Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



Newsletter Article


Hospitals Watch for News on Uncompensated Care in Medicare Rule

By Kerry Young, CQ Roll Call

April 13, 2016 --Hospital groups may soon learn whether they’ve made progress in bids to change how their customers’ unpaid bills factor into Medicare reimbursement calculations. The program for the elderly and disabled is poised to begin unveiling a series of its annual payment rules.

Medicare is expected to release soon its draft of the fiscal 2017 rule on payment for hospital stays. These payments for so-called inpatient stays are among the federal government’s single biggest expenses of any kind, costing Medicare about $110 billion. The White House’s Office of Management and Budget (OMB)  has been reviewing the hospital pay rule since March 21. OMB checks on major rules before federal agencies release them. OMB also already is reviewing a payment rule for skilled nursing care and a rate update for hospice, services that combined cost Medicare more than $40 billion a year.

The Centers for Medicare and Medicaid Services (CMS) likely will outline steps for a new uncompensated care framework in the fiscal 2017 hospital payment rule, given the agency’s past statements, lobbyists said. Implementing a change may take several years.

The Medicare Payment Advisory Commission (MedPAC) in March recommended a slow shift to using hospitals’ cost reports for these calculations. CMS now relies on a proxy measure that reflects hospital stays of low-income and disabled people in the Medicaid program.

“Given that the [cost reports] more closely tracks hospitals’ relative costs of caring for the uninsured, we have urged CMS to transition over three years,” MedPAC said, adding that this “will prevent financial shocks to hospitals and will create an incentive for them to more accurately report uncompensated care.”

The advisory panel found many flaws in the current CMS approach to uncompensated care payments for hospitals. Medicare's subsidies of Medicaid costs sends states a signal that they can underpay hospitals through Medicaid, MedPAC said.

The panel also noted that this current approach focuses on inpatient stays. “It ignores uncompensated care that occurs in the emergency department, which is problematic for rural hospitals that may provide much of their uncompensated care in an outpatient setting,” MedPAC said.

This work on Medicare's uncompensated care involves addressing thorny issues that echo from the 2010 health overhaul. The measure changed how the federal government helps hospitals cover the expenses of treating people who can’t afford to buy their services, while also moving to bring millions of Americans into private insurance and Medicaid plans. The pool of money directly designated for uncompensated care dropped to about $6.4 billion for this year from $9.4 billion in 2014, according to MedPAC.

Under the current approach to setting payments from the uncompensated care pool, hospitals in states that didn’t expand Medicaid are being penalized, said Paul A. Salles, chief executive of the Louisiana Hospital Association, in a comment to CMS on the fiscal 2016 payment rule. Louisiana only this year began expanding its Medicaid eligibility.

Like many other hospital executives, Salles said that further work needed to be done on the form of cost reports before they could be used as a basis for payments.

"We urge the agency to take action to revise and improve both [the form of the cost report] and the instructions and, once stakeholders have had an opportunity to weigh in on the proposed changes, educate both the field and CMS’ contractors," he wrote to CMS last year.

Kerry Young can be reached at [email protected].

Publication Details