Implementation of Disproportionate Share Hospital Adjustment Payments Audit Rule

2

Presented by:• Frank Vito, Partner • David McMahon, Sr. Manager• Cara Cantu, Manager• Lamont McKenzie, Manager• Emilie Deveraux, Manager• Joe Lackey, Sr. Associate

3

Agenda Items

• Recap of Final Rule• Hospital documentation and how

it corresponds to reporting requirements

• Issues & results of 2008 audit• Proposed Rule: Disproportionate

Share Hospital Payments – Uninsured Definition

4

Purpose of Disproportionate Share Hospital Payments Final Rule Published December 19, 2008

Implements 42 CFR §447.299(c) & (d) and 42 CFR §455.300 through §455.304 to satisfy requirements set forth under the Social Security Act §1923(j) as amended by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 §1001(d).

Plain English Translation: Implements requirements for reporting of DSH program payments by States and the audit of such reporting.

5

Reason for the DSH Audit Rule

• To ensure that the hospital specific DSH limits have not been exceeded.

• Hospital specific DSH limit is uncompensated costs incurred during the year of furnishing hospital services by the hospital to individuals who either are eligible for medical assistance under the State plan or have no health insurance (or other source of third party coverage) for services provided during the year.

6

Calculation of Uncompensated Care

Total Uncompensated Care of Hospital

Uncompensated Care of Medicaid Eligible Beneficiaries

Uncompensated Care of Individuals with No Third Party

Coverage

7

Calculation of Uncompensated Care

Uncompensated Care Of Medicaid Eligible

Beneficiaries

Individuals who have a payment made

under Medicaid Fee for Service

Individuals enrolled under a Medicaid

Managed Care plan

Individuals with third party insurance

and Medicaid

Individuals with Medicare and

Medicaid

8

Calculation of Uncompensated Care

9

Verification Steps Mandated For Certified Audit Under §455.304(d)

•Verification Step #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 eligible individuals and individuals with no source of third party coverage for the services in order to reflect the total amount of claimed DSH expenditures.

10

Verification Steps Mandated For Certified Audit Under §455.304(d)

•Verification Step #2– DSH payments made to each qualifying

hospital comply with the hospital-specific DSH payment limit. For each audited Medicaid State plan rate year, the DSH payments made in that audited Medicaid State plan rate year must be measured against the actual uncompensated care cost in that same audited Medicaid State plan rate year.

11

Verification Steps Mandated For Certified Audit Under §455.304(d)

•Verification Step #3– Only uncompensated care costs of furnishing

inpatient and outpatient hospital services to Medicaid eligible individuals and individuals with no third party coverage for the inpatient and outpatient hospital services they received as described in section 1923(g)(1)(A) of the Act 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.

12

Verification Steps Mandated For Certified Audit Under §455.304(d)

•Verification Step #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 eligible individuals, 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.

13

Verification Steps Mandated For Certified Audit Under §455.304(d)

•Verification Step #5– Any information and records of all of its

inpatient and outpatient hospital service costs under the Medicaid program; claimed expenditures under the Medicaid program; uninsured inpatient and outpatient hospital service costs in determining payment adjustments under this section; and any payments made on behalf of the uninsured from payment adjustments under this section has been separately documented and retained by the State.

14

Verification Steps Mandated For Certified Audit Under §455.304(d)

•Verification Step #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 eligible individuals and individuals with no source of third party coverage for the inpatient hospital and outpatient hospital services they received.

15

Analysis of Six Verifications

• How does the independent auditor verify these six verifications?– Review and analysis of hospital

documentation– Review and analysis of State documentation– PDSS (Provider Data Summary Schedule)

• All in state hospitals receiving DSH payments• Limited reporting for all out of state hospitals

receiving DSH payments

16

Hospital Documentation

Hospital documentation needed in order to populate the PDSS and meet the 6 verifications

17

Reporting Periods

• Cost report period– Certain documentation is needed by cost reporting

period in order to verify requirements by MSP rate year

• Medicaid State Plan (MSP) rate year• Audits must be completed with information on the MSP rate

year §447.299(c)

• MSP rate year October 1-September 30 annually– Michigan State Plan, Attachment 4.19-A

• If the hospital cost report period does not coincide with the MSP year, then documentation needed may be two or more cost reports

18

Reporting Periods• Cost report periods -How is that data used?

