News & Insights


August 24, 2020

Health Headlines – August 24, 2020

CMS Clarifies that Positive COVID-19 Test Results Necessary for 20-Percent Increase to MS-DRG Weighting

On August 17, 2020, CMS issued a Medicare Learning Network (MLN) Matters article providing that for admissions occurring on or after September 1, 2020, in order to be eligible for the 20 percent increase in the MS-DRG weighting factor, COVID-19 diagnoses must be documented in the patient’s medical record with a positive COVID-19 laboratory test.  Positive tests may be demonstrated using only the results of viral testing (i.e. molecular or antigen), consistent with CDC guidelines.

Section 3710 of the CARES Act provides that “in the case of a discharge of an individual diagnosed with COVID–19, the Secretary shall increase the weighting factor that would otherwise apply to the diagnosis-related group to which the discharge is assigned by 20 percent.”  Section 3710 further states that “[t]he Secretary shall identify a discharge of such an individual through the use of diagnosis codes, condition codes, or other such means as may be necessary.” 

CDC coding guidance for COVID-19 encounters directs providers to “[c]ode only a confirmed diagnosis of [COVID-19] as documented by the provider, documentation of a positive COVID-19 test result, or a presumptive positive COVID-19 test result.”  The coding guidance further specifies that “[i]n this context, ‘confirmation’ does not require documentation of the type of test performed; the provider’s documentation that the individual has COVID-19 is sufficient.”  Based on the August 17, 2020 MLN Matters article now requiring the medical record to include positive viral test results, we may see further updates to CDC guidance in the coming months. 

In the August 17, 2020 MLN Matters article, CMS also states that the IPPS Pricer will continue to apply the 20% increase to the DRG weighting factor for diagnosis code U07.1 but may conduct post-payment review to confirm the presence of a positive COVID-19 laboratory test in the medical record.  If the required test is not documented in the medical record for admissions on or after September 1, 2020, the additional payment resulting from the 20 percent increase in the MS-DRG weight will be recouped.  If a hospital diagnoses a patient with COVID-19 consistent with CDC coding guidelines but does not have evidence of a positive test result, the hospital can decline the additional payment at the time of claims submission to avoid the repayment. 

While access to the tests required under the MLN Matters article may be less difficult to obtain now, these changes have the potential to limit payments to hospitals combatting the pandemic.  As noted above, the new requirements are also more stringent than the CDC coding guidance, which does not require documentation of the particular type of test performed and specifies that the provider’s documentation that the patient has COVID-19 is sufficient. 

To view a copy of CMS’s August 17, 2020 MLN Matters article, please click here.

Reporter, John Whittaker, Sacramento, +1 916 321 4808,

CMS Issues Instructions for MACs to Adjust Part C Payments for Nursing and Allied Health and Direct Graduate Medical Education from 2002 through 2018

On August 21, 2020, CMS issued a transmittal (Change Request 11642) instructing Medicare Administrative Contractors (MACs) to recalculate the Part C components of nursing and allied health (NAH) and direct graduate medical education (DGME) payments to hospitals for calendar years 2002 through 2018.  The instruction applies to all unsettled cost reports as well as cost reports settled within the past three years.  The adjustments required by this instruction are expected to produce increased DGME payments and reduced NAH payments.

Both DGME payments and NAH payments include separate components for Part A patients and Part C patients.  Specifically, Congress instructed CMS to create a pool of up to $60 million annually to compensate a hospital for the NAH costs associated with its Part C patients and to fund that payment pool through corresponding reductions in DGME Part C payments.  For 2001, CMS calculated a NAH Part C payment pool of $43 million and applied a 14.13 percent reduction to DGME Part C payments to fund that pool.   In the transmittal, CMS explained that it had not updated those numbers since 2001 and that it was now “provid[ing] MACs with instructions on how to compute and/or reconcile these payments for CYs 2002 through 2018.” 

CMS further explained that NAH programs should receive—and DGME programs should fund—no more than $60 million annually in NAH Part C payments.  The updated numbers in Change Request 11642 suggest that, as a result of the adjustments required by the transmittal, DGME payments to hospitals will increase and NAH payments will decrease.  In particular, the transmittal indicates that the 14.13 percent reduction to DGME Part C payments that has applied since 2001 will be substituted for substantially smaller percentages.  Since the DGME reductions were used to fund the Part C NAH payments, NAH payments are likely to see a corresponding decrease in payments. 

