CMS has pushed to broaden the data hospitals must provide to substantiate their claims for uncompensated care for several years now. Starting this fall, under its final rules for FY-19’s Inpatient Prospective Payment System (“IPPS”), the agency will begin auditing provider compliance.

Here are five key takeaways from the FY-19 final rule:

  • New Documentation Requirements for Providers

Effective for cost reporting periods beginning on or after October 1, 2018, CMS will begin requiring DSH-eligible hospitals to submit patient-level records for encounters that result in uncompensated charity care. Although the agency has always required hospitals to record and maintain this data, providers were not previously required to submit detailed documentation to substantiate the total amount of uncompensated care reported on their S-10 worksheets (the section of the Medicare cost report where hospitals report their uncompensated care figures).

  • CMS Will Begin Auditing Hospitals This Fall

Additionally, CMS will begin auditing hospitals in the fall regarding the amounts of uncompensated care they have reported in the past. This means that in addition to producing patient-level documentation going forward, providers may also need to provide adequate records that substantiate the figures reported on previous fiscal year S-10 worksheets.

  • Audit Protocols Remain Confidential

The agency announced it will initially target hospitals that report a high amount of uncompensated care relative to their total operating costs. CMS has also specifically requested Medicare Administrative Contractors (“MACs”) to begin reviewing historical data for providers that fit this description. Otherwise, the government has kept its audit protocols confidential. This means hospitals must walk a fine line between overestimating their uncompensated care amounts (and risk potential findings during an audit) and acting overly conservative (thus foregoing potentially payable claims) without further guidance.

  • CMS Is Altering How It Calculates DSH Payments

This balancing act will have a heightened impact on the bottom line of participating providers. CMS has also announced a substantial change going forward to how it will calculate hospital DSH payments. Previously, CMS based DSH payments primarily on Medicaid days and Supplemental Security Income (“SSI”) ratios. However, the agency announced that it will continue to phase uncompensated care into its DSH payment methodology in place of traditional Medicaid/SSI low-income days for FY-19.

  • Hospitals In These States Stand to Gain Higher DSH Payments

Because CMS previously focused more heavily on Medicaid patient days to calculate DSH payments, providers in states that have not expanded their Medicaid programs under the Affordable Care Act have historically received lower DSH payments than their counterparts. However, as CMS phases in its new methodology, these hospitals will begin to see a more proportionate share of payment allocation over the next fiscal year. Specifically, qualifying hospitals in the following states can expect to see a rise in their overall DSH payments:

KansasMissouriNorth Carolina
NebraskaMississippiSouth Carolina
South DakotaIdaho



This new wave of government audits is quickly approaching. Providers are strongly encouraged to take immediate action.

Advis can help you prepare for the increased scrutiny your charity care and bad debt claims are about to receive. Our five-step DSH Payment and Uncompensated Care Audit Response Plan helps providers:

  • Assess their potential risk vis-a-vis upcoming audits;
  • Better protect themselves from potential findings; and
  • Maximize their DSH and uncompensated care payments in a compliant manner.

Click here to learn how we can help your organization navigate these new payment methodologies and upcoming government audits.

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