• MSP year=10/1/08-9/30/09• Cost report period=7/1/08-6/30/09• Cost report period=7/1/09-6/30/10• Example of the calculation of Medicaid costs

from PS&R data: Medicaid charges from 10/1/08-6/30/09 x

7/1/08-6/30/09 cost to charge ratios+ Medicaid charges from 7/1/09-9/30/09 x

7/1/09-6/30/10 cost to charge ratios= Medicaid costs for MSP 10/1/08-9/30/09

19

Time Line for 2009 DSH Audits

• Documentation due to PHBV Partners on:

March 23, 2012

20

OB Requirement

• Request list #1• Cost report period• PDSS column 4• 2 obstetricians with staff privileges and are

Medicaid approved physicians and UPIN numbers– Exceptions to OB requirement

• Rural facilities may have two physicians with staff privileges at the hospital that perform non-emergency obstetrics

• Patients are predominately under (18) years of age• Facility did not offer non-emergency obstetric services as of

December 22, 1987

21

OB Requirement

• Hospital must meet the OB requirements to qualify for DSH under verification 1– §455.304(d)– MI State Plan Attachment 4.19-A

22

MIUR (Medicaid Inpatient Utilization

Rate) • PDSS column 2 & 4• Hospital’s MIUR must be at least 1%

– Medicaid inpatient days / total inpatient days• Sub-provider days on L14 should be included

– Therapy– Rehab– Psych

• Swing beds, SNF days, or other sub-providers should not be included in calculation

23

Working Trial Balance

• Request list #2• Cost report period

– If the cost report period does not coincide with the MSP rate year, two or more trial balances will need to be provided that fall within the MSP rate year

• Possible sources of revenue to be offset• Accounting records required under Final

Rule

24

Audited Financial Statements

• Request list #3• Cost report period• Possible sources of revenue to be

offset• Accounting records required

under Final Rule

25

Expenses and Revenue Mapping to Worksheets A & C of Medicare

Cost Report

• Request list #4• Cost report period• Used in conjunction with the trial balance

to ensure proper matching of cost and charges are reported on the Medicare cost report

• Cost to charge ratios are used to determine costs for both Medicaid and Uninsured

26

Transplant Providers

• Request list #5• Cost report period• List of charges:

– Medicaid by organ– Uninsured by organ

• Payment information– Medicaid FFS– Medicaid Managed Care– Out of State

27

Crosswalks• Request list #6-9 • Cost report period• Utilized to map revenue codes to cost

centers of cost report • Provide crosswalks in excel format (see

example in request list)• If crosswalk is not provided/usable then

charges are allocated on a percent to total of charges reported on the cost report

28

Summary Listing of Payments by Payer Code

• Request list #10• MSP rate year

– Used as reasonableness test to ensure detailed listing of self pay payments is complete

– Total payments received by payer, which may include but is not limited to:

• Medicaid• Medicare• Primary Insurance• Secondary Insurance• Self-Pay• Charity Care 1• Charity Care 2• Worker’s compensation

29

Provider Payer Code Listing with Descriptions

• Request list #11• MSP rate year• Listing is needed to determine

what payer codes are uninsured, insurance, or other payers.

30

Detail Listing of Self-Pay Payments

• Request list #12• MSP rate year• PDSS column 11• Uninsured self-pay cash basis payments received

during the MSP year– Payments should be on a cash basis and agree to the

MSP rate year, regardless of the date when charges were incurred

– Self-pay payments are often made for years, this ensures all the payment data is eventually captured

– Limited to collections on uninsured accounts only

31

Detail Listing of Self-Pay Payments

• Payments are compared to uninsured clean listing and prior year clean listings– If the uninsured charges were not reported, the

payments will not be offset

• If data is not received– An average percentage of payments made by

hospitals is computed– That average percentage is then applied to

total uninsured charges to calculate a payment amount to be offset

32

Medicaid Managed Care Organizations and Out of State

Medicaid Agencies• Request list #13-16• MSP rate year• PDSS column 9 (costs)• PDSS columns 5 & 6 (payments)• Michigan does have MCO, please provide any

out of state MCO as well • Charges and payments are calculated from

MCO and out of state data

33

Medicaid Managed Care Organizations and Out of State

Medicaid Agencies

• Detailed log or detail and summary reports– Inpatient– Outpatient– Patient Name– Account Number – Beneficiary ID Number– Dates of Service– Charges– Payments– Days – Revenue Code

34

Dual Eligible

• Request list #17• MSP rate year• PDSS column 9 (costs)• PDSS column 5 (payments)• Comparison is made to Medicaid charges and

uninsured to ensure no duplicate charges are reported

• Those not duplicated will be used to calculate cost and payments to be applied

35

Dual Eligible

• Log of patients eligible for Medicare and Medicaid– Inpatient– Outpatient– Patient Name– Account Number – Beneficiary ID Number– Dates of Service– Charges– Payments– Days – Revenue Code

36

Other Payments

• Request list #18-20• MSP rate year• PDSS column 7• Offset against Medicaid costs• Supplemental/Enhanced Medicaid payments

