THREE THINGS YOU NEED TO KNOW ABOUT DISPROPORTIONATE SHARE (DSH) IN 2013

On Friday, August 2, 2013, CMS announced their long-awaited Inpatient Medicare Regulations for Federal FY 2014. As expected, the biggest change involves the way DSH will be calculated beginning October 1, 2013 (beginning of the Federal Fiscal Year).

As expected, DSH will be made up of two parts:

**Part I.** 25% of DSH payments will come from the traditional method of calculation (see DPP below).

**Part II.** 75% of DSH payments will come from an __uncompensated care pool__ aggregated from ALL DSH hospitals. Shares from this pool will be distributed to DSH hospitals based on the ratio of the hospital’s uncompensated care to the total amount of uncompensated care provided by all Medicare DSH hospitals.

The biggest news to come from these final regulations, is HOW the total uncompensated care pool is calculated. *Essentially, CMS has taken total Medicaid and SSI days from the cost reports of all Medicare hospitals in FY2011. This totals approximately $9 Billion. So, 75% of your future DSH payments will depend entirely upon the number of Medicaid and SSI days you can confirm on your cost report (relative to the $9 Billion uncompensated pool).*

But, before you can appeal any DSH amounts, you must still pass the DPP threshold.

The threshold for most hospitals is 15% using the basic formula for calculating DPP:

```
$$\mathrm{DDP}=\frac{\mathrm{Medicare/SSI\; Days}}{\mathrm{Total\; Medicare\; Days}}+\frac{\mathrm{Medicaid/Non-Medicare\; Days}}{\mathrm{Total\; Patient\; Days}}$$
```

DPP =Medicare/SSI Days+Medicaid/Non-Medicare DaysTotal Medicare Days Total Patient Days

If your DPP is at least 0.15 (15%), you qualify for the DSH adjustment. Your DPP is factored into some IPPS calculations to provide a DSH value, just as in the past. This value will now be multiplied by 0.25 to give you **Part I** of your DSH adjustment.

Passing the DSH threshold also entitles you to a share of the uncompensated care pool. For your next cost report, your share of the pool is already fixed. It will be the ratio of your Medicaid and SSI days (from 2011) as a percentage of the $9 Billion pool.

Providers received a limited victory in 2011, when Federal Court ruled in Northeast Hospital v. Sebelius, that Medicare Part C (Medicare Advantage) belongs in the numerator of the Medicaid DPP fraction instead of the denominator of the Medicare fraction. It was a “limited” victory because it only applied to pre-2004 cost reports for those hospitals in the appeal. The Allina case, currently in circuit court, seeks to extend this Part C status beyond 2004 to present.

In order to more fully understand the impact this case could have, we simply have to plug some numbers into the DPP formula, and see the difference. For demonstration purposes, consider a hospital with: 5 Medicare/SSI days; 40 Medicare Part A days; 10 Medicare Part C days (50 total Medicare days); 5 Medicaid Days; and 100 Total Patient Days. The DPP formula would look like this:

```
$$\mathrm{DDP}=\frac{\mathrm{5\; SSI\; Days}}{\mathrm{50\; Medicare\; Part\; A\; \&\; C\; Days}}+\frac{\mathrm{5\; Medicaid,\; Non-Medicare\; Days}}{\mathrm{100\; total\; Patient\; Days}}$$
```

DPP =5 SSI Days+5 Medicaid, Non-Medicare Days50 Medicare Part A & C Days 100 total Patient Days

Written another way the above formula would read: 0.10 + 0.05 = 0.15, or 15%

Now, if you move the Medicare Part C days from the denominator of the Medicare fraction, to the numerator of the Medicaid fraction (per the Northeast ruling), your formula would look like this:

```
$$\frac{\mathrm{5\; SSI\; Days}}{\mathrm{40\; Medicare\; Part\; A\; Days}}+\frac{\mathrm{5\; Medicaid\; +\; 10\; Medicare\; Part\; C\; Days\; (15\; total)}}{\mathrm{100\; Total\; Patient\; Days}}$$
```

DPP =5 SSI Days+5 Medicaid + 10 Medicare Part C Days (15 total)40 Medicare Part A Days 100 total Patient Days

This configuration would be: 0.125 + 0.15 = 0.275 or 27.5%

**This represents an increase of 83%!** Granted, this increase would only apply to the 25% portion of your DSH adjustment. But the final adjusted formula could be enough to push some hospitals over the DPP threshold, enabling them to participate in DSH for the first time.

Hospitals generally benefit, any time they can add numbers to a numerator in the DPP formula. Above, we see how a favorable Allina ruling will accomplish this. So will adding SSI days to the Medicare fraction of the formula. This is accomplished by identifying patients who have Medicare status, but should have been registered as SSI patients. Sometimes they don’t know they are SSI eligible. Sometimes they have applied for SSI, but were wrongfully denied. Running patient records through an SSI database (as well as others) will very often reveal “candidate” mislabeled SSI patients. Some detective work will confirm the wrong classification. Documentation and proper filing will then increase the hospital’s DSH appeal.

Hospitals typically scour for additional Medicaid and SSI eligible inpatient days to include in their DSH calculations. These days are now more valuable than ever before. Therefore, we present the following recommendations:

- Dedicate 2013 to maximizing your uncompensated care, uncovering every possible inpatient Medicare and SSI day. Leave no stone unturned, because these days represent the only tool left to maximize your DSH adjustments.
- Make sure you are represented in the Allina appeal. This case could have any number of outcomes, but we feel that most likely, the Court will find for the hospitals (like they did for Northeast). However, only those hospitals that join the appeal will get the benefit of this ruling. If you use a consultant that works entirely on contingency, you can only win regardless of the final decision.

*Quality Reimbursement Services, Inc. has been consulting hospitals on matters dealing with Medicare and Medicaid reimbursements since 1994. We work on a contingency basis, requiring no up-front or maintenance charges for our services. We would be happy to meet with you, and review your circumstances to see if we may be of service.*