• Stakes Are High For Texas Hospitals
    With New Method Of Reporting
    Uncompensated Care Costs


By Marty Stempniak

A big change is coming for Texas hospitals that will affect how billions of dollars are distributed for years to come.

This change dates back to December, when the federal government approved a new five-year Medicaid 1115 Transformation Waiver for the state. The approval represents approximately $25 billion through 2022 for Texas hospitals of all sizes and locations.

But the money comes with a new set of rules. Hospitals must transition away from using the current uncompensated care tool to a modified Worksheet S-10 from the Medicare cost report to report their uncompensated care costs. This means payments will be based solely on hospitals’ uninsured charity care costs and no longer factor in bad debt or Medicaid underpayment.

Because these reported costs are the basis for the entire UC payment pool for all eligible hospitals and for individual hospital payments, experts say it’s crucial for Texas hospitals to accurately calculate and document their charity care costs in this process.

“The stakes really could not be higher for Texas hospitals,” said Kyle Pennington, client relations manager with Southwest Consulting Associates, and an expert in the S-10 and uncompensated care cost reporting.

Experts and Texas hospitals weighed in on some of the best practices for filling out the S-10 Worksheet, and what hospitals should be doing now to prepare for the transition.


Keri Disney-Story
Experts encourage hospitals not to wait. Payments based on the new methodology begin Sept. 30, 2019, with the uncompensated care pool to be resized based on 2017 S-10 data. Parkland Health & Hospital System certainly hasn’t dawdled, as the Dallas-based public hospital system has spent months getting comfortable with its own facts and figures.

“I just can’t stress enough the value of moving quickly on this,” said Keri Disney-Story, administrative director of government value-based program finance at Parkland. “We’ve had such little time as a state, and the organizations that moved quickly are going to fare better under the reimbursement plan than the organizations that waited too long.”

“You have to get comfortable with your data” said James Blasingame, Parkland’s director of government reimbursement. To help do so, he proactively collaborates closely with both accounting and patient financial services and is strengthened by the support of those departments. Parkland's chief financial officer and IT have played key roles, as well.

Hospitals must be willing to drill down and uncover any inconsistencies with their records, before examiners start finding deficiencies, experts said.

“Familiarity with system structure and data is really valuable right now,” added Disney-Story. “A facility that assumes it knows how the process is happening may end up with a surprise during an audit down the road.”

William Galinsky
Similarly, Baylor Scott & White Health in Dallas has been carefully “scrubbing” its data to make sure that it’s accurate, said William Galinsky, vice president of government finance. BSW has been doing so since the announcement of the waiver in December, for 2015, 2016 and 2017, as hospitals were unsure how the rule would line up.

And since this is based on just one singular data point — uninsured charity care — Galinsky said it’s “vitally important” to make sure that data are properly identified, and not misclassified as bad debt or some other form of ineligible uncompensated care cost.

“It’s all about the data. Scrub it, make sure the data are reported accurately, and that you don’t miss anything, either good or bad. Because, it’s all going to be subject to review,” he said.


Southwest Consulting Associates' Jonathan Mason, senior manager of operations who oversees the S-10 Worksheet division, notes that there will be a number of hospitals in Texas accustomed to receiving UC payments that have not filled out a Worksheet S-10. Children’s hospitals are the prime example as they do not have Medicare patients. He notes these hospitals may face a steep learning curve and could place themselves at a “significant” audit risk, if not cautious.

For hospitals that already have submitted 2017 data, Mason recommends reimbursement teams start reviewing their programs to determine if they need to make any changes or revisions and amend their cost report in the next several months ahead of the pool resizing in 2019.

Hospitals also must make changes to their charity care policies, which experts said can take anywhere from three to 12 months, in order to clearly document those modifications, and gain approval from the hospital’s governing body. Policies should line up with CMS’s charity care specifications, and your hospital’s transactions should line up with its written policies, Parkland’s Blasingame noted.

Mason said hospitals must take a “deep dive” to ensure that their charity care and bad-debt determinations conform to federal policies. Texas hospitals must not only follow Medicare cost report Worksheet S-10 guidelines, but also the state waiver protocol instructions. Only charity care that’s in accordance with those policies can be reported, he said.

Mason recommends hospitals review their record systems and determine whether they are able to accurately and completely identify, comply and pull patient-level detail. Hospitals must have a firm grasp on their data at the patient level, and should expect thorough reviews and scrutiny of records.

“Use of the S-10 has far-reaching ramifications … and the focus should be a top priority for the field,” he said.


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Southwest Consulting Associates has been an endorsed partner with the Texas Hospital Association since 2018. Contact Jeff Norman at 972/732-8100 or jnorman@southwestconsulting.net.

Learn more about Southwest Consulting Associates.