healthcare association of new york state bob mcleod march 12, 2015

Healthcare Association of New York State www.hanys.org

Central New York HFMA

Bob McLeod•March 12, 2015


Agenda

• NYS Hospital Financial Assistance Law compared to IRS Final Rule 501(r),

• Indigent Care Pool, and

• 2012 Medicaid DSH audit 0bjectives and Timeline


NYS Hospital Financial Assistance Law (HFAL)

compared to IRS Final Rule 501(r)


Why such a focus on charity care (financial assistance) and collections?• Some policy makers believe that charity care is the most

important community benefit.

• Concerns regarding some patient experiences with the collections process:

– Discouraging uninsured patients from seeking or obtaining care at tax-exempt hospitals.

– Leaving patients with excessive medical debt.

– Hospitals willing to offer greater discounts to commercial insurers than to low-income patients.

• Lobbying by consumer advocates.Source: Verite Healthcare Consulting, LLC 2015


Brief History and ContextIRS 501 (r)

Concerns about tax-

exempt hospitals

2007: Redesigned

form 990 and Schedule H

2010: ACA “501(r)”

requirements

Dec 2014: 501(r) Final

Rule

Source: Verite Healthcare Consulting, LLC 2015


The Affordable Care Act – March 2010

• Added 501(r) to the Internal Revenue Code:– Standards for conducting and publishing a Community

Health Needs Assessment (CHNA);– Establishment and disclosure of financial assistance policies;– Limitations on amounts charged to patients who are eligible

for financial assistance; and– Rules governing billing and collections practices.

• Compliance with the Final Rule must occur by the beginning of Tax Years on/after December 29, 2015 (Final Rule – Dec 2014).


Brief History and ContextNYS Hospital Financial Assistant Law

(HFAL)

Adverse Media Attention on

Hospital Billing of the

Uninsured

2004: Financial

Aid/Charity Care Guidelines

2007:State Budget

Mandated HFALPublic Health Law 2807-k(9)

2007-present:DALs and Education

Clarifying HFAL

2014:State Audit of

Hospital Compliance with HFAL


Compliance

HFAL• Originally compliance with the

HFAL was required as a condition of participation in Indigent Care Pool distributions on/after January 1, 2009.– Later subject to a fine up to

$10,000 per violation.

• 2014: 1% of Medicaid DSH payments withheld until substantial compliance is determined.

IRS 501(r)• No sanctions or disclosures

apply to errors that are minor and either inadvertent or due to reasonable cause if corrected promptly.

• Willful non-compliance may result in revoking 501(c)(3) status for hospital facility.

This document is not intended and should not be considered legal advice. HANYS strongly suggests that hospitals work with their legal advisers to ensure that their financial assistance policy and related documents meet all the requires of these laws.


Eligibility

HFAL• At a minimum individuals

with household incomes below 300% FPL without insurance or who have exhausted their health insurance benefits.

• Insured individuals: co-pays and deductibles at the discretion of hospital.

• Must be reported in FAP.

IRS 501(r)• No specified eligibility

criteria. Although once established by hospital it must be reported in its financial assistance policy (FAP).



Determination of Eligibility/Income

HFAL• May not be overly

burdensome. Only documentation that indicates current income is permitted. The hospital may not require tax returns or monthly bills.

IRS 501(r)• Requirements must be

described in FAP.

• Individuals may not be denied financial assistance if they do not provide documentation that has not be specified in the FAP.



Presumptive Eligibility

HFAL• Permitted. • The hospital may use credit

scoring software for purposes of establishing income eligibility and approving financial assistance.– May not require patients to provide

social security numbers, and the scoring must not negatively impact the patient’s FICO scores.

– Credit scoring software cannot be used to deny applications for financial assistance, and

– Language referring to credit scoring should not appear on applications.

IRS 501(r)• Permitted.• Assistance may be grated at less

than the most generous level (different from proposed rule).– May apply for more generous

assistance.• Allowable sources of information

besides those provided by individual must be disclosed in FAP.

• Under what circumstances prior FAP-eligibility may be used must be disclosed in FAP.



Financial Assistance Conditional on Medicaid Application

HFAL• Prohibits a blank requirement. • On a case-by-case basis hospitals

may require individuals applicants that it believes would be eligible for Medicaid or other public health insurance to cooperate in applying, or that coverage as a condition of receiving financial assistance. – Financial assistance applications

must be processed concurrently with any application for public assistance.

