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Report: Uncompensated Care Payments Insufficiently Aligned With Uncompensated Costs

Some of the payments Medicare makes to hospitals to help them with their uncompensated care costs are not well-aligned with actual hospital uncompensated care costs, the U.S. Government Accountability Office has concluded.

gaoIn a new report based on FY 2013 and FY 2014 data, the GAO found that

Medicare UC [uncompensated care] payments are not well aligned with hospital uncompensated care costs for two reasons. First, payments are largely based on hospitals’ Medicaid workload rather than actual hospital uncompensated care costs…Second, CMS [the Centers for Medicare & Medicaid Services] does not account for hospitals’ Medicaid payments that offset uncompensated care costs when making Medicare UC payments.

Medicare uncompensated payments to hospitals also are sometimes as Medicare disproportionate share (Medicare DSH) uncompensated care payments.

To address this problem, the GAO recommends that CMS

  • improve alignment of Medicare UC payments with hospital uncompensated care costs
  • account for Medicaid payments made when making Medicare UC payments to individual hospitals

The report notes that CMC agreed with these recommendations.

The National Association of Urban Hospitals has long observed that the tool the GAO cites for quantifying hospitals’ uncompensated care – the Medicare cost report’s S-10 worksheet – is deeply flawed and not reliable as a source of data upon which to base important policy decisions on the distribution of federal funds. NAUH most recently argued against the use of the S-10 for this purpose in a June 17, 2016 letter to CMS in response to the agency’s proposal to use this data in calculating FY 2017 Medicare uncompensated care payments.

To learn more about what the GAO found and what its implications might be for hospitals, go here for a link to the new GAO report Hospital Uncompensated Care: Federal Action Needed to Better Align Payments with Costs and to a summary of that report.

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