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Worksheet S-10 Basics andUpdates from Recent Audits

Agenda

7/31/19 | Healthcare Conference2

• Medicare DSH and Uncompensated Care Background• What is Worksheet S-10?• What Should Be Included in Worksheet S-10?• Transition to Use of Worksheet S-10• The Importance of Capturing Worksheet S-10 Data Appropriately• What Did We Learn from Recent Audits/Reviews?• Action Items to Prepare for Future Filings and Potential Audits/Reviews

Medicare DSH and Uncompensated Care Background

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• The Affordable Care Act (ACA) required changes to the Medicare operating disproportionate share hospital (DSH) methodology, as detailed in the FFY 2014 IPPS Final Rule:

• DSH payment methodology prior to 10/1/2013:• Based on a formula that considers a hospital’s:

• Medicare utilization of beneficiaries who also receive Supplemental Security Income (SSI) benefits and

• Medicaid eligible inpatient utilization

• DSH payment methodology on or after 10/1/2013:• Two components to the DSH payments:

• 25% of the payments based on the pre 10/1/2013 payment methodology (now called “empirically justified Medicare DSH payments”) plus

• An allocation from a new Medicare DSH uncompensated care pool

7/31/19 | Healthcare Conference


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• Uncompensated care pool• Payment methodology:

• 75% of the total funds that otherwise would have been paid as Medicare DSH after a reduction for changes in the percentage of individuals under the age of 65 who are uninsured

• Each hospital qualifying for empirically justified Medicare DSH payments will receive an uncompensated care pool allocation based on its share of the total amount of uncompensated care for all Medicare DSH hospitals



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• Uncompensated care pool amounts

• FFY 2014 = $9.035 billion

• FFY 2015 = $7.648 billion (-15%)

• FFY 2016 = $6.406 billion (-16%)

• FFY 2017 = $5.977 billion (- 7%)

• FFY 2018 = $6.767 billion ( 13%)

• FFY 2019 = $8.273 billion ( 22%)

• FFY 2020 = $8.489 billion ( 3%)



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9.035

7.648

6.4065.977

6.767

8.273 8.489

0

1

2

3

4

5

6

7

8

9

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FFY 2014 FFY 2015 FFY 2016 FFY 2017 FFY 2018 FFY 2019 FFY 2020

Uncompensated Care Pool Amounts

Uncompensated Care Pool Amounts (in billions)



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16.0

13.0

11.0

8.39.1 9.4 9.4

9.035

7.6486.406 5.977

6.767

8.273 8.489

0

2

4

6

8

10

12

14

16

18

2014 2015 2016 2017 2018 2019 2020

Uncompensated Care Pool in Relation to Uninsured < 65 Years of Age

% Uninsured < 65 UCP in Billions


What is Worksheet S-10?

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• A form in the Medicare cost report used to gather data on the cost incurred by hospitals for providing patient care services for which the hospital is not compensated

• It is the only nation-wide uniform tool that gathers this type of data.



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• Key definitions:• Uncompensated Care – consists of charity care, non-Medicare bad debt, and non-

reimbursable Medicare bad debt• Excludes – courtesy allowances, discounts given to patients that do not meet the hospital’s

charity care policy, and discounts given to uninsured patients that do not meet the hospital’s financial assistance policy (FAP)

• Charity Care and Uninsured Discounts – result from the hospital’s policy to provide all or a portion of services free of charge to patients that meet the charity care policy or FAP

• Excludes – patients not eligible for discount under the hospital’s charity care policy or FAP, prompt pay discounts, and unpaid deductibles and co-insurance for accounts where Medicare reimbursement has been received

• Non-Medicare Bad Debt – charges for health services for which a hospital determines the non-Medicare patient has the financial responsibility to pay, but the non-Medicare patient does not pay



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• Key definitions (continued):• Non-Reimbursable Medicare Bad Debt– the amount of allowable Medicare coinsurance

and deductibles considered to be uncollectible but are not reimbursed by Medicare under the requirements of 42 CFR 413.89(h) and CMS Pub. 15-1, chapter 3


What Should Be Included in Worksheet S-10?

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• Line 20 (Periods beginning on or after 10/1/2016):• Charge amounts for uninsured patients given full or partial discounts that were

determined in accordance with the hospital’s charity care criteria/policy or FAP and written off during this cost report period. Charges for non-covered services provided to patients eligible for Medicaid or other indigent care programs can be included if such inclusion is specified in the hospital’s charity care policy or FAP and the patient meets the policy.

• Exclude:• Charge amounts for physician and other professional services• Charges for patients given courtesy discounts or charges for uninsured patients who do not meet the

hospital’s charity care policy or FAP



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• Line 20 (continued):• Uninsured patients = total charges or the portion of total charges written off to charity care

for uninsured patients and patients with coverage from an entity that does not have a contractual relationship with the provider. These patients must meet the hospital’s charity care policy or FAP. Charges for non-covered services provided to patients eligible for Medicaid or other indigent care programs can be included if such inclusion is specified in the hospital’s charity care policy or FAP and the patient meets the policy criteria.



