News & Insights


October 2, 2017

Health Headlines – October 2, 2017

CMS Issues New Instructions for Completing Worksheet S-10 and Extends Deadline for Providers to Submit Updated Data for FYs 2014 and 2015 to October 31, 2017

For the second time in less than one year, CMS has updated its instructions for completing Worksheet S-10 of the Medicare cost report for hospitals. The new instructions expand the definition of charity care, as reported in column 1 of Line 20, to include discounts given to uninsured patients who meet the hospital’s charity care policy or “financial assistance policy.”  Commenters to the FY 2018 inpatient prospective payment system (IPPS) rulemaking specifically requested this change “for consistency with the terminology used in the regulations implementing section 501(r) of the Internal Revenue Code.”  82 Fed. Reg. 37990, 38217 (Aug. 14, 2017). In addition, the new instructions provide that certain items are no longer subject to the cost-to-charge ratio, such as deductibles and co-insurance amounts for uninsured patients (Line 20, column 2) and non-reimbursable Medical bad debt. The new instructions create Line 27.01 for hospitals to report Medicare allowable bad debts, which are subtracted from a hospital’s total bad debts (Line 26) and multiplied by the CCR to calculate non-Medicare bad debt costs. Finally, the new instructions clarify that charges for non-covered insured patients for days exceeding a length-of-stay limit can now be reported as charity care charges in column 2 of Line 20. In light of the new instructions for completing Worksheet S-10, CMS has given hospitals until October 31, 2017 to submit an updated Worksheet S-10 for their cost reporting periods beginning in FYs 2014 and 2015.

These new instructions apply to cost reporting periods beginning on or after October 1, 2013 (FY 2014). This latest revision comes in the wake of CMS’ announcement in the Fiscal Year (FY) 2018 IPPS rulemaking that the agency will use Worksheet S-10 data to determine how the uncompensated care component of the disproportionate share hospital (DSH) payment will be distributed among eligible hospitals. That data will be used to calculate uncompensated care payments starting in FY 2019.

Section 3133 of the Affordable Care Act (ACA), which went into effect in FY 2014, significantly altered the Medicare DSH payment. Hospitals now receive 25 percent (as estimated by CMS) of the DSH payment they would have received under the payment methodology that existed prior to FY 2014. The remaining 75 percent (Factor 1) is reduced by the change in national uninsured rates (Factor 2) and divided among eligible hospitals based on their proportionate share of uncompensated care (Factor 3). When the ACA changes were first implemented, CMS determined that Medicaid and Medicare/SSI days were the best available proxy for calculating uncompensated care. Therefore, between FYs 2014 and 2017, CMS calculated Factor 3 based on a hospital’s number of Medicaid and Medicare/SSI days.

In the FY 2018 IPPS final rule, CMS announced that it is phasing out the use of Medicaid and Medicare/SSI days and will begin incorporating data from Worksheet S-10 to calculate Factor 3. CMS reasoned that “we have reached a tipping point with respect to the use of S-10 data. Specifically, we can no longer conclude that alternative data are available…that are a better proxy for the costs of…treating individuals who are uninsured than the data on uncompensated care costs reported on the Worksheet S-10.”  82 Fed. Reg. at 38202. In FY 2018, Worksheet S-10 data will be used to calculate one-third of Factor 3. By FY 2020, all of Factor 3 will be based on Worksheet S-10 data.

CMS intends to use Line 30 of Worksheet S-10 as the data metric for uncompensated care. Line 30 represents the sum of a hospital’s costs of charity care (Line 23) and non-Medicare bad debt (Line 29). Over the past year, CMS has twice revised the instructions for Worksheet S-10 to clarify what costs qualify as charity care and non-Medicare bad debt. In Transmittal 10, issued on November 18, 2016, CMS clarified that charity care does include discounts given to uninsured patients who meet the hospital’s charity care criteria, but does not include amounts of unpaid deductibles and co-insurance for which the hospital has received reimbursement from Medicare. On September 29, 2017, CMS issued Transmittal 11, which contains the new instructions for completing Worksheet S-10 detailed above.

