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June 24 Deadline to Review Proposed Medicare DSH Amounts

Hospitals have until June 24 to contact the Centers for Medicare & Medicaid Services (CMS) about  inaccuracies in the agency’s posted Factor 3 values for Medicare disproportionate share hospital (DSH) payments.

In the fiscal year (FY) 2020 Medicare Inpatient Prospective Payment System (IPPS) proposed rule, CMS outlined its methodology for calculating Medicare DSH payments in FY 2020. Hospitals can access CMS’ proposed rule Factor 3 values for each hospital using Table 18 on the agency’s IPPS website.

CMS distributes two types of Medicare DSH payments:

  • a per-discharge “empirically justified” amount, which is 25 percent of the amount hospitals would receive using pre–Affordable Care Act DSH methodology; and
  • the uncompensated care (UC)–based amount, which is allocated based on each hospital’s share of UC costs relative to all hospitals nationally.

Each hospital’s share of aggregate UC, called the Factor 3, is multiplied by the total amount of expected UC DSH payments (the UC pool) to determine the hospital’s individual UC DSH amount. Confirming the accuracy of Factor 3 is critical to ensuring each hospital receives the appropriate amount of UC DSH payments.

In the proposed rule, CMS posted a list of Factor 3 values for each hospital based on the agency’s calculation of UC share relative to aggregate UC nationally. CMS uses FY 2015 worksheet S-10 data from Medicare cost reports. CMS noted it might consider using FY 2017 worksheet data instead. CMS also posted the Factor 3 values under this alternative FY 2017 methodology in Table 18.

In our analysis, we identified more than 300 hospitals with mismatching FY 2015 UC values compared with CMS’ provided Factor 3 values. This could be attributable to CMS using the February update of cost report data, while the agency said it would use the more recent March update in the final rule. Although the discrepancy should be resolved by the use of the March update in the final rule, hospitals should review their posted Factor 3 and contact CMS about any discrepancies to ensure the agency is aware of the discrepancy.

Contact Senior Director of Policy Erin O’Malley at or 202.585.0127 with questions.


About the Author

Shahid Zaman is a senior policy analyst at America's Essential Hospitals.

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