– UPL– Cost report settlements– GME (graduate medical education)– Any other IP/OP payments covered under DSH– Out of state DSH payments received are enhancement

payments• Should be provided for

– In state– Out of state– MCO out of state

37

Intergovernmental Transfers (IGTs)

• Request list #21• MSP rate year• Documentation from provider records

detailing payment of IGTs– Must be from provider records, not

documentation received from State• General ledger• Journal entries• Revenue journal• Reconciliation• Bank statement

– Auditor must verify the provider is allowed to retain the DSH payment

38

DSH Payments

• Request list #22• MSP rate year• Documentation from provider records

detailing payment of DSH payments– Must be from provider records, not

documentation received from State• Bank statements (preferred)• Reconciliation • General ledger• Journal entries• Revenue journal

– Auditor must verify the provider is allowed to retain the DSH payment

39

Federal Section 1011 Payments

• Request list #23• PDSS column 12• MSP rate year• Listing of section 1011 payments (undocumented

aliens) – Inpatient– Outpatient– Patient Name– Account Number – Beneficiary ID Number– Dates of Service– Charges– Payments– Days – Revenue Code

40

Medicaid Not Billed

• Request list #24• MSP rate year• PDSS column 9 (costs)• Costs will be calculated and added to total

Medicaid costs• Medicaid not billed is usually when

hospitals have not billed because they know they will not receive payment– Exhausted days– Liability exceeds charges

41

Medicaid Not Billed

• Detailed log of Medicaid eligible residents that incurred charges but were never billed to Medicaid– Inpatient– Outpatient– Patient Name– Account Number – Beneficiary ID Number– Dates of Service– Charges– Payments– Days – Revenue Code

42

Medicaid Costs & Payments (FFS)

• Costs – MSP rate year– PDSS column 9– MMIS data for the MSP rate year will be obtained from

MDCH to calculate Medicaid costs– MMIS data is by cost center– Applicable cost to charge ratio from the Medicare cost

report is used to calculate costs

• Payments – MSP rate year– PDSS column 5– Medicaid FFS including crossover and liability will be

offset

43

Uninsured Charges

• Request list #26-27• MSP rate year• PDSS column 13• Inpatient and Outpatient• Used to calculate Uninsured

costs by utilizing charges and cost to charge ratios from the Medicare cost report

44

Uninsured Charges– Patient name– Provider Type– Account Number– Beneficiary ID Number– Medical Record Number– Admit Date– Discharge Date– Primary Payer– Secondary Payer– Hospital Charges– Professional Charges– Primary Payer Payments– Secondary Payer Payments– Patient Payments

45

Credit and Collection Policy

• Request list #28• Auditor is required to verify that

hospitals attempt collection efforts for all uninsured patient balances and that all collection effort recoveries received during the MSP rate year are recorded to patient specific accounts and offset for DSH limit

46

Uninsured Cleaning

“Cleaning” analysis will be performed

1. The “Uninsured Inpatient/Outpatient Schedule” tab contains the original uninsured data sent to Clifton Gunderson. This tab tests each uninsured account for the following characteristics:

a. Is the claim a duplicate entry (“Duplicate Entries” column)b. Is the claim outside of the fiscal period being tested (“Fiscal Year

Test” column)c. Does the Beneficiary ID on the claim match the MMIS Patient

Detail received from the state of Michigan Department of Community Health for the period under review. In addition, does the date or service or discharge date fall during the recipients eligibility period

47

Uninsured Cleaningd. Does the account number on the claim match the

account number on the listing of dual eligible residents received from the provider (“Dual Eligible Coverage” column)

e. Does the account number on the claim match the account number on the listing of out of state Medicaid residents received from the provider (“Out-of-State coverage” column)

f. Does the account number on the claim match the account number on the listing of MCO accounts(“MCO Coverage” column)

g. Does the claim have an insurance code for credible insurance (“Insurance Test” column)

48

Uninsured Cleaningh. For claims that matched in step g., is the

insurance workers compensation and if so was there a payment made by this insurance (“Workers Comp Test” column)

i. Does the account number on the claim match the account number on the listing of the Medicaid eligible residents that were not billed to state of Michigan Medicaid (“Medicaid Not Billed” column)

j. Does any payment that was received for the claim exceed 40% of the total charge (“Payment to Charge Ratio” column)

k. Were any payments received on a claim with no charges (“Payments But No Charge” column)

49

Uninsured Cleaning

• Any claims that did meet the characteristics in step 1 above will be rejected to a separate excel worksheet for that reason. (for example: “Reject-Duplicates”)

• Any claims that did not have any of the characteristics in step 1 above were summarized in the “clean listing” tab.

• In the “Clean Listing” tab, scroll to the far right to see a summary of all charges that were accepted and rejected by type. The total amount of clean data and rejected data will reconcile back to the original amount submitted by the provider.

