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Uncompensated Care Reimbursement: Factor 3 (Piece of the Pie)

Posted by Cory Aubuchon on Oct 27, 2014 8:00:00 AM

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Under the Affordable Care Act, Medicare disproportionate share hospitals (DSH) will be reimbursed under an uncompensated care (UC) model.  The amount of uncompensated care reimbursement received by a DSH is determined by 3 factors.  

Factor 3 determines a qualifying DSH’s portion of the UC reimbursement pool (Factor 1 x Factor 2).



a hospital-specific value that expresses the proportion of the estimated uncompensated care amount for each subsection (d) hospital...with the potential to receive DSH payments relative to the estimated uncompensated care amount for all hospitals estimated to receive DSH payments. - CMS


UC costs are reported on Worksheet S-10 of the Medicare cost report. However, S-10 data has proven to be unreliable and inconsistent across hospitals (a subject for a future blog).  CMS has elected to use “alternative” data, insured low-income patient days, to proxy uncompensated care.


Low-Income Patient Days = SSI days + Medicaid days


For Federal Fiscal Year (FFY) 2015, CMS will use the most recently published SSI days (FFY 2012).  Medicaid days will be taken from the latest FFY 2011 or FFY 2012 Medicare cost report per the 2014 Q1 HCRIS file.  HCRIS is updated based on cost report submissions accepted by MACs and transmitted to CMS.  Only cost report data housed within HCRIS prior to the 2014 Q1 deadline will be available for inclusion in the CMS Factor 3 file.


Note:  The FFY 2015 Proposed Rule used FFY 2011 SSI days and 2013 Q4 HCRIS data.  Since the proposed rule was released, more recent SSI and cost report data has become available. Hospitals’ Factor 3 values have changed accordingly.


Based on prior and projected DSH qualification trends, CMS predicts which hospitals will qualify as a DSH in FFY 2015.  The sum of the Low-Income Patient Days from those predicted DSHs is used as the denominator for the individual hospital Factor 3 percentage calculation.


Hospital’s Factor 3 =     Hospital Low-Income Patient Days       

                            Sum all “DSHs” Low-Income Patient Days


A hospitals UC reimbursement is then calculated:


Hospital’s UC Reimbursement = Factor 1 * Factor 2 * Factor 3

Hospitals should ensure their Medicaid days are accurately reported on the as-filed cost report in order to receive their entitled UC reimbursement.  Submitting revised Medicaid days listings to the MAC or addressing upon reopening will no longer be timely under the UC reimbursement model. Unreported Medicaid days are now equivalent to lost reimbursement, and in many cases, significant lost reimbursement.  We anticipate the FFY 2016 final rule will use FFY 2012 or FFY 2013 cost report Medicaid days to calculate a provider’s Factor 3.  If this assumption holds true, hospitals should (if they haven’t already) be revising their FFY 2012 and FFY 2013 Medicaid days NOW and work with their MAC to amend cost reports for inclusion in the 2015 Q1 HCRIS data pull.


In case you missed it in our Factor 1 or Factor 2 posts, our 2015 IPPS comments letter to CMS also further analyzes potential issues with Factor 3.  Take a look at it HERE or by clicking the picture below.

Uncompensated Care Payment Factor 3 Southwest Consulting Associates

Topics: Medicare DSH Reimbursement, uncompensated care

About This Blog

The climate of provider reimbursement is ever-changing and this blog is intended to keep you up-to-date on the latest information regarding:

  • DSH Reimbursement
  • 340B Pharmacy Drug Discount Program
  • Compliance Issues
  • Litigation Surrounding Provider Reimbursement

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