1, 2021, regardless of the delay in the
implementation. We have capability within the data source systems to
retroactively extract such data as they existed at those particular
points in time
[[Page 11883]]
(that is, March 31, 2021 for application to SPRYs beginning during FFY
2022 and March 31, 2022, for application to SPRYs beginning during FFY
2023).
We considered proposing a process in order include information for
hospitals that do not have Medicare cost reports in the data set used
to determine which hospitals meet the exception for 97th percentile
hospitals. However, without a cost report CMS would not have the total
inpatient day count readily available to compute the Medicare SSI day
ratio. Even if we were to consider an alternative mechanism outside of
the existing Medicare cost report data to collect total inpatient days
data from those hospitals without Medicare cost reports in HCRIS, there
would not be a way to define what the most recent cost reporting period
would be for those hospitals that would be consistent with how we are
defining it as proposed for hospitals that do have a cost report, which
is based on what is the most recent cost reporting period available in
HCRIS at a given point in time in advance of October 1 each year. Given
that the plain language of section 203 of the CAA points to the days
for ``the most recent cost reporting period,'' and we would not be able
to associate these hospitals' nominal Medicare Part A days found in
MEDPAR with a cost report, we believe it is reasonable to exclude
hospitals with no cost report from the data set.
For hospitals with cost reports that are for periods less than 1
year, we considered annualizing the number of days for ranking purposes
for qualification of the 97th percentile exception. However, hospitals
with a short cost reporting period would still have an opportunity to
qualify to meet the exception on the basis of the percentage of their
Medicare SSI days to total inpatient days. Also, annualizing hospitals
with a short cost reporting period could push a hospital with 12-month
cost reporting period, that would have otherwise qualified, out of the
ranking to qualify for the 97th percentile exception, based on what is
in effect hypothetical data from another hospital's partial-year cost
reporting period that would be extrapolated to a full year.
Furthermore, for hospitals with cost reports that are for periods of
greater than 1 year, we also considered annualizing the number of days
to 12 months. However, doing that would again mean we are not using the
number of days from the most recent cost reporting period as they are,
and in this case potentially adversely affecting that hospital's own
qualification for the 97th percentile exception by reducing its number
of days hypothetically. Consistent with the treatment of hospitals with
cost reports that are for periods less than 1 year, we are proposing to
use the data as they are and not annualize for hospitals with cost
reports that are for period greater than 1 year.
CMS considered various alternatives for making the determination
regarding how far back the time period of a hospital's cost report
could relate to in order to be included in the data set for the
calculation of hospitals that meet the 97th percentile threshold
exception. While we proposed not including any cost report ending
earlier than September 30, 3 years prior to the March 31 snapshot date
for compiling the data set, we considered a shorter cutoff, such as
excluding any cost report ending earlier than September 30, 2 years
prior to the March 31 snapshot date. However, we were concerned that
establishing too short of a cutoff could exclude a material number of
hospitals due to either delays in hospitals filing cost reports or
delays in the transmitting and processing of cost report files into
HCRIS. Conversely, we considered a longer cutoff than 3 years, but we
were concerned this could create too much variability in the cost
reporting periods and would also capture in the data set hospitals that
are currently inactive or terminated. To control the uniformity in the
cost reporting periods we are using, we also considered using only cost
reports that begins or ends within a set FFY, but we would have to have
selected a sufficiently old FFY in order to have a reasonably complete
universe of hospitals due to time lags in cost reports showing up in
HCRIS; in that case, for some hospitals those cost reports would no
longer be for the most recent cost reporting period for which the
hospital has a cost report in HCRIS. We believe our proposed cutoff is
equitable in ensuring there is general consistency in the cost
reporting periods used, conforms with the use of ``most recent cost
reporting period,'' and is practical for implementation purposes.
3. Audit Requirement To Quantify Financial Impact of Audit Findings
We considered proposing to require auditors to clarify the impact
of audit findings and caveats within the existing data element report
by incorporating finding amounts into existing data elements (for
example, Total Medicaid Uncompensated Care). However, this option may
not enable auditors to effectively capture financial impacts of
specific issues and such findings might not be readily transparent to
States, CMS, and hospitals, as the quantified impacts of potential
errors would be folded into figures that utilize verified data.
