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5 Steps for Hospitals to Manage Risk Around

Fall 2018 Uncompensated Care CMS Audits

Amid a growing uninsured population and CMS audits How Can Hospitals Manage Risk
of uncompensated care reporting starting this fall, hospi- While Maximizing Quality Outcomes?
tals’ lifelines will be proper patient-level documentation Hospitals are required to report their uncompensated
and clearly defined charity care policies. care costs in a section of the Medicare cost report called
the S-10 worksheet, which CMS uses to calculate DSH
Disproportionate-Share Hospital Payment payments.
Changes Drive Fall CMS Audits To successfully toe the line between allocating costs
In 2014 under the Affordable Care Act’s assumed within Medicare rules to optimize reimbursement and rev-
Medicaid expansion, CMS began calculating dispropor- enue, and mitigating heightened false claims risk, health-
tionate-share hospital (DSH) payments based on charity care organizations should keep the following five-step
care and bad debt—together known as uncompensated checklist top of mind.
care. DSH payments were previously calculated based on
the number of Medicaid, dual-eligible and disabled STEP 1: Ensure Bright Lines on Charity Care Policies
patients treated. Beginning this fall, CMS will start audit- BY STEVEN SHILL AND JOHN BARRY Do you have a charity care policy with defined terms,
ing the uncompensated care data included in worksheet including what is covered under the policy? Your policy
S-10 of a hospital’s cost report. Upon audit, CMS will should establish clear, non-discriminatory income levels
require hospitals to support uncompensated care amounts with patient-level data. that constitute charity care, include instructions and required documentation for
CMS said it would audit the top 1 percent of hospitals with a high ratio of uncompen- applying for charity care, and be available in all respective languages of your patient
sated care to total operating costs. In its final 2019 acute-care hospital inpatient prospec- population.
tive payment system (IPPS) rule, which dictates the way hospitals are reimbursed based
on cost reports three years in arrears, the agency then underlined that its audit protocols STEP 2: Implement Proper Information Governance to Support Patient-Level
are confidential—underlining the importance of hospitals ensuring proper documenta- Documentation
tion in the face of little guidance. Have you implemented the policies and processes—across your entire organiza-
tion—needed to ensure you’re capturing and accurately recording the level of
Growing Threats to the Hospital Model patient data required to optimize reimbursement and mitigate fraud risk? Because
Today’s DSH calculations are based on uncompensated care data from 2015-17, largely patient-level data is essential to support the uncompensated care amounts in work-
before ACA rollbacks took shape. Once the individual mandate penalty ends next year, sheet S-10 upon audit, you must ensure you have a proper information governance
almost 25 percent of large businesses expect at least some of their workers and families framework in place to do so.
to stop enrollment in coverage, the Kaiser Family Foundation found. As the ACA is rolled Have you then made changes to ensure patient-level documentation is happening
back further and the uninsured population grows, hospitals are likely to see their uncom- across your organization? This means recording the patient’s information upon
pensated care population grow in tandem. Since the rate at which they’re reimbursed for admittance and throughout the entire episode of care—at the front end with your
that uncompensated care does not account for ACA changes, however, hospitals’ future billing department and at the back end with follow-up for qualifications of charity
revenue is likely to be negatively impacted. care. It’s also crucial to maintain the documentation provided in each patient’s record
Additionally, the percentage of workers with a deductible increased to 85 percent this so that it’s accurate and easily-accessible come an audit.
year, compared to 81 percent in 2017 and 59 percent 10 years ago, according to Modern
Healthcare. As the number of consumers facing deductibles—and the amounts of We will continue this conversation in next month’s
them—grow, it will become increasingly important for hospitals to consider deductibles publication and share the final 3 steps.
and co-insurance write-offs to charity in the face of uncompensated care audits.
The uncompensated care audits, and the accompanying required patient-level docu- Steven Shill is partner and national leader in The BDO Center for Healthcare Excellence
mentation upon audit, come at a time when hospitals already must manage heightened &Innovation. He can be reached at sshill@bdo.com. John Barry is an assurance partner at
financial risk while maximizing quality outcomes in the process. As care traditionally BDO. He can be reached at jbarry@bdo.com. Don’t miss the latest BDO News and insights
provided at the hospital moves to outpatient settings and from fee-for-service to value- – subscribe at www.bdo.com/blogs/healthcare.
based reimbursement, hospitals have been forced to transform their business model to
revolve around improved outcomes and consumer convenience. Our South Florida healthcare leaders are ready to address your complex and unique
At the same time, healthcare entities—hospitals included—are grappling with a new needs:
accounting standard, ASC 606, Revenue from Contracts with Customers. The third step Alfredo Cepero, Managing Partner
of the standard—determining the transaction price—proves especially tricky for an 305-420-8006/ acepero@bdo.com
industry transitioning to value-based reimbursement and determining the accuracy of its Angelo Pirozzi, Partner
revenue forecasts in the process. 646-520-2870 / apirozzi@bdo.com

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South Florida Hospital News southfloridahospitalnews.com November 2018 11