HHS Updates Medicaid Safety Net Payment Policies

Last month, we described the announcement by the Department of Health and Human Services (HHS) announcing the allocation to Medicaid providers under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  In the past couple of days, HHS has updated its policies regarding the Medicaid allocation (including the allocation to safety net providers) and we thought now would be a good time to highlight those updated policies.

By way of background, the CARES Act, and a supplemental appropriations law, appropriated $175 billion to a provider relief fund to address increased expenses and revenue losses attributable to the coronavirus pandemic.  HHS has been allocating funding under the CARES Act since early April, including to Medicare providers, providers in COVID “hot spots,” rural providers, skilled nursing facilities, Indian Health facilities, and to providers that treat uninsured COVID patients.  On June 9, announced two tranches of funding to high Medicaid providers:  $15 billion to providers that do not traditionally bill Medicare but do bill Medicaid and CHIP, and another $10 billion to safety net hospitals.

Last week, HHS answered a couple of questions that have come into the Department regarding the Medicaid provider and safety net hospital allocation.  The questions address how “safety net” hospitals were defined, and how the allocation to those hospitals was distributed.  We wanted to shine some light on those questions.

First, how were safety net hospitals defined:  HHS explains that a “safety net” hospital can be either an acute care hospital or a pediatric hospital.  In the case of an acute care hospital, it qualifies if it meets three tests:

  • First, its Medicare disproportionate patient percentage (DPP) is 20.2% or higher.[1]
  • Second, it has uncompensated care of at least $25,000 per bed.[2]
  • Finally, the hospital has a profit margin of 3% or less.

A pediatric hospital qualifies if its Medicaid-only ratio (Medicaid patient days to total patient days) exceeds 20.2% and it has a profit margin of 3% or less.

Second, how were distributions to safety net hospitals determined?  HHS explains that hospitals qualifying as safety net hospitals under the formula above receive a payment from the $10 billion allocation equal to the ratio of the individual hospital’s “facility score” to the sum of all facility scores of all safety net hospitals, multiplied by $10 billion.  A “facility score” for an acute care hospital is the product of the hospital’s DPP and the number of beds at the hospital; for a pediatric hospital, it’s the product of the hospital’s Medicaid ratio and number of beds.  (Although being a math major isn’t necessary to be a health care lawyer, it doesn’t hurt.  Who knew?  Your blog author was an English and Political Science major before law school but always enjoyed a good math class, as his high school Algebra II teacher can attest).

The new HHS policy FAQs address some other Medicaid issues as well.  For example, what if a provider was billing Medicaid under the provisions of an § 1115 waiver rather than under a regular State Plan Amendment?  Are they eligible for funding?  HHS explains that such a provider can still qualify for a distribution if they meet the other eligibility criteria.  Another FAQ we noticed addresses the situation of new providers:  those that billed Medicaid only beginning after January 1, 2020.  HHS makes clear that these providers may not receive a payment under the Medicaid allocation because there is insufficient data for claims billed between January 1, 2020 and May 31, 2020.  These providers may be eligible under other allocations, however.

Here at the Medicaid and the Law Blog, we will continue to monitor developments with the Medicaid allocation.  According to HHS, there is approximately $50 billion left in the provider relief fund, although it’s possible Congress may replenish it this summer.  We’ll certainly let you know if that happens.

[1] Although the Medicaid program mandates that states make extra payments to disproportionate share hospitals, this funding allocation relies on the Medicare disproportionate share adjustment because that adjustment uses a consistent, nationwide formula.  A hospital’s DPP under the Medicare program is the sum of two fractions:  first, the ratio of a hospital’s dual eligible patient days to total Medicare patient days and the second is the ratio of Medicaid patient days to total patient days.  If the sum of these two fractions equals or exceeds 20.2%, the hospital meets the first test.

[2] Under the ACA, a hospital’s disproportionate share payment, based on its DPP as described above, is increased as its uncompensated care increases, and decreases as its uncompensated care decreases.

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