CMS Proposes Medicare Changes that Benefit Puerto Rico
SAN JUAN — The Centers for Medicare and Medicaid Services (CMS) has issued a proposed rule that would modify aspects of the formula used to compensate hospitals in the United States for providing services to traditional Medicare patients, and the revised formula—which will take effect on Oct. 1, 2016—would significantly benefit the approximately 50 acute-care hospitals in Puerto Rico. After a public comment period, CMS will issue a final rule on August 1, 2016.
The federal government reimburses hospitals who admit Medicare patients under the Inpatient Prospective Payment System. Each hospital receives a “base rate” payment, which can then be adjusted upward due to a variety of factors. The base rate payment is intended to cover both the operating costs and the capital costs that a reasonably efficient hospital would incur in providing care. Every hospital in the states is paid the same base rate. Until recently, however, hospitals in Puerto Rico were paid a base rate that was about 14 percent lower than the base rate paid to hospitals in the states, according to statement released Monday by Resident Commissioner Pedro Pierluisi’s office in Washington, D.C.
In March 2015, Pierluisi introduced legislation, H.R. 1417, to fix this disparity. The language of H.R. 1417 was included in the Consolidated Appropriations Act for fiscal year 2016 and enacted into law in December. As a result, starting this year, hospitals in Puerto Rico will receive the same base rate as hospitals in the states with respect to the “operating costs” portion of the formula, which is the largest factor in the formula.
“At the urging of the resident commissioner, the proposed rule just issued by CMS would also extend state-like treatment to hospitals in Puerto Rico under the smaller but still significant ‘capital costs’ portion of the formula, starting on October 1st. It is estimated that, once all of these changes are fully implemented, annual Medicare base rate payments to hospitals in Puerto Rico could increase by nearly $12 million per year.
“In addition, the rule issued by CMS proposes to improve the way in which Puerto Rico hospitals are treated under the Medicare ‘disproportionate share hospital’—or DSH—program,” the congressman’s statement reads.
Since the 1980s, the federal government has utilized the DSH program to provide additional financial support directly to hospitals that treat a high percentage of low-income patients, who tend to be more costly to care for. The formula used to calculate DSH payments to a hospital has operated to the disadvantage of hospitals in Puerto Rico because it relies in part on how often a hospital treats a patient who is enrolled in both Medicare and the Supplemental Security Income program, known as SSI, but Congress has not extended the SSI program to Puerto Rico.
The resident commissioner’s release adds that “In June 2015, Pierluisi introduced H.R. 2635, the Improving the Treatment of the U.S. Territories Under Federal Health Programs Act, and Section 203 of that bill would amend the DSH formula for Puerto Rico, establishing a substitute—or proxy—for SSI for part of the formula. The rule just issued by CMS does precisely that, which will help ensure that island hospitals receive fair DSH payments. According to CMS, this change is expected to have net positive impact of approximately $8.4 million annually, increasing DSH payments from $66.7 million a year to $75.1 million a year.
“In the last several months, we have made significant progress in improving Puerto Rico’s treatment under traditional Medicare and Medicare Advantage. In December 2015, Congress enacted the Consolidated Appropriations Act for Fiscal Year 2016, which included two provisions taken verbatim from bills I introduced. The first provision provided Puerto Rico hospitals with the same base rate as hospitals in the states under Medicare, and the proposed rule that CMS just issued ensures that this provision will be fully implemented starting on October 1st.
“The second provision fixed another disparity, authorizing bonus payments under Medicare to hospitals in Puerto Rico that become meaningful users of electronic health records, which help modernize services and improve patient care. Then, in April, after years of efforts, CMS issued a rule that will help stabilize and strengthen the Medicare Advantage program in Puerto Rico, which provides health insurance to nearly 570,000 seniors and disabled individuals on the island. Finally, the proposed rule just issued by CMS will help ensure that Puerto Rico hospitals are treated equitably under the Medicare DSH program,” Pierluisi stated.
“There is still much work that remains to be done to ensure that Puerto Rico is treated fairly under federal health programs, whether it be Medicaid, traditional Medicare or Medicare Advantage, but it is important to pause and acknowledge the progress we are making towards this goal,” added the Resident Commissioner.