IRS 501(r)• Permitted.• Allows the FAP-eligibility

determination to be held pending the determination of Medicaid.

This document is not intended and should not be considered legal advice. HANYS strongly suggests that hospitals work with their legal advisers to ensure that their financial assistance policy and related documents meet all the requires of these laws .


Covered Services

HFAL• Emergency Services – All NYS

residents at a minimum. • Non-emergent, medically

necessary services to residents in a hospital’s primary service area at a minimum.– While DOH establishes the hospitals

primary service area, the hospital may provide financial assistance to residents beyond this area.

– The hospital must disclose the geographic service area within which is FAP will apply.

IRS 501(r)• All emergency services and other

medically necessary care (as applicable under the laws of the state).

• Must establish an emergency medical care policy that :– Prohibits it from actions that

discourage individuals from seeking emergency care such as demanding payment before receiving treatment or permitting debt collection activities.

• No reference to service area requirements.



Providers Covered by the Hospital’s FAP

HFAL• Disclosure is not required.

IRS 501(r)• The hospital must list

providers, other than the hospital itself, delivering emergency or other medically necessary care in the hospital that are covered and not covered by the hospital’s FAP.



Publicizing the FAP

HFAL

• The hospital must:

– Ensure that its FAP summary and financial aid application are available on the hospital’s website.

– Make policy summary available in writing to the public or upon request and in areas where care in provided.

– Patients must be notified of the availability and how to obtain financial assistance:• During the intake process;• Though conspicuous posting of the information in appropriate

areas of the hospital; and• On billing statements.



Publicizing the FAP - Continued

IRS 501(r)• Hospital must:

– Make available on its website the FAP, FAP application form and the plain language summary (PLS) of the FAP;

– Make available paper copies available upon request in public locations and by mail (ER and admitting at a minimum);

– Notify and inform members of the community “in a manner reasonably calculated to reach those members who are most likely to require financial assistance from the hospital facility.”; and

– Notify and inform individuals who receive care from the hospital facility about the FAP:• Paper copy PLS at intake/discharge;• Billing statement; and• Conspicuous posting (ER and admitting at a minimum).



Language Requirement

HFAL• Applications must be

available in the primary languages of individuals that use the hospital services. – 5% of languages used during

patient visits annually; or– Languages spoken by at least

1% of the total population of the hospital’s service area.

IRS 501(r)• The FAP, FAP application, and PLS

must be translated into the primary language spoken by limited English proficiency (LEP) language groups that constitute the lesser of:– 1,000 people or– 5% of the community

serviced.



Cap on Fees

HFAL• Specifies the maximum payment amounts (MPA) for the mandated

eligible population(at or below 300% FPL) based on payments from either Medicare, Medicaid, or the highest volume commercial payer: Individuals at or below 100%FPL may be charged no more than a nominal

amount based on care provided; Individuals between 101%-150% FPL sliding scale from a nominal amount up to

20% of the MPA; Individuals between 151%-250% sliding scale from 20% up to 100% of MPAl;

and Individuals between 251%-300% FPL no more than at MPA.

• The hospital may use different discounting methods for inpatient and outpatient services.



Cap on Fees - Continued

IRS 501(r)• Specifies the maximum amount collected from FAP-eligible

individuals for emergency or medically necessary care is limited to the amount generally billed (AGB) insured patients.

• Two methods for calculating AGB may be used:– “Look-back” method, or– “prospective” method

• The FAP must state the method of determining AGB.• Hospital may change the method as long as it incorporates the

change into the FAP before implementing.• Organizations having multiple hospitals may have different

AGBs/methods of calculated AGB for each hospital.This document is not intended and should not be considered legal advice. HANYS strongly suggests that hospitals work with their legal advisers to ensure that their financial assistance policy and related documents meet all the requires of these laws .



IRS 501(r)• “Look-back” method

– Calculate at least annually.– Formula: 12-months allowed claims/associated gross charges (all

claims, not only medically necessary); – Hospital may use:

• Medicare fee-for-service; or• Medicare fee-for-services and all private health insures; or• Medicaid; or• Medicaid and all private payers

– May be one or multiple (service-specific) percentages.– Must be applied by the 120th day after the 12-month period.