Hospitals that receive NAH payments, DGME payments, or both, should, therefore, carefully review their open cost years and any cost year settled within the past three years to estimate how Change Request 11642 will affect their reimbursement. 

A copy of the change request is available here

Reporter, Alek Pivec, Washington D.C., + 1 202 626 2914,

California Bill Giving Attorney General Authority to Regulate and Approve or Deny Healthcare Transactions Advances to Floor Vote

On August 20, 2020, the Committee on Appropriations of the California State Assembly approved sending SB-977 to the Assembly for a final vote, ahead of an August 31, 2020 deadline to send bills to Governor Gavin Newsom.  SB-977, titled “Health care system consolidation: Attorney General approval and enforcement,” would grant the California Attorney General (AG) sweeping authority to review, and approve or deny, changes of control and acquisitions of health care facilities and providers. The bill would require health care systems, private equity groups, and hedge funds to provide notice to, and obtain written consent of, the AG prior to any change of control or acquisition of or with a healthcare facility or provider.

The California Hospital Association, California Medical Association, California Dental Association and the California Chamber of Commerce oppose SB-977 as well as several other provider, finance, and business groups. More information on SB-977 may be found here.

Reporters, Travis Jackson, Los Angeles, +1 213 443 4374,, and Kyle Gotchy, Sacramento, +1 916 321 4809,


CMS Instructs States to Resume Additional Inspections and Outlines Plan for Resolving Suspended Enforcement Cases – On August 17, 2020, CMS issued a memorandum to State Survey Agency Directors (QSO-20-35-All), authorizing states to resume certain surveys that have been suspended due to the COVID-19 public health emergency and outlining plans for resolving suspended enforcement cases.  The memorandum expands on CMS’s June guidance, which instructed states to begin performing surveys in connection with complaint investigations triaged as Non-Immediate Jeopardy High, revisit surveys of facilities with removed Immediate Jeopardy, Special Focus Facilities with Special Focus Facility Candidate recertification surveys, and nursing home and Intermediate Care Facility for Individuals with Intellectual Disabilities recertification surveys where it has been over 15 months since the last standard survey.  The August 17, 2020 memorandum authorizes states to perform the following additional surveys: certain onsite revisits, complaint investigations triaged as Non-Immediate Jeopardy Medium, and annual recertification surveys required to be conducted within 15 months from a provider’s last recertification survey.  CMS also outlined its approach to processing enforcement cases that have been suspended earlier this year.  As part of the approach, CMS expanded the desk review policy to include review of continuing noncompliance following removal of Immediate Jeopardy, which would otherwise have required an onsite revisit. 

House Democrats Request GAO Review of HHS Hospital Capacity Reporting – In a letter submitted on August 19, 2020, Democrats from the House Energy and Commerce Committee asked the Government Accountability Office (GAO) to review changes made by HHS to its hospital capacity reporting system. The letter expresses concern with guidance HHS issued on July 10 removing CDC’s National Healthcare Safety Network (NHSN) from the reporting process and directing hospitals to instead submit data through the TeleTracking platform or certain HHS-authorized state agencies. This change, the letter argues, resulted in hospitals becoming burdened by having to report additional detailed variables that were not previously required and may erode the quality of data. The letter calls upon GAO to review the effects of the reporting changes, evaluate the overall data-collection process, and investigate the decision-making process that led to the changes. The letter was signed by Energy and Commerce Committee Chair Frank Pallone (D-NJ), Health Subcommittee Chair Anna Eshoo (D-CA), and Oversight and Investigations Subcommittee Chair Diana Degette (D-CO). A copy of the letter is available here. Subsequent to the letter, a number of media outlets reported on Thursday regarding remarks made on Monday by Dr. Deborah Birx of the White House Coronavirus Task Force indicating that the current system will only be used on an interim basis and that responsibility for the reporting system will return to CDC, which will be creating a new system.

HHS Awards Over $35 million to Increase Access to Health Care in Rural Communities -- On August 20, 2020, HHS, through the Health Resources and Services Administration (HRSA), awarded over $35 million to more than 50 rural organizations across 33 states in an effort to enhance access to high quality health care in rural communities. The awards were allocated in multiple areas including telehealth, health workforce training, rural residency programs, rural health research, technical assistance for rural hospitals and HIV care and treatment. The complete press release is available here and the awards are detailed here.