How Hospitals Can Prepare for S-10 Audits

How Hospitals Can Prepare for S-10 Audits

As of October 1st, Disproportionate Share Hospital (DSH) eligible hospitals must now submit patient-level records for encounters that result in uncompensated charity care reported on their S-10 worksheets. Worksheet S-10 compliance is critical as the Centers for Medicare and Medicaid Services (CMS) has reiterated that there is no better proxy for the costs of hospitals for treating individuals who are uninsured despite stakeholder concerns over “inconsistent reporting” and “inadequate and unreliable data.”

Although Worksheet S-10 data accounts for only one-third of the Uncompensated Care (UCC) payments (until 2020 when it will make up one hundred percent of the calculation), with nearly $12 billion in uncompensated care payments earmarked for 2019, it is imperative for hospitals to review and update, where necessary, their Charity Care Policies (CCP) and Financial Assistance Policies (FAP) in order to benefit from CMS’s broadened definition of charity care. Specifically, for purposes of calculating the UCC payment, CMS currently defines “charity care” to include discounts given to uninsured patients that meet the hospital’s financial assistance policy FAP, non-Medicare bad debt, and non-reimbursed Medicare bad debt. The more robust the CCPs and FAPs are, the more a hospital can report (and support) as valid charity care. Hospitals are advised to maintain compliance with their documented CCPs and FAPs and ensure they are consistent with CMS’ policies. In addition, DSHs must implement and maintain Worksheet S-10 policies, develop and maintain financial statements, conduct internal and external reporting reconciliations, and train staff on the importance of patient-level record maintenance.

Pursuant to CMS’ fiscal year 2018 Inpatient Prospective Payment System final rule which relies on – in part – uncompensated care claims on S-10 worksheets, the amount claimed in uncompensated care cost will affect how much the federal government pays out in DSH payments. Mistakes that occur in S-10 worksheet claims can costs the hospital its share in the UCC pool.

New DSH Calculation Formula

Under the previous formula, DSH payments were based primarily on how many Medicaid, dual-eligible and disabled patients hospitals served (Medicaid days) and Supplemental Security Income ratios. However, Section 3133 of the Affordable Care Act amended the formula to include discounts given to uninsured patients that meet the hospital’s financial assistance policy and non-Medicare bad debt. The change also means that a hospital’s DSH payment from the federal government is based on the hospital’s UCC costs relative to other hospitals’ UCC costs as a part of the new UCC pool calculation. 

CMS Directs MACs to Audit Hospitals with High Ratios of Uncompensated Costs vs. Total Operating Costs

Medicare Administrative Contractors (MACs) have already started to audit hospitals by sending out Additional Documentation Requests as a result of historical S-10 data with short deadlines to respond. The deadline has passed to amend historical S-10 data, but hospitals can proactively ensure that their current S-10 worksheets are accurately capturing its charity care data (free services after a financial demonstration that a patient cannot pay) and its uncompensated care costs (free services after a financial assessment that shows the patient can pay but does not). Additionally, CMS made a number of revisions by way of Transmittal 11 and the Cost Report Worksheet S-10 Instructions and a Q&A Document on Worksheet S-10 released after the final rule. Hospitals should be aware of and seek guidance on requirements like CCPs and FAPs must expressly include self-pay discounts to be written off as charity care even if state law requires self-pay discounts, in order to offer charity care to insured patients it must be included in the hospitals written CCPs and FAPs. Hospitals need to be prepared to provide supporting documentation for all claims on its S-10 worksheets during the desk review by MACs. MAC appeals can take years to resolve and a disallowance of a charity care claim would cause the amount to be excluded in the hospital’s uncompensated care reimbursement for that year. Finally, hospitals should be aware of their UCC costs and seek guidance if it is in excess of half of the hospital’s total operating expenses as this may be viewed as aberrant by CMS.

For assistance in reviewing your hospital’s CCPs and FAPs, Worksheet S-10 policies, and/or patient-level record maintenance compliance, contact Frier Levitt today to speak to an attorney.

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