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• Line 20 (continued):• Insured patients = deductible and coinsurance payments required by the payer for insured

patients covered by a public program or private insurer with which the provider has a contractual relationship that were written off to charity care. In addition, enter in column 2, the non-covered charges for days exceeding a length-of-stay limit for patients covered by Medicaid or other indigent care programs if such inclusion is specified in the hospital’s charity care policy or FAP and the patient meets the hospital’s policy criteria.

• Exclude:• Deductibles and coinsurance claimed as Medicare bad debt



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• Line 22 (Periods beginning on or after 10/1/2016):• All payments received during the cost report period (regardless of when the services were

performed) from patients for amounts previously written off to Line 20 as charity care or uninsured discounts.

• Excludes:• Payments for physician and other professional services• Grants or other mechanisms of funding for charity care



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• Line 22 (continued):• Uninsured patients = payments received from uninsured patients and patients with

coverage from an entity that does not have a contractual relationship with the provider.

• Insured patients = payments received from patients covered by a public program or a private insurer with which the provider has a contractual relationship.



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• Line 26:• Total facility amount of bad debts (Medicare bad debts and non-Medicare bad debts), net

of recoveries, written off during this cost report period on balances owed by the patient, regardless of the date of service.

• Exclude: • Bad debts for physician and other professional services• Amounts included in Line 20• For privately insured patients, exclude bad debts that were the obligation of the insurer rather than the

patient



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• Changes to Worksheet S-10 instructions resulting from Transmittal 10 & Transmittal 11:

• In Transmittal 10, CMS clarified that Line 20 column 1 can include discounts given to uninsured patients who meet the hospital’s charity care criteria. In Transmittal 11, CMS further clarified that full or partial discounts given to uninsured patients who meet the hospital’s charity care policy or FAP/uninsured discount policy may be included in Line 20 column 1.

• CMS modified the application of the cost-to-charge ratio (CCR). The CCR will not be applied to the deductible and coinsurance amounts for insured patients approved for charity care and non-reimbursed Medicare bad debt. The CCR will be applied to uninsured patients approved for charity care or an uninsured discount, non-Medicare bad debt, and charges for non-covered days exceeding a length of stay limit imposed on patients covered by Medicaid or other indigent care programs.


Transition to Use of Worksheet S-10

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2018

Low Income Days 2012


S-10 Data 2014

2019


S-10 Data 2014

S-10 Data 2015 2020

*

S-10 Data 2015or

S-10 Data 2017

* - Proposed Rule


The Importance of Capturing Worksheet S-10 Data Appropriately

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• Reimbursement impacts:• DSH payments• 340B drug pricing program• Electronic Health Record (EHR) incentive payments (expired)

• Public perception

• Government scrutiny• Are nonprofit hospitals providing benefits sufficient to justify tax exemptions?


What Did We Learn from Recent Audits/Reviews?

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• Requests for significant amounts of detail, including items that were not required to complete the as-filed cost report:

• Examples:• 2 part financial statement reconciliation• Patient details for charity and bad debt amounts that include data elements at the transaction

level rather than the patient encounter (i.e., charges by revenue code)

• Short turn around time to provide requested support:• Example:

• 2 weeks to respond to initial request• 3 days to a week to respond to subsequent requests

• Inconsistent communications from MACs and subcontractors



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• “Expected payment” calculation issues• Skewed results due to a limited population of providers being audited• Sample sizes that are potentially not representative of the total population• Small window to respond to proposed adjustments:

• Example• 1 week

• Sample S-10 Review - Request List.docx


Sample%20S-10%20Review%20-%20Request%20List.docx


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• Recent “Potentially Aberrant Worksheet S-10” letters• Relate to cost report periods beginning in FFY 2017• Appear to focus on Line 20, column 2• Per the FFY 2020 IPPS Rule, CMS is proposing to apply statistical trim methodologies to

potentially aberrant cost-to-charge ratios and potentially aberrant uncompensated care costs reported on Worksheet S-10.

• If the hospital does not provide an acceptable response or explanation, the 2017 data would be trimmed using data from the 2015 cost report.

• Sample S-10 Potentially Aberrant Worksheet S-10 Letter.pdf


Sample%20S-10%20Potentially%20Aberrant%20Worksheet%20S-10%20Letter.pdf

Action Items to Prepare for Future Filings and Potential Audits/Reviews

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• Review charity care policies and FAP• Ensure the policies address the use of presumptive charity methods• Prepare a crosswalk detailing which transaction codes correspond to the FAP & charity

care policy

• Educate employees involved in the revenue cycle about the importance of gathering appropriate documentation for uninsured patients

• Ensure your organization can segregate write-offs of non-covered services from contractual adjustments


Action Items to Prepare for Future Filings and Potential Audits/Reviews

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• Review recently filed Worksheet S-10 and ensure it can be supported with the level of detail requested through the recent audits

• Begin gathering data on a concurrent basis, as patient details will have to be submitted with the cost report beginning in FFY 2019

• Consider the need for a reconciliation of the data to accounting records

• Compare data gathered for Worksheet S-10 to other reporting documents for reasonableness:

• Examples:• IRS Form 990• Audited financial statements• Other reports or surveys


Stephen D. Harrell, CPA, CGMAPartner

[email protected]

Healthcare

Main: (229) 883-7878

Direct: (229) 518-3442

Questions?

7/31/19 | Healthcare Conference28

mailto:[email protected]

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