Therefore, we opted to include this as an additional, discrete data
element on the DSH report to ensure our ability to assess a quantified
impact or the extent to which there is an issue that cannot be
quantified.
4. Clarifying the Discovery Date for DSH Overpayments and
Redistribution Requirements
We considered proposing to use the date that the auditor submits
the independent certified audit to the State as the date of discovery
for DSH overpayments identified through the independent certified
audit, but ultimately decided to consider the date that a State submits
the independent certified audit to CMS as the discovery date. The
earlier date would start the clock for State repayment of FFP without
regard to possible work that may need to occur between States and
auditors to finalize the audit and associated reporting prior to
submission to CMS.
5. Technical Changes To Publishing DSH and CHIP Allotments
We considered continuing the requirement and option to publish the
DSH and CHIP allotments, respectively, in the Federal Register.
However, we believe this is unnecessary as States are already informed
regarding their annual DSH and CHIP allotments prior to the publication
of the Federal Register notice that we now provide. In addition, we did
not receive negative feedback via public comment when this change was
proposed in prior rulemaking.
E. Accounting Statement and Table
As required by OMB Circular A-4 (available at <a href="https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/">https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/</a>), we have prepared
an accounting statement in Table 3 showing the classification of the
costs associated with the provisions of this proposed rule.
[[Page 11884]]
Table 3--Accounting Statement--Classification of Estimated Costs
----------------------------------------------------------------------------------------------------------------
Units
-----------------------------------------------
Category Estimates Discount rate
Year (%) Period covered
----------------------------------------------------------------------------------------------------------------
Costs
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($million/year)............ 0.01 2021 7 2022-2032
0.01 2021 3 2022-2032
----------------------------------------------------------------------------------------------------------------
From Whom to Whom Federal to States
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($million/year)............ 0.04 2021 7 2022
0.04 2021 3 2022
----------------------------------------------------------------------------------------------------------------
From Whom to Whom Regulatory Review Costs
----------------------------------------------------------------------------------------------------------------
F. Regulatory Flexibility Act (RFA)
The RFA requires agencies to analyze options for regulatory relief
of small entities, if a rule has a significant impact on a substantial
number of small entities. The great majority of hospitals and most
other health care providers and suppliers are small entities, either by
being nonprofit organizations or by meeting the SBA definition of a
small business (having revenues of less than $8.0 million to $41.5
million in any 1 year). Individuals and States are not included in the
definition of a small entity. As its measure of significant economic
impact on a substantial number of small entities, HHS uses a change in
revenue of more than 3 to 5 percent. We do not believe that this
threshold will be reached by the provisions in this proposed rule.
This rule establishes requirements that are solely the
responsibility of State Medicaid agencies, which are not small
entities. Therefore, the Secretary certifies this proposed rule would
not, if promulgated, have a significant economic impact on a
substantial number of small entities.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a metropolitan
statistical area and has fewer than 100 beds. This rule will not have a
significant impact on the operations of a substantial number of small
rural hospitals.
G. Unfunded Mandates Reform Act (UMRA)
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. In 2022, that
threshold is approximately $165 million. This rule does not contain
mandates that will impose spending costs on State, local, or tribal
governments in the aggregate, or by the private sector, in excess of
the threshold.
H. Federalism
Executive Order 13132 establishes certain requirements that an
agency must meet when it issues a proposed rule that imposes
substantial direct requirement costs on State and local governments,
preempts State law, or otherwise has federalism implications. This rule
does not impose substantial direct costs on State or local governments,
preempt State law, or otherwise have federalism implications.
I. Conclusion
If the policies in this proposed rule are finalized, it will enable
CMS to implement statutory changes, strengthen financial oversight,
clarify existing financial management policies, and reduce unnecessary
administrative burden.
The analysis in this section V., together with the rest of this
preamble, provides a regulatory impact analysis. In accordance with the
provisions of Executive Order 12866, this proposed rule was reviewed by
the Office of Management and Budget.
Chiquita Brooks-LaSure, Administrator of the Centers for Medicare &
Medicaid Services, approved this document on February 7, 2023.
List of Subjects
42 CFR Part 433
Administrative practice and procedure, Child support, Claims, Grant
programs--health, Medicaid, Reporting and recordkeeping requirements.