CMS is giving hospitals until October 31, 2017 to amend Worksheet S-10 for their cost reports beginning in FYs 2014 and 2015 consistent with the new instructions in Transmittal 11. Hospitals are not required to submit amended Worksheet S-10s, but they may choose to resubmit if they have additional data in light of the new instructions. The Worksheet S-10 data from the FY 2014 and 2015 cost reports will be used to calculate two-thirds of a hospital’s Factor 3 in FY 2019. Given the significant amount of reimbursement at stake, hospitals should investigate whether they stand to benefit from this opportunity to amend their cost reports consistent with the new instructions.

Reporters, Alek Pivec, Washington, DC, + 1 202 626 2914,, Mark Polston, Washington, DC, +1 202 626 5540,, Dan Hettich, Washington, DC, +1 202 626 9128,

Senate Pulls ACA Repeal and Replace Vote; Congress to Work on Renewing CHIP Funding; HHS Secretary Price Resigns

Last week, Senate Republicans scrapped plans to vote on the ACA repeal and replace bill authored by Senators Lindsey Graham (R-SC) and Bill Cassidy (R-LA). Senate Republicans had planned to use the budget reconciliation process, which requires 50 votes plus the tie-breaking vote of Vice President Pence, to consider the Graham-Cassidy bill. However, with the announced opposition of Senators Rand Paul (R-KY), John McCain (R-AZ), and Susan Collins (R-ME), Republicans did not have sufficient votes to pass the bill. Although the reconciliation instructions expired on September 30, Senators Graham and Cassidy pledged to continue their work to repeal and replace the ACA.

In his statement announcing opposition to the Graham-Cassidy bill, Senator McCain expressed his hope that Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander (R-TN) and Patty Murray (D-WA) would  “resume their work should this last attempt at a partisan solution fail.”  After the Senate dropped plans to vote upon the Graham-Cassidy bill, Alexander and Murray did resume their discussions around a market stabilization approach. However, President Trump and House Speaker Paul Ryan had earlier signaled they would not support this bipartisan effort, as the House would not be able to support legislation that continued ACA subsidies without repealing and replacing the law.

This week, House and Senate committees are expected to work on legislation to fund the Children’s Health Insurance Program (CHIP). On September 30, Federal funding for CHIP expired. The Senate Finance Committee is scheduled to mark up a bipartisan, five-year $8 billion CHIP reauthorization bill, S. 1827 on October 4. A description of the “chairman’s mark” of the bill can be found here. The text of a House Energy and Commerce Committee $6 billion CHIP funding bill, which is also expected to reauthorize funding for community health centers, should be released today, with a committee markup anticipated for October 4.

By the end of last week, amidst criticism over his taxpayer-funded use of privately chartered jets, HHS Secretary Tom Price resigned. On September 29, President Trump named Don Wright, a longtime HHS staffer who currently serves as Acting Assistant Secretary for Health, to be Acting HHS Secretary.  It is unclear who President Trump will nominate to replace Dr. Price, although early speculation includes CMS Administrator Seema Verma, FDA Commissioner Scott Gottlieb, and former Louisiana Governor Bobby Jindal.

Reporter, Allison Kassir, Washington, D.C., +1 202 626 5600,

Senate Passes CHRONIC Care Act of 2017 – On September 26, 2017, the Senate passed the Creating High-Quality Results and Outcomes Necessary to Improve Chronic (CHRONIC) Care Act of 2017. The CHRONIC Care Act amends Title XVIII (Medicare) of the Social Security Act to, among other things:

  • Extend the Independence at Home (IAH) demonstration program, allowing seniors with multiple complex and extensive chronic conditions to receive specialized care at home;
  • Allow Medicare Advantage plans to tailor coordination and benefits to specific patient groups, instead of requiring uniform benefits; and
  • Expand the use of telehealth services in multiple areas.