IRS 501(r)• “Prospective” Medicare or Medicaid method

– Use the Medicare fee-for-service or Medicaid billing and coding process to calculate AGB for amounts Medicare/Medicaid would pay (includes any coinsurance amounts that are the patient’s responsibility).




IRS 501(r)• The hospital must charge the FAP-eligible individual less than

gross charges for any medical care (including care not covered by under the hospital’s FAP).

• The AGB limitation for insured individuals that are FAP-eligible is applied only to the amount that the individual is personally liable for after all payments from the insurer has been applied.– Therefore the combined amount paid to the hospital by the FAP-

eligible individual and the health insurance may exceed AGB.




IRS 501(r)• Hospital not in violation of IRS 501(r) when charges exceed

AGB if:– The charge was not a part of an upfront payment for medically

necessary care;– At the time of the charge the individual had not submitted a complete

FAP application; and – If the individual is later found to be FAP-eligible the hospital refunds

any amount collected over the FAP discounted amount.




IRS 501(r)“If a hospital facility requires an individual to make an upfront payment for medically necessary care that exceeds the AGB for the care and the individual turns out to be FAP-eligible, the hospital facility will have failed to meet the requirements of 501(r)(5).”



Application Period

HFAL• Total of 110 days• Individuals have at least 90

days from date of discharge to apply.

• In addition they are provided at least 20 days to submit a completed application including all required documents.

IRS 501(r)

• Total of 240 days.• The hospital must wait at

least 120 days before initiating certain collection actions

• The hospital is required to accept applications for an additional 120 days.



Eligibility Notification

HFAL• Hospital must respond in writing

with a determination within 30 days from receiving an application.

• If denied financial assistance, the individual must be provided information on how to appeal the denial.– Hospital’s FAP must outline the

appeals process

IRS 501(r)• Hospital must notify the individual in

writing of eligibility determination.• If FAP-eligible:

– Revised billing statement showing discount and how it was determined;

– Provide any refund if applicable; and– Take reasonable efforts to reverse any

“extraordinary collection actions” (ECAs) implemented.

• Incomplete application– provide a written notice that

describes the additional information needed; and

– give the individual a reasonable opportunity to complete.



Billing and Collections

HFAL• The FAP must contain information about the hospital’s

collection practices: Requirement that contracted collections agencies comply with the

hospital’s FAP and provide application information to individuals; Prohibit the forced sale or foreclosure of individual’s primary

residence; Prohibit sending an account to collection for those individuals who

have submitted applications with eligibility determinations still pending; and

Requirement that a written notification be sent to individuals at least 30 days prior to referring the account to collections.



Billing and Collections - continued

HFAL Requirement that contracted collections agencies obtain the hospital’s

written consent before commencing a legal action; and Prohibit collections against any individual who was Medicaid eligible at

the time care was provided.

Hospital staff that interacts with patients, especially those in billing and collections, must receive training about the hospital’s financial assistance policies and procedures.




IRS 501(r)• The FAP must contain the hospital’s collection policies unless

the hospital has a separate collections policy that meets the law’s requirements.

• The hospital cannot engage in extraordinary collections actions (ECA) before making a reasonable effort to determine the individual’s FAP eligibility.

• ECAs include: Selling an individual’s debt (with some exceptions); and Reporting adverse information to consumer credit reporting agencies

or credit card bureaus.




IRS 501(r)• ECAs include (continued):

Deferring, denying or requiring payment before providing medically necessary care to individuals with outstanding bills for previous care; and

Actions that require a legal or judicial process including: Placing a lien or foreclosing on an individual’s real property; Attaching or seizing a bank account or other personal property; Commencing a civil action; Causing an individual’s arrest or for the individual to be subject to a writ of

body attachment; or Garnishing of wages




IRS 501(r)• At least 30 days before initiating an ECA, the hospital must:

– provide the individual with written notice that states the availability of financial assistance and identifies the ECA(s) that the hospital intends to take;

– Provide the individual with the plain language summary (PLS) of the FAP; and

– Make reasonable efforts to orally notify the individual about the hospital’s FAP.



Data Reporting

HFAL• Schedule 50 of the

Institutional Cost Report (ICR).

• Submission of FAP to DOH.• KPMG questionnaire as

part of the ICR audit.