42 CFR Part 447
Accounting, Administrative practice and procedure, Drugs, Grant
programs--health, Health facilities, Health professions, Medicaid,
Reporting and recordkeeping requirements, Rural areas.
42 CFR Part 455
Fraud, Grant programs--health, Health facilities, Health
professions, Investigations, Medicaid, Reporting and recordkeeping
requirements.
42 CFR Part 457
Administrative practice and procedure, Grant programs--health,
Health insurance, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services proposes to amend 42 CFR chapter IV as set forth
below:
PART 433--STATE FISCAL ADMINISTRATION
0
1. The authority citation for part 433 continues to read as follows:
Authority: 42 U.S.C. 1302.
0
2. Amend Sec. 433.316 by--
0
a. Redesignating paragraphs (f) through (h) as paragraphs (g) through
(i), respectively; and
0
b. Adding a new paragraph (f).
The addition reads as follows:
Sec. 433.316 When discovery of overpayment occurs and its
significance.
* * * * *
(f) Overpayments identified through the disproportionate share
hospital
[[Page 11885]]
(DSH) independent certified audit. In the case of an overpayment
identified through the independent certified audit required under part
455, subpart D, of this chapter, CMS will consider the overpayment as
discovered on the earliest of the following:
(1) The date that the State submits the independent certified audit
report required under Sec. 455.304(b) of this chapter to CMS.
(2) Any of the dates specified in paragraph (c)(1), (2), or (3) of
this section.
* * * * *
PART 447--PAYMENTS FOR SERVICES
0
3. The authority citation for part 447 continues to read as follows:
Authority: 42 U.S.C. 1302 and 1396r-8.
0
4. Amend Sec. 447.294 by revising paragraphs (e)(12) introductory text
and (e)(12)(i) and (ii) to read as follows:
Sec. 447.294 Medicaid disproportionate share hospital (DSH) allotment
reductions.
* * * * *
(e) * * *
(12) Section 1115 budget neutrality factor (BNF) calculation. This
factor is only calculated for States for which all or a portion of the
DSH allotment was included in the calculation of budget neutrality
under a section 1115 demonstration pursuant to an approval on or before
July 31, 2009. CMS will calculate the BNF for qualifying States by the
following:
(i) For States in which the State's DSH allotment was included in
the budget neutrality calculation for a coverage expansion that was
approved under section 1115 as of July 31, 2009, determining the amount
of the State's DSH allotment included in the budget neutrality
calculation for coverage expansion. This amount is not subject to
reductions under the HMF and HUF calculations. DSH allotment amounts
included in the budget neutrality calculation for purposes other than
coverage expansion for a demonstration project under section 1115 that
was approved as of July 31, 2009 are subject to reduction as specified
in paragraphs (e)(12)(ii) through (iv) of this section. For States
whose DSH allotment was included in the budget neutrality calculation
for a demonstration project that was approved under section 1115 after
July 31, 2009, whether for coverage expansion or otherwise, the entire
DSH allotment amount that was included in the budget neutrality
calculation is subject to reduction as specified in paragraphs
(e)(12)(ii) through (iv) of this section.
(ii) Determining the amount of the State's DSH allotment included
in the budget neutrality calculation subject to reduction. The amount
to be assigned reductions under paragraphs (e)(12)(iii) and (iv) of
this section is the total of each State's DSH allotment diverted under
an approved 1115 demonstration during the period that aligns with the
associated State plan rate year DSH audit utilized in the DSH allotment
reductions.
* * * * *
0
5. Amend Sec. 447.295 by adding a definition for ``97th percentile
hospital'' in alphanumerical order in paragraph (b) and by revising
paragraph (d) to read as follows:
Sec. 447.295 Hospital-specific disproportionate share hospital
payment limit: Determination of individuals without health insurance or
other third party coverage.
* * * * *
(b) * * *
97th percentile hospital means a hospital that is in at least the
97th percentile of all hospitals nationwide with respect to the
hospital's number of inpatient days or the hospital's percentage of
total inpatient days, for the hospital's most recent cost reporting
period, made up of patients who were entitled to benefits under part A
of title XVIII and supplemental security income benefits under title
XVI (excluding any State supplementary benefits paid).