The legislation, which has received bipartisan support, passed by unanimous consent in the Senate. The Congressional Budget Office (CBO) estimates that enacting the legislation would reduce direct spending for Medicare and Medicaid by $217 million over the 2018-2022 period, and would have no significant effect on total direct spending over the 2018-2027 period.

A one-page overview of the CHRONIC Care Act is available here. The text of the legislation is available here. The preliminary CBO report is available here.

Reporter, Jennifer S. Lewin, Atlanta, + 1 404 572 3569,

Bipartisan Congressional Opposition Mounts Against Proposed CY 2019 Home Health Groupings Model in Home Health PPS Proposed Rule – On July 28, 2017, CMS published the calendar year (CY) 2018 Home Health Prospective Payment System (PPS) Proposed Rule (the Proposed Rule) in which it proposed a new CY 2019 Home Health Groupings Model (HHGM). The proposed HHGM is set to take effect January 1, 2019. It will replace the current 60-day episode of care payment model with a 30-day period model. The new model will place patients into 144 payment groups based more heavily on clinical characteristics and other patient information rather than the number of therapy visits. Comments were already due to CMS by September 25, but within the last couple of weeks, bipartisan Congressional opposition to the HHGM has been mounting.  

In a September 22 letter to CMS, Senator Orrin Hatch (R-Utah) requested that CMS not finalize the HHGM in its forthcoming final rule. He argued that more time and “robust data analysis” is needed because the HHGM in the Proposed Rule differs from MedPAC’s recommended options. Hatch also argued that CMS exceeded its authority by proposing regulatory payment reform in a non-budget neutral or partially-budget neutral manner. The Proposed Rule cites that the HHGM would save $950 million in CY 2019 if implemented in a non-budget neutral manner and $480 million if implemented in a partially-budget neutral manner.   According to Hatch’s letter, CMS may propose budget neutral changes, but changes that generate mandatory savings which are returned to the Treasury must be directed by Congress. Finally, Hatch argues that CMS has not provided sufficient data or assumptions behind these numbers that would enable stakeholders to independently evaluate the agency’s data and conclusions within the 60-day comment period.

Following Hatch’s letter, a bipartisan group of 49 senators signed a letter to CMS and the then-Secretary of HHS Tom Price, dated September 26, 2017, also requesting that CMS not finalize the HHGM in the final rule “until affected stakeholders can fully analyze and understand the impact of the proposed changes.”  In the letter, the senators specifically ask whether CMS plans to provide the data used to produce the cost estimates of the HHGM. If so, the senators ask when the information will be available, and if not, the senators request the rationale for not providing the information.

Reporter, Kate Stern, Atlanta, +1 404 572 4661,


CMS Updates Payment Error Instructions to Hospices – On September 26, 2017, CMS revised its instructions to hospices regarding the process for adjusting claims. In May 2017, CMS had instructed hospices to submit adjustments for correcting payment errors involving routine home care (RHC) and service intensity add-on (SIA) payments on an individual basis. However, based on feedback from the hospice industry regarding the time-consuming nature of individual adjustments, CMS is now instructing hospices to submit a list of claims to be adjusted to their MAC. For more information, click here.

340B Program Penalties Rule Delayed Again – HHS announced another delay in the effective date for 340B Civil Monetary Penalties. The rule, which was set to go into effect October 1, 2015, is now scheduled to become effective on July 1, 2018. As previously reported, the rule was finalized in January shortly before the change in administration and established penalties for manufacturers that knowingly and intentionally charged a covered entity more than the ceiling price for a covered outpatient drug. To view the notice, click here.

CMS Issues New Graduate Medical Education Payment Instructions – CMS has issued new program instructions for contractors to follow when calculating interim rates for graduate medical education payments to new teaching hospitals. The new instructions also describe the documentation that contractors must collect from new teaching hospitals to calculate interim payments. The instructions will go into effect on October 23, 2017. To review the instructions, click here.