IRS 501(r)• Schedule H of the IRS 990.



NYS Financial Assistance Compliance Pool - HFAL

• The 2012-13 State Budget as part of the Indigent Care Pool distribution language established the financial assistance compliance pool.

• Authorizes 1% of Total DSH distributions to be set aside for 2014 and 2015. Total New York State DSH Distributions (excluding OMH hospitals) is $2.64B. 1% of this amount

results in a FACP of $26.4M.

• Pool funds are released back to hospitals upon their demonstrating/achieving substantial compliance with HFAL.

33


HFAL Substantial Compliance

• Method for determining substantial compliance is based on achieving a “passing score” on HFAL questionnaire and KPMG review.

Achieving a minimum compliance level on questions pertinent to HFAL. For 2014, compliance in 38 of the 46 areas tested on the HFAL questionnaire completed as part of 2012 ICR Audit.

Minimum compliance level will increase in 2015, as hospitals will have had time to become closer to total compliance. The standard will be 44 of 49 areas of compliance.

34Source: NYSDOH


HFAL Questionnaire Results

• In 2014, Of the 46 questions presently considered pertinent to HFAL compliance: 9 hospitals were deficient in 9 or more areas, An additional 30 hospitals were deficient in 6-8 areas, An additional 21 hospitals were deficient in 5 areas.

• Hospitals not achieving substantial compliance will have to submit a corrective action plan and demonstrate substantial compliance by 12/31/15 or their FACP funds will be forfeited and reallocated.

35Source: NYSDOH


2014 Questionnaire Reponses Top 5 Areas of Non-Compliance with HFAL

Question # Question DescriptionNumber of Hospital Non-Compliant

A.20 Does the denial form include DOH contact information? 96

A.22 Does the hospital only apply an asset test to patients who are below 150% FPL and only if they have received explicit permission from the NYSDOH to do so?

90

A.4-1 Does the hospital require as a condition of receiving financial assistance tax returns as part of its application process?

54

A.4-2 Does the hospital require as a condition of receiving financial assistance Medicaid denials as part of its application process?

54

A.8 Has the hospital developed a method to measure compliance with HFAL policies and procedures?

51


Indigent Care Pool


Indigent Care Pool Methodology

Current Methodology Established beginning with 2013 Indigent Care Pool through a provision

in the 2012-13 state budget; Moved from Bad Debt and Charity care methodology; Collapsed the 9 sub-pools for voluntary hospitals into one pool and

maintained the public hospital pool; Established a transition methodology; Required substantial compliance with hospital financial assistance law to

receive full distribution; and Increased the Voluntary Supplemental Inpatient UPL payments up to

$339M. Current methodology sunsets on December 31, 2015. New distribution methodology is being negotiated as part of the 2015-16

state budget.

38


Indigent Care Pool Methodology

Uncompensated care Uninsured units x Medicaid rate for each Inpatient and Outpatient service; Adjusted by statewide cost adjustment factor (Inpatient and Outpatient

computed separately); and Reduced by collections received from uninsured patients.

Nominal need Uncompensated care adjusted by a factor which incorporates the

Medicaid inpatient percentage.

Allocation Major public hospitals remain at $139.4M; Voluntary hospitals increased by $25M to $994.9M; Proportional allocation in each group is based on the individual hospital’s

nominal need to the total nominal need within the group.

39Source: NYSDOH


Transition Payment

Provide payments to limit losses by capping the percentage hospitals can gain as compared to current distributions (based on a 3-year average): Year 1 – 2.5% limitation on losses; approx. 10% cap on gains for voluntaries and 2% for

major publics; Year 2 – 5.0% limitation on losses; approx. 15% cap on gains for voluntaries and 4% for

major publics; and Year 3 – 7.5% limitation on losses; approx. 20% cap on gains for voluntaries and 6% for

major publics.

Provide additional $25M (included in $994.9M) for Voluntary Hospital allocations, as part of the Voluntary Hospital UPL payment.

40

Source: NYSDOH


Governor’s Budget Proposal• Maintains overall funding levels and distribution methodology.

• Maintains but modifies the transition methodology:– Increases the cap on maximum losses by 2.5% per year

• 10.0% for 2016;• 12.5% for 2017; and• 15.0% for 2018.