(i) CMS will identify the 97th percentile hospitals, for each
Medicaid State plan rate year beginning on or after October 1, 2021,
using Medicare cost reporting and claims data sources, as well as
supplemental security income eligibility data provided by the Social
Security Administration.
(ii) CMS will publish lists identifying each 97th percentile
hospital annually in advance of October 1 of each year. CMS will revise
a published list only to correct a mathematical or other similar
technical error that is identified to CMS during the one-year period
beginning on the date the list is published.
* * * * *
(d) Hospital-specific DSH limit calculation. (1) For each State's
Medicaid State plan rate years beginning prior to October 1, 2021, and
subject to paragraph (d)(3) of this section, only costs incurred in
providing inpatient hospital and outpatient hospital services to
Medicaid individuals, and revenues received with respect to those
services, and costs incurred in providing inpatient hospital and
outpatient hospital services, and revenues received with respect to
those services, for which a determination has been made in accordance
with paragraph (c) of this section that the services were furnished to
individuals who have no source of third-party coverage for the specific
inpatient hospital or outpatient hospital service are included when
calculating the costs and revenues for Medicaid individuals and
individuals who have no health insurance or other source of third-party
coverage for purposes of section 1923(g)(1) of the Act.
(2) For each State's first Medicaid State plan rate year beginning
on or after October 1, 2021, and thereafter, subject to paragraph
(d)(3) of this section, only costs incurred in providing inpatient
hospital and outpatient hospital services to Medicaid individuals when
Medicaid is the primary payer for such services, and revenues received
with respect to those services, and costs incurred in providing
inpatient hospital and outpatient hospital services, and revenues
received with respect to those services, for which a determination has
been made in accordance with paragraph (c) of this section that the
services were furnished to individuals who have no source of third-
party coverage for the specific inpatient hospital or outpatient
hospital service are included when calculating the costs and revenues
for Medicaid individuals and individuals who have no health insurance
or other source of third-party coverage for purposes of section
1923(g)(1) of the Act.
(3) Effective for each State's first Medicaid State plan rate year
beginning on or after October 1, 2021, and thereafter, the hospital-
specific DSH limit for a 97th percentile hospital defined in paragraph
(b) of this section is the higher of the values from the calculations
described in paragraphs (d)(1) and (2) of this section.
Sec. 447.297 [Amended]
0
6. Amend Sec. 447.297 by--
0
a. In paragraph (b), removing the phrase ``published by April 1 of each
Federal fiscal year,'' and adding in its place the phrase ``posted as
soon as practicable,'';
0
b. In paragraph (c)--
0
i. Removing the phrase ``publish in the Federal Register'' and adding
in its place the phrase ``post in the Medicaid Budget and Expenditure
System/State Children's Health Insurance Program Budget and Expenditure
System and at <a href="http://Medicaid.gov">Medicaid.gov</a> (or similar successor system or website)'';
and
0
ii. Removing the phrase ``publish final State DSH allotments by April 1
of each Federal fiscal year,'' and adding in its place the phrase
``post final State DSH
[[Page 11886]]
allotments as soon as practicable for each Federal fiscal year,'';
0
c. In paragraph (d)(1), removing the phrase ``by April 1 of each
Federal fiscal year'' and adding in its place the phrase ``as soon as
practicable for each Federal fiscal year'' and by removing the phrase
``prior to the April 1 publication date'' and adding in its place the
phrase ``prior to the posting date''; and
0
d. Removing paragraph (e).
0
7. Amend Sec. 447.299 by--
0
a. Revising paragraphs (c)(6) and (7), (c)(10) introductory text,
(c)(10)(ii), and (c)(16);
0
b. Redesignating paragraph (c)(21) as paragraph (c)(22); and
0
c. Adding new paragraph (c)(21) and paragraphs (f) and (g).
The revisions and additions read as follows:
Sec. 447.299 Reporting requirements.
* * * * *
(c) * * *
(6) Inpatient (IP)/outpatient (OP) Medicaid fee-for-service (FFS)
basic rate payments. The total annual amount paid to the hospital under
the State plan, including Medicaid FFS rate adjustments, but not
including DSH payments or supplemental/enhanced Medicaid payments, for
inpatient and outpatient hospital services furnished to Medicaid
individuals, as determined pursuant to Sec. 447.295(d).
