July 6, 2012
DSH Payments Still Set to Decrease
In the weeks leading up to passage of the Affordable Care Act ("ACA") in 2009, the hospital industry agreed to accept approximately $155 billion in funding cuts on the premise that the law's Medicaid expansion requirement would decrease the number of uninsured patients or charity cases. However, last week's Supreme Court ruling gives states the ability to opt out of the Medicaid expansion requirement. That means hospitals now face significant cuts in reimbursement rates without the corresponding decrease in uninsured patients promised by the ACA, and hospitals receiving Disproportionate Share Hospital ("DSH") payments will be among those impacted most.
The ACA reduces Medicaid DSH payments by $500 million in 2014; $600 million in 2015; $600 million in 2016; $1.8 billion in 2017; $5 billion in 2018; $5.6 billion in 2019; and $4 billion in 2020. In the meantime, the Department of Health and Human Services ("HHS") is tasked with establishing a "DSH Health Reform Methodology" that will impose the largest percentage cuts on states with the lowest percentage of uninsured or on states that don't target their DSH payments to hospitals with many Medicaid patients or high levels of uncompensated care. Regardless of the methodology established by HHS, DSH reductions are still set to occur even if a state chooses not to expand its Medicaid program, and that will undoubtedly have a severe financial impact on hospitals across the country.
The Politics of Medicaid Expansion
Now that the Supreme Court has said the federal government cannot stop all Medicaid matching funds if a state chooses not to expand its Medicaid program, the focus shifts to the governors and state legislators who must decide whether to accept or reject billions of new federal dollars that would cover many of their uninsured constituents. While this decision may seem easy at first blush, states with divided governments are likely to see fierce debate over the issue in the coming months.
States that choose to comply with the ACA's Medicaid expansion requirement will see the federal government pay for 100% of the cost from 2014 to 2016. That amount decreases to 90% in 2019, which means states will be required to pay a 10% share in the future. In response, elected officials in statehouses across the country have already said they won't support Medicaid expansion on the grounds their states can't afford to pay a 10% share. Many others simply believe legislators on Capitol Hill won't honor the 90% funding increase as debt reduction talks move forward next year. The result is a debate that is likely to last well beyond the November elections.
CMS Proposes Increasing ESRD Pay by 3.1%
On July 2, CMS proposed increasing Medicare payments to large chain dialysis facilities by 3.1% beginning January 1, 2013. While the final rule is likely to be released this fall, CMS said in a press release the agency anticipates the result of the proposed rule would be to increase pay rates for outpatient maintenance dialysis treatments by 2.5% in CY 2013. This is the outcome of the End Stage Renal Disease ("ESRD") bundled market basket increase of 3.2% reduced by a productivity adjustment of 0.7%.
The rule also proposes to change the ESRD Quality Incentive Program that provides payment incentives to dialysis facilities to improve the quality of dialysis care. CMS already cuts pay to facilities that fail to meet quality measures. The proposed rule calls for adding clinical and reporting measures and expanding the scope of two reporting measures already in use. The proposed rule will appear in the July 11, 2012 Federal Register, and CMS will accept comments on the proposed rule until August 31, 2012.
CMS's Blum Promoted to Principal Deputy Administrator
CMS announced this week that Medicare chief Jonathan Blum has been promoted to Principal Deputy Administrator. Blum will also continue his current duties as Medicare director. Prior to joining CMS, Blum worked at the Office of Management and Budget and the Senate Finance Committee.
Next Week in Washington
The House and Senate return from the July 4 recess. The House schedule will include at least one symbolic vote to repeal the health care law, which is currently set for July 11. While the measure won't be taken up in the Democrat-controlled Senate, close attention will still be paid to the number of House Democrats who vote for repeal. The last ACA-related vote saw 34 House Democrats vote against the law, and that number could increase with the November elections looming.
At the committee level, the House Ways and Means Committee will hold a hearing Tuesday to explore tax implications of the Supreme Court's ruling on the individual mandate. On the Senate side, the Finance Committee will host a roundtable addressing the Medicare physician pay formula. This will be the committee's third hearing on changes to the SGR formula.
For more information, please contact John F. Williams, III at 317.977.1462 or jwilliams@hallrender.com. | 
