Beginning with the 2013/14 federal fiscal year, the Affordable Care Act (ACA) mandated a 75% reduction in Medicare disproportionate share (DSH) payments to hospitals and allocated these funds to an uncompensated care pool. Once the size of the pool is determined, the data used to calculate each hospital’s share of the uncompensated care pool, eg. Factor 3, has been the subject of much debate.  CMS has clearly indicated its intent to use data from Worksheet S-10 to calculate Factor 3, but each year has delayed its use due to concerns expressed by most of the hospital industry that the S-10 form and data needed significant corrections.  During this time, proxy data in the form of Medicaid and SSI patient days are being used.

The proposed PPS rule for the 2016-17 federal fiscal year was published in the Federal Register on April 27, 2016.  At that time, CMS planned to transition away from using proxy data to calculate each hospital’s share of the uncompensated care pool to the use of data from Worksheet S-10 of the Medicare cost report.  The transition would have been as follows:

  • Federal FY 2016-17:   100% Proxy data.
  • Federal FY 2017-18:   33% Worksheet S-10 from 2014 and 67% Proxy data.
  • Federal FY 2018-19:   67% Worksheet S-10 from 2014 and 2015 and 33% Proxy data.
  • Federal FY 2019-20:   100% Worksheet S-10 from 2014, 2015, and 2016

However, in the final rule published in the Federal Register on August 22, 2016, CMS decided to defer this transition and the use of Worksheet S-10 to allow for more time to institute additional quality control and data improvement measures.  CMS was very clear that the Worksheet S-10 data would be used for Factor 3 once these measures were in place, but no later than FY 2021. 

So why is it important NOW to get the Medicare Worksheet S-10 data right?

  • Based on additional comments by CMS in the final rule, it appears that Worksheet S-10 data from the cost reporting year beginning in 2017 will be used in FY 2021 as part of transition away from proxy data to 100% reliance on Worksheet S-10 data.  Therefore, 2017 is the year that hospitals must begin ensuring that they have the proper systems in place to capture and accurately report this information that will better position them when the Worksheet S-10 is utilized for this purpose.  However, it should still be noted that CMS could choose to implement prior to FY 2021 as allowed for by their final rule.  If so, a transition period using data from 2017 and prior could occur.  While data cannot be captured retroactively, a review of prior fiscal year data mapping could still be accomplished.  Then any appropriate corrections could be made through cost report re-openings if they occur within allowed timeframes, with data capturing systems modified for subsequent periods.
  • The data that is reported on Worksheet S-10 must be consistent with the hospital’s financial assistance policy (charity care policy).  Hospital practices must meet the language contained in the policy or the data can be disallowed.  Policies can only be modified on a “go forward” basis.  It is critical that policies be reviewed in light of Worksheet S-10 reporting requirements to ensure that policies and practices are in synch.
  • The Worksheet S-10 requirements are not the same as generally accepted accounting principles (GAAP) so the data from the hospital’s general ledger is not sufficient for meeting the Worksheet S-10 requirements.  The hospital must be able to generate sufficient supplemental data reports to meet these requirements to support an audit from Medicare.

As a result of the final rule by CMS for FY 2016-2017, hospitals have been given a short reprieve with respect to the use of the Worksheet S-10. Therefore, hospitals should take advantage of this opportunity now to evaluate how the data is captured and reported to ensure they will not be disadvantaged by the Worksheet S-10 data they have currently reported.   It is important that each hospital has the appropriate systems in place to ensure that they have the capability to account for and report their S-10 data accurately on a “go forward” basis. SCA provides consultation to:

  • Assess hospital financial assistance (charity care) policies, practices and procedures to ensure compliance with the hospital’s (health system’s) mission and goals, as well as federal and state legislative requirements.
  • Establish a documented, auditable process for identifying, assigning and reporting care provided to patients who qualify for help under the hospital’s financial assistance policy.
  • Assess hospital’s ability to properly prepare Medicare Cost Report Worksheet S-10 based upon its financial assistance policy and practices, and internal accounting system that captures the required information.
  • During Medicare contractor audits, review any government audit adjustments related to the Worksheet S-10 information and advise hospital of the legitimacy of the adjustment or how to support a challenge of an adjustment.