(7) IP/OP Medicaid managed care organization payments. The total
annual amount paid to the hospital by Medicaid managed care
organizations for inpatient hospital and outpatient hospital services
furnished to Medicaid individuals, as determined pursuant to Sec.
447.295(d).
* * * * *
(10) Total cost of care for Medicaid IP/OP services. The total
annual costs incurred by each hospital for furnishing inpatient
hospital and outpatient hospital services to Medicaid individuals as
determined pursuant to Sec. 447.295(d). The total annual costs are
determined on a hospital-specific basis, not a service-specific basis.
For purposes of this section, costs--
* * * * *
(ii) Must capture the total burden on the hospital of treating
Medicaid patients as determined pursuant to Sec. 447.295(d), not
including payment by Medicaid. Thus, costs must be determined in the
aggregate and not by estimating the cost of individual patients. For
example, if a hospital treats two Medicaid patients at a cost of $2,000
and receives a $500 payment from a third party for each individual, the
total cost to the hospital for purposes of this section is $1,000,
regardless of whether the third-party payment received for one patient
exceeds the cost of providing the service to that individual.
* * * * *
(16) Total annual uncompensated care costs. The total annual
uncompensated care cost equals the total cost of care for furnishing
inpatient hospital and outpatient hospital services to Medicaid
individuals as determined pursuant to Sec. 447.295(d), and to
individuals with no source of third-party coverage for the hospital
services they receive, less the sum of regular Medicaid FFS rate
payments, Medicaid managed care organization payments, supplemental/
enhanced Medicaid payments, uninsured revenues, and section 1011
payments for inpatient and outpatient hospital services. This should
equal the sum of paragraphs (c)(9), (12), and (13) of this section
subtracted from the sum of paragraphs (c)(10) and (14) of this section.
* * * * *
(21) Financial impact of audit findings. The total annual amount
associated with each audit finding. If it is not practicable to
determine the actual financial impact amount, state the estimated
financial impact for each audit finding identified in the independent
certified audit that is not otherwise reflected in data elements
described in this paragraph (c). For purposes of this paragraph (c),
audit finding means an issue identified in the independent certified
audit required under Sec. 455.304 of this chapter concerning the
methodology for computing the hospital-specific DSH limit or the DSH
payments made to the hospital, including, but not limited to,
compliance with the hospital-specific DSH limit as defined in paragraph
(c)(16) of this section. Audit findings may be related to missing or
improper data, lack of documentation, non-compliance with Federal
statutes or regulations, or other deficiencies identified in the
independent certified audit. Actual financial impact means the total
amount associated with audit findings calculated using the
documentation sources identified in Sec. 455.304(c) of this chapter.
Estimated financial impact means the total amount associated with audit
findings calculated on the basis of the most reliable available
information to quantify the amount of an audit finding in circumstances
where complete and accurate information necessary to determine the
actual financial impact is not available from the documentation sources
identified in Sec. 455.304(c) of this chapter.
* * * * *
(f) DSH payments found in the independent certified audit process
under part 455, subpart D, of this chapter to exceed hospital-specific
cost limits are provider overpayments which must be returned to the
Federal Government in accordance with the requirements in part 433,
subpart F, of this chapter or redistributed by the State to other
qualifying hospitals, if redistribution is provided for under the
approved State plan. Overpayment amounts returned to the Federal
Government must be separately reported on the Form CMS-64 as a
decreasing adjustment which corresponds to the fiscal year DSH
allotment and Medicaid State plan rate year of the original DSH
expenditure claimed by the State.
(g) As applicable, States must report any overpayment
redistribution amounts on the Form CMS-64 within 2 years from the date
of discovery that a hospital-specific limit has been exceeded, as
determined under Sec. 433.316(f) of this chapter in accordance with a
redistribution methodology in the approved Medicaid State plan. The
State must report redistribution of DSH overpayments on the Form CMS-64
as separately identifiable decreasing adjustments reflecting the return
of the overpayment as specified in paragraph (f) of this section and
increasing adjustments representing the redistribution by the State.
Both adjustments must correspond to the fiscal year DSH allotment and
Medicaid State plan rate year of the related original DSH expenditure
claimed by the State.
PART 455--PROGRAM INTEGRITY: MEDICAID
0
8. The authority citation for part 455 continues to read as follows:
Authority: 42 U.S.C. 1302.