50

Uninsured Cleaning-Rejects

• In the “Reject Sample Population” tab we have summarized a list of claims that were selected from the “reject” tabs noted in step 1, items d thru j, which were rejected for various reasons of possible insurance. In the first column of the worksheet, there will be either “sample” or “pass”. Please provide UB 92 Charge detail (or patient billing statement showing charges by revenue code) and Patient Accounting detail (payment detail and collection notes) for those claims that should be considered uninsured and are marked as “sample”. Please upload this information to your facility’s distribution folder on the secure FTP website.

• Please note that accounts rejected due to Medicaid Eligibility (Item c above) will be included in the calculation of Medicaid shortfall. Therefore, these charges are simply shifted to the Medicaid cost calculation rather than being included in the uninsured cost calculation.

51

Creditable Coverage

• Creditable coverage refers to coverage of an individual under any of the following:– Group health plan– Health insurance coverage – Medicare Part A or B– Medicaid– Medical and dental care for members and certain formers members of

the uniformed services and their dependents– Indiana Health Service or tribal organization medical care program– State health benefits risk pool– Public health plan

52

Uninsured vs. Underinsured

• Eligibility for credible coverage is determining factor

• Uncompensated – provider does not receive payment for charges – self pay/no pay, exceeds coverage, co pays, coinsurance, deductibles not met.

• Uninsured – no coverage on DOS from any outside source (exceptions – 3rd party legal pmts, etc.)

• Underinsured – health insurance does not cover services

53

Uninsured vs. Underinsured

• Auto Insurance and Worker’s compensation– If claim is denied and zero amount is paid, uninsured– If any payment is made, patient is considered insured by

third party

• Charity Care– Not considered insurance– Patients are required to meet certain criteria based on

hospital’s written policy– Accounts will not be sent to collections for recovery, but

written off to bad debt– Any payments from patients should still be offset and

submitted as self-pay uninsured

54

Provider Documentation Issues with Prior

Audits

• Lack of documentation– UPL/supplemental payments– Out of state Medicaid– Dual Eligible– Crosswalks

55

Documentation

• Do not send PHI (protected health information) via e-mail

• A secure ftp website has been or can be set up for all providers

• Electronic format is preferred• Do not submit detailed logs in pdf format

or hardcopy• Identify documentation by corresponding

number on request list– If the item requested does not apply, please

provide a brief written explanation

56

Reportable Issues

• Hospitals reviewed that received DSH payments– 2005-126 hospitals– 2006-127 hospitals– 2007-130 hospitals– 2008-129 hospital

• Verification #1– Hospitals did not qualify for DSH due to not

providing OB documentation and/or a MUIR exceeding 1%

• 2005-4 hospitals• 2006-4 hospitals• 2007-4 hospitals• 2008-2 hospitals

57

Reportable Issues

• Verification #2– No hospitals exceeded the hospital

specific estimated limit– Result of verified calculated hospital

specific DSH limits•DSH payments exceed the DSH limit for

– 2005- 49 hospitals– 2006- 46 hospitals– 2007- 28 hospitals – 2008- 40 hospitals

58

Reportable Issues

• Verification #3– Hospitals included individuals with

insurance or other third-party coverage in uninsured accounts•2005- 19 hospitals•2006- 19 hospitals•2007- 27 hospitals•2008- 42 hospitals

59

Time Line for 2008 DSH Audits

• Documentation due to PHBV Partners on:

March 23, 2012

• PHBV Partners to issue Final Report on:

September 30, 2012

60

National Landscape for DSH Audits

61

Proposed Rule

• 42 CFR Part 447– Disproportionate Share Hospital Payments – Uninsured

Definition• For the purposes of calculating the hospital specific DSH

limit, individuals who have no health insurance or 3rd party coverage for services furnished during the year will be included on a service-specific basis rather than on an individual basis.

– Example: Individual with basic hospitalization coverage that has an exclusion for transplant services. Should the individual need the excluded services, the cost of the service could be included in the Medicaid hospital specific DSH limit.

• Requires a determination of whether each specific service furnished during the year was covered by a 3rd party.

– The determination is based on actual coverage for a particular inpatient or outpatient hospital service under the terms of an insurance or other coverage plan. The determination is not based on payment.

62

Proposed Rule

– Disproportionate Share Hospital Payments – Uninsured Definition

• “No source of 3rd party coverage for a specific inpatient or outpatient service” to mean that the service is not within a covered benefit package under a group health plan or health insurance coverage, and is not covered by another legally liable third party.

• Services beyond annual or lifetime limits on insurance coverage would not be considered to be within a covered benefit package

– Individuals who have creditable coverage but have reached annual or lifetime insurance limits or have otherwise exhausted covered benefits can be included in calculating the hospital specific DSH limit.

63

Questions?