Un­wanted clar­i­fi­ca­tion

Crit­i­cal-ac­cess hos­pi­tals fight CMS over rule­mak­ing on provider taxes

Modern Healthcare - - Rural Health -

CMS of­fi­cials are look­ing to crack down on what they con­sider to be dou­ble-dip­ping on the part of crit­i­cal-ac­cess hos­pi­tals, but ad­vo­cates for the largely ru­ral hos­pi­tals say the CMS isn’t be­ing fair.

The CMS in re­cent rule­mak­ing drew a new line in the sand by stat­ing that crit­i­cal-ac­cess hos­pi­tals, which re­ceive Medi­care re­im­burse­ment based on their costs—plus a lit­tle ex­tra— should not be adding state hos­pi­tal provider taxes into those costs if they also lead to greater Med­i­caid re­im­burse­ment.

Hos­pi­tal ad­vo­cates strongly dis­agree, say­ing the CMS has changed its rules and by­passed stan­dard pro­ce­dures for do­ing so. As a re­sult, providers and their rep­re­sen­ta­tives have fought the in­ter­pre­ta­tion through Medi­care ad­min­is­tra­tive ap­peal, in fed­eral court, in meet­ings with CMS Ad­min­is­tra­tor Dr. Don­ald Ber­wick and in Congress.

The is­sue is a po­ten­tially big one for crit­i­calac­cess hos­pi­tals, which are re­im­bursed by Medi­care at 101% of their al­low­able costs, and de­pend­ing on the state in which they are lo­cated, might be pay­ing a healthy amount of provider taxes.

At least 22 states with crit­i­cal-ac­cess hos­pi­tals cur­rently charge or are plan­ning to charge a provider tax that could be used to draw on ad­di­tional fed­eral Med­i­caid match­ing funds, ac­cord­ing to data from the Na­tional Con­fer­ence of State Leg­is­la­tures, the Na­tional Ru­ral Health As­so­ci­a­tion and the Flex Mon­i­tor­ing Team, a group com­posed of three ru­ral health re­search cen­ters that mon­i­tor and eval­u­ate a Medi­care grant pro­gram. In those states, there are an es­ti­mated 697 crit­i­cal-ac­cess hos­pi­tals with more than 15,600 beds (See map).

The pay­ment of a hos­pi­tal provider tax of­ten is part of a com­pli­cated state fi­nanc­ing ma­neu­ver that leads to greater fed­eral pay­ments for Med­i­caid. Hos­pi­tals pay the provider tax to the state, which then uses the re­ceipts to fund Med­i­caid spend­ing while draw­ing an in­creased fed­eral match of that spend­ing.

There are fed­eral lim­its on how much can be charged in taxes, and the move is not uni­ver­sally pop­u­lar. South Carolina Gov. Nikki Ha­ley on Feb. 16 ruled out plans to raise state hos­pi­tal bed taxes to help cover a Med­i­caid deficit, ac­cord­ing to the Associated Press. Ha­ley said hos­pi­tals are “im­moral” for back­ing what she says amounts to pass­ing the buck to con­sumers.

Proper pro­ce­dure?

Re­gard­less of whether the taxes are good pol­icy, crit­i­cal-ac­cess hos­pi­tal ad­vo­cates ar­gue that the provider taxes should count as a Medi­care cost as they have his­tor­i­cally, and say that the CMS is not fol­low­ing proper pro­ce­dure in rais­ing the is­sue as part of what it calls a clar­i­fi­ca­tion in rule­mak­ing for the in­pa­tient prospec­tive pay­ment sys­tem.

“The clar­i­fi­ca­tion as it were that CMS came out with last year … is very trou­bling,” says Brock Slabach, se­nior vice pres­i­dent for mem­ber ser­vices at the Na­tional Ru­ral Health As­so­ci­a­tion, Kansas City, Mo. “It’s a sig­nif­i­cant change in pol­icy by the CMS.”

The ques­tion arose when the CMS in its pro­posed in­pa­tient prospec­tive pay­ment rule— pub­lished in the May 4, 2010, Fed­eral Reg­is­ter — stated that CMS of­fi­cials be­lieve taxes paid into Med­i­caid pools that draw fed­eral match­ing funds are in part, if not com­pletely, off­set by in­creased Med­i­caid fund­ing to the sec­tor. For that rea­son, the taxes are not nec­es­sar­ily a cost for Medi­care pur­poses, and just the net amount be­tween what is paid in taxes and what the hos­pi­tal is re­im­bursed for by Med­i­caid from that pool should be clas­si­fied as a Medi­care cost, the CMS states in its pro­posed and fi­nal in­pa­tient prospec­tive pay­ment rules.

“In sit­u­a­tions in which pay­ments that are associated with the as­sessed tax are made to providers specif­i­cally to make the provider whole or partly whole for the tax ex­penses, Medi­care should sim­i­larly rec­og­nize only the net ex­pense in­curred by the provider,” the CMS

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