0
9. Amend Sec. 455.301 by revising the definition of ``Independent
certified audit'' to read as follows:
Sec. 455.301 Definitions.
* * * * *
Independent certified audit means an audit that is conducted by an
auditor that operates independently from the Medicaid agency or subject
hospitals and is eligible to perform the disproportionate share
hospital (DSH) audit. Certification means that the independent auditor
engaged by the State reviews the criteria of the Federal audit
regulation and completes the verification, calculations and report
under the professional rules and
[[Page 11887]]
generally accepted standards of audit practice. This certification
includes a review of the State's audit protocol to ensure that the
Federal regulation is satisfied, an opinion for each verification
detailed in the regulation, a determination of whether or not the State
made DSH payments that exceeded any hospital's hospital-specific DSH
limit in the Medicaid State plan rate year under audit, and a
quantification of the financial impact of each audit finding on a
hospital-specific basis. The certification also identifies any data
issues or other caveats or deficiencies that the auditor identified as
impacting the results of the audit.
* * * * *
0
10. Amend Sec. 455.304 by revising paragraphs (d)(1), (3), (4), and
(6) to read as follows:
Sec. 455.304 Condition for Federal financial participation (FFP).
* * * * *
(d) * * *
(1) Verification 1. Each hospital that qualifies for a DSH payment
in the State is allowed to retain that payment so that the payment is
available to offset its uncompensated care costs for furnishing
inpatient hospital and outpatient hospital services during the Medicaid
State plan rate year to Medicaid individuals as determined pursuant to
Sec. 447.295(d) of this chapter, and individuals with no source of
third-party coverage for the services, in order to reflect the total
amount of claimed DSH expenditures.
* * * * *
(3) Verification 3. Only uncompensated care costs of furnishing
inpatient and outpatient hospital services to Medicaid individuals as
determined pursuant to Sec. 447.295(d) of this chapter, and
individuals with no third-party coverage for the inpatient and
outpatient hospital services they received are eligible for inclusion
in the calculation of the hospital-specific disproportionate share
limit payment limit, as described in section 1923(g)(1)(A) of the Act.
(4) Verification 4. For purposes of this hospital-specific limit
calculation, any Medicaid payments (including regular Medicaid fee-for-
service rate payments, supplemental/enhanced Medicaid payments, and
Medicaid managed care organization payments) made to a disproportionate
share hospital for furnishing inpatient hospital and outpatient
hospital services to Medicaid individuals as determined pursuant to
Sec. 447.295(d) of this chapter, which are in excess of the Medicaid
incurred costs of such services, are applied against the uncompensated
care costs of furnishing inpatient hospital and outpatient hospital
services to individuals with no source of third-party coverage for such
services.
* * * * *
(6) Verification 6. The information specified in paragraph (d)(5)
of this section includes a description of the methodology for
calculating each hospital's payment limit under section 1923(g)(1) of
the Act. Included in the description of the methodology, the audit
report must specify how the State defines incurred inpatient hospital
and outpatient hospital costs for furnishing inpatient hospital and
outpatient hospital services to Medicaid individuals as determined
pursuant to Sec. 447.295(d) of this chapter, and individuals with no
source of third-party coverage for the inpatient hospital and
outpatient hospital services they received.
* * * * *
PART 457--ALLOTMENTS AND GRANTS TO STATES
0
11. The authority for part 457 continues to read as follows:
Authority: 42 U.S.C. 1302.
0
12. Amend Sec. 457.609 by revising paragraph (h) to read as follows:
Sec. 457.609 Process and calculation of State allotments for a fiscal
year after FY 2008.
* * * * *
(h) CHIP fiscal year allotment process. The national CHIP allotment
and State CHIP allotments will be posted in the Medicaid Budget and
Expenditure System/State Children's Health Insurance Program Budget and
Expenditure System and at <a href="http://Medicaid.gov">Medicaid.gov</a> (or similar successor system or
website) as soon as practicable after the allotments have been
determined for each Federal fiscal year.
Dated: February 16, 2023.
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2023-03673 Filed 2-22-23; 4:15 pm]
BILLING CODE 4120-01-P
</pre></body>
</html>Indexed from Federal Register on February 24, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.