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CMS Bulletin on Third-Party Payers in Uncompensated Care Calculations

The Centers for Medicare & Medicaid Services (CMS) issued an Aug. 18 informational bulletin on how states should treat third-party payers when determining uncompensated care (UC) costs used to calculate hospital-specific Medicaid disproportionate share hospital (DSH) payment limits. The guidance in the bulletin applies to Medicaid DSH audits for state plan rate year 2017.

This bulletin provides states two approaches to properly report UC costs if a state decides not to report third-party payer payments to offset hospital-specific DSH limits prior to June 2, 2017, which is the effective date of the agency’s 2017 final rule on the treatment of third-party payments in calculating UC costs.

CMS has faced several lawsuits on the implementation of the 2017 final rule. Most recently, the United States Court of Appeals for the Fifth Circuit issued an April 20 decision in Baptist Memorial Hospital-Golden Triangle Inc. et al v. Azar et al reinstating the 2017 final rule, which initially was struck down by three lower district courts that found the rule conflicted with federal Medicaid statute.

Contact Senior Director of Policy Erin O’Malley at eomalley@essentialhospitals.org or 202.585.0127 with questions.

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About the Author

Zina Gontscharow is a former senior policy analyst for America's Essential Hospitals.

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