• DOH must revise methodology if ACA cuts to Medicaid DSH are enacted.– Cuts have been delayed by Congress twice; set to take effect Oct. 1,

2016.

• Makes permanent the 1% withhold for the “Financial Assistance Compliance Pool.”


Assembly’s Budget Proposal• Accepts the Governor's proposal to extend the current distribution

methodology, for three years.

• Accepts the Governor’s transition maximum loss caps (at same levels) over the three-year extension.

• Modifies the Governor’s proposal for DOH to revise the methodology if ACA cuts to Medicaid DSH are enacted. – Reconvene the Medicaid Redesign Team (MRT) technical assistance team on indigent

care reform by July 1 to develop recommendations related to the distribution methodology and maximum loss caps to target funding to facilities that provide a disproportionate share of care to uninsured, under-insured, and Medicaid populations.

• Accepts the Governor’s proposal to make permanent the 1% withhold for the “Financial Assistance Compliance Pool.”


Senate’s Budget Proposal• Accepts the Governor's proposal to extend the current distribution

methodology, for three years.

• Accepts the Governor’s transition maximum loss caps (at same levels) over the three-year extension.

• Does not include the Governor’s contingency provision that would allow DOH to revise the methodology if ACA cuts to Medicaid DSH are enacted.

• Rejects the Governor’s proposal to make permanent the 1% withhold for the “Financial Assistance Compliance Pool” and instead extends it for 1 year, through calendar year 2016.


2012 Medicaid DSH AuditObjectives and Timeline


DSH Audit State Plan Rate Year 2012Audit Objectives

• Assess the State’s compliance with the Medicare Modernization Act of 2003 (MMA) and the DSH Final Rule– The State’s audit protocols to ensure that regulation is satisfied.– If the State made DSH payments to hospitals in excess of their DSH

cap.– Compliance with verifications specified in the Final Rule including:

• DSH payments comply with hospital specific DSH limits;• Only uncompensated care costs are used to calculated hospital specific

DSH limits;• State has record of all Medicaid payments, expenditures and uninsured

costs; and • State’s definition of costs for individuals that are either Medicaid-eligible

or with no source of third-party coverage complies with federal requirements.


CMS Final Rule Definition of Uninsured (Highlights)

• December 5, 2014 CMS issued a Final Rule to be effective starting December 31, 2014 (DSH audit 2011).

• Definition is now applied on a service-specific basis to those services that the individual had no health insurance or other source of third party coverage.– This population needs to be included in the uninsured population for

Uncompensated Care Costs

• Clarified that exhaustion of Medicaid benefits with no other source of third party coverage for the specific service can be included in the Medicaid shortfall.

• Patients with third-party insurance with high copays/deductibles are still considered insured.


2012 DSH Audit Timeline

2012 DSH Audit

Webinar1/22/15

2012 Audit Notification

Packages 3/9/15

Hospital Access to

KPMG DSH Tool

3/30/15

Deadline for Tool

Completion4/30/15

Audit Fieldwork /

Desk Procedures

June to August

Audit Report to

DOH 9/30/15

Audit Report to

CMS 12/31/15

Source: KPMG LLP, 2012 DSH Audit Webinar


2011 DSH Audit Results• Top three findings:

1) Non-allowable charges and payments (57 hospitals)– Hospitals included charges and payments for Part B physician

professional services.

2) Denied charges and withheld claims (46 hospitals)– Hospital is unable to identify whether administratively denied

services payments and costs for Medicaid-eligible individuals are included in the Tool amounts.

3) Insufficient supporting documentation or audit participation (41 hospitals)– Patient level detail did not reconcile with amounts used in

tool.Source: KPMG LLP, 2012 DSH Audit Webinar


More Information

• 2012 DSH Audit Webinar Presentation• January 22, 2015, slides and recording on HANYS.org

• Contacts:– DOH• Ann Foster ([email protected]),• Maureen Flanagan ([email protected])

– KPMG• May Boucherak, Director ([email protected]),• Anthony Trapasso, Manager ([email protected]


Contact Information

Bob McLeodVice President, Health InformationHealthcare Association of New York State [email protected] or (518) 431-7908

mailto:[email protected]

healthcare association of new york state bob mcleod march 12, 2015

Documents

hfal slide

compliance hfal

verite healthcare consulting

timeline slide

financial assistance

eligibility hfal

r final rule source

r concerns