Payment Matters

September 28, 2011

D.C. Appeals Court Provides Mixed Victory to Provider on DSH Calculation Involving Medicare Part C Days

By: Mark A. Stanley

In a limited victory for providers, the United States Court of Appeals for the District of Columbia Circuit ruled in Northeast Hospital v. Sebelius [PDF] that CMS used an impermissibly retroactive policy when it calculated the provider’s disproportionate share hospital (DSH) adjustment. Although the provider prevailed in Northeast Hospital, the decision threatens to dramatically reduce DSH reimbursement for any provider with a significant Medicare managed care population.

The DSH calculation measures the number of patient days associated with low income patients using two fractions: (1) the Medicare fraction, which includes only days associated patients that are “entitled to benefits under Medicare Part A,” and (2) the Medicaid fraction, which excludes days associated with patients that are “entitled to benefits under Medicare Part A.” The issue in Northeast Hospital was the proper treatment of patient days associated with beneficiaries who are both enrolled in Medicare Part C and eligible for Medicaid. Inclusion of days associated with such patients in the Medicare fraction, as opposed to the Medicaid fraction, significantly diminishes reimbursement under the DSH adjustment.

CMS Bundled Payment Initiative: An ACO Alternative?

By: Sarah E. Swank

CMS recently announced that it is seeking applications for a new Bundled Payment for Care Improvement initiative in hopes to gather data and input from well organized health care providers to potentially overhaul the Medicare reimbursement system. Under this program, providers would propose a set price for a single episode of care and then receive a predetermined discount if the target is met along with other requirements set out in the Application process and described in the Bundled Payments Request for Application [PDF] document. Each participant would be paid on a fee for service basis and then share the savings, if any. If this sounds familiar - it is. These bundled payments seem to share some of the characteristics of an ACO described in proposed regulations from CMS, without the corporate structure and other restraints.