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Medicare's new disproportionate share hospital (DSH) payment method combines a payment amounting to 25 percent of what a hospital would have traditionally received with an additional amount that is the product of three factors: An estimate of the aggregate amount of DSH payments that the Medicare program would have paid in FFY14 under the traditional payment method. An adjustment to that figure to account for an estimated percentage change in the national uninsured rate between FFY13 and FFY14. Each hospital's estimated percentage of the total uncompensated care costs incurred by all hospitals that are expected to qualify for DSH payments.

The 340B program provides an opportunity for hospitals to achieve significant cost savings on outpatient drugs. Disputes surrounding the Medicare DSH payment calculation, and potential misunderstandings of Medicare provider-based rules, pose obstacles to hospitals that wish to continue or gain participation in the program. Eligible hospitals should pay close attention not only to the rules governing the 340B program, but also to Medicare reimbursement rules to ensure access to drug discounts available under the program.

The amended PRRB rules will significantly change the way providers prepare for and prosecute appeals to the board. All providers and chain organizations should take stock of their longstanding as well as upcoming appeal issues to preserve their rights to pursue proper Medicare reimbursement. The rules' emphasis on front-end work by providers could require significant process changes for organizations.

Although the Centers for Medicare and Medicaid Services says that it lacks statutory authority to provide federal funding for graduate medical education (GME), the authors present three arguments refuting this claim: States have made Medicaid GME payments and received matching funds for those payments since the inception of the Medicaid program. GME costs are costs of patient care services for which states are entitled to federal financial participation (FFP). The Medicaid statute requires FFP for GME costs.

CMS rules regarding what constitutes a patient day are often confusing and inconsistent. It is important for hospitals and their advisers to have a clear understanding of CMS's rules regarding what constitutes a patient day, the impact of those rules on Medicare payment, and instances in which CMS's rules may be subject to challenge. Lack of familiarity with the finer points of these rules may result in substantial underpayments for services rendered.

CMS rules regarding what constitutes a patient day are inconsistent and often confusing. Hospitals and their advisers should have a clear understanding of CMS's rules regarding what constitutes a patient day, the impact of those rules on Medicare payment, and instances in which CMS's rules may be subject to challenge. Lack of familiarity with the finer points of these rules may result in substantial underpayments for services rendered.

CMS's recent FAQs on how GME/IME payments will be managed for residents' training in nonhospital settings only add to healthcare providers' confusion on this issue. Several recommendations represent substantial changes in the rules. The new requirements that are expressed or implied in the FAQs make compliance extremely difficult.

Today's regulatory climate makes it far from simple for hospitals to offer discounts to uninsured and indigent patients. Questions abound regarding whether offering such discounts might lead to reductions in Medicare payments for outliers, new technology, and bad debt. Offering waivers of coinsurance or deductibles may seem an attractive option, but routine waivers could implicate federal statutes regarding illegal remuneration and patient inducement. And across-the-board discounts to uninsured patients could change the calculation of a hospital's "usual charges," resulting in the hospital's violation of the statutory bar against having charges to Medicare that are "substantially in excess" of the "usual charges." The best course for hospitals is to have clearly defined financial assistance policies in place that reflect an awareness of all the related potential legal and regulatory concerns.

Discount policies are likely to face increased scrutiny in light of congressional inquiries on Medicare outlier payments and recent media attention regarding pricing for the uninsured. If you're considering making changes to your hospital's policy, you'll need to understand the current regulatory environment, recognize potential concerns, and develop a plan of action that complies with recent HHS guidance.

CMS and the OIG are examining payment for residents' training in nonhospital settings. Over the next year, as the current moratorium on Medicare disallowances of GME and IME payments for these residents comes to a close, providers should stay up to date on the latest developments and anticipate changes that are likely to follow.

Under CMS's hold-harmless policy, a hospital's Medicaid proxy for periods prior to 2000 may include certain state-only program days for patients who were not eligible for medical assistance under an approved Medicaid state plan if the hospital either received DSH payments that included the same type of days in previous cost-reporting periods settled before October 15, 1999, or filed an appeal citing exclusion of these days from the Medicare DSH formula before October 15, 1999.

Some Medicare intermediaries are reducing the disproportionate share hospital (DSH) payment by excluding labor/delivery room days and dual-eligible days from the DSH calculation. Some intermediaries are excluding maternity patients who are in a labor/delivery room at the census-taking hour unless the patient previously occupied a routine bed. Intermediaries also are excluding Medicaid-eligible days attributable to patients who are not entitled to payment under Medicare Part A. These adjustments are of questionable legal validity and hospitals should protect their rights to appeal these issues.

Amended regulation reduces IME funding. Policy excludes residents' research time from IME formula. Policy will significantly reduce payments to many teaching hospitals. Hospitals should appeal based on various legal grounds. Hospitals could seek legislative relief.

Two recent publications of the Centers for Medicare and Medicaid Services (CMS) seem to belie the view that providers can expect to see an easing of their regulatory burden under the Bush Administration. Program memorandum (PM) A-01-141, issued in December 2001, sets forth the agency's expectations with respect to audits of Medicare cost reports. PM A-01-141 instructs Medicare intermediaries "as a general rule" not to reopen a cost report or settle an appeal if the request for reopening or appeal is based on submission documentation that was not made available at the time of the audit. A proposed rule issued by CMS on January 25, 2002, would require a Medicare provider to identify and return an overpayment to its Medicare intermediary within 60 days after the provider identifies the overpayment. The proposed rule defines "overpayment" but leaves many issues open to interpretation.