[Federal Register Volume 85, Number 152 (Thursday, August 6, 2020)]
[Proposed Rules]
[Pages 47723-47728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-16896]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1739-P]
RIN 0938-AU24


Medicare Program; Treatment of Medicare Part C Days in the 
Calculation of a Hospital's Medicare Disproportionate Patient 
Percentage

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would establish a policy concerning the 
treatment of patient days associated with persons enrolled in a 
Medicare Part C (also known as ``Medicare Advantage'') plan for 
purposes of calculating a hospital's disproportionate patient 
percentage for cost reporting periods starting before fiscal year (FY) 
2014 in response to the ruling in Azar v. Allina Health Services, 139 
S. Ct. 1804 (June 3, 2019).

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on EDT on October 5, 
2020.

ADDRESSES: In commenting, please refer to file code CMS-1739-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1739-P, P.O. Box 8013, 
Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1739-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Donald Thompson (410) 786-4487.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments 
received before the close of the comment period are available for 
viewing by the public, including any personally identifiable or 
confidential business information that is included in a comment. We 
post all comments received before the close of the comment period on 
the following website as soon as possible after they have been 
received: http://www.regulations.gov. Follow the search instructions on 
that website to view public comments.

I. Executive Summary and Background

A. Purpose and Legal Authority

    This proposed rule would create a policy governing the treatment of 
days associated with beneficiaries enrolled in Medicare Part C for 
discharges occurring prior to October 1, 2013, for the purposes of 
determining the additional Medicare payments to subsection (d) 
hospitals under section 1886(d)(5)(F) of the Social Security Act (the 
Act).

B. Summary of Major Provisions

    Section 1886(d)(5)(F) of the Act provides for additional Medicare 
payments to subsection (d) hospitals that serve a significantly 
disproportionate number of low income patients. The Act specifies two 
methods by which a hospital may qualify for the Medicare 
disproportionate share hospital (DSH) payment adjustment. Under the 
first method, hospitals that are located in an urban area and have 100 
or more beds may receive a Medicare DSH payment adjustment if the 
hospital can demonstrate that, during its cost reporting period, more 
than 30 percent of its net inpatient care revenues are derived from 
State and local government payments for care furnished to needy 
patients with low incomes. This method is commonly referred to as the 
``Pickle method.'' The second method for qualifying for the DSH payment 
adjustment, which is more common, is based on a complex statutory 
formula under which the DSH payment adjustment is based on the 
hospital's geographic designation, the number of beds in the hospital, 
and the hospital's disproportionate patient percentage (DPP). A 
hospital's DPP is the sum of two fractions: The ``Medicare fraction'' 
and the ``Medicaid fraction.'' The Medicare fraction (also known as the 
SSI fraction or SSI ratio) is computed by dividing the number of the 
hospital's inpatient days that are furnished to patients who were 
entitled to both Medicare Part A and Supplemental Security Income (SSI) 
benefits by the hospital's total number of patient days furnished to 
patients entitled to benefits under Medicare Part A. The Medicaid 
fraction is computed by dividing the hospital's number of inpatient 
days furnished to patients who, for such days, were eligible for 
Medicaid, but were not entitled to benefits under Medicare Part A, by 
the hospital's total number of inpatient days in the same period.
    Because the DSH payment adjustment is part of the inpatient 
prospective payment system (IPPS), the statutory references to ``days'' 
in section 1886(d)(5)(F) of the Act have been interpreted to apply only 
to hospital acute care inpatient days. Regulations located at 42 CFR 
412.106 govern the Medicare DSH payment adjustment and specify how the 
DPP is calculated as well as how beds and patient days are counted in 
determining the Medicare DSH payment adjustment.

C. Summary of Costs and Benefits

    If we adopted our proposal to include days associated with patients 
enrolled

[[Page 47724]]

in Medicare Part C in the calculation of the SSI ratio and to exclude 
them from the calculation of the numerator of the Medicaid fraction, 
there would not be any additional costs or benefits relative to the 
Medicare DSH payments that have already been made because those 
payments were made under the policy reflected in the proposal (prior to 
it having been vacated). The effect of this proposed rule would be to 
avoid the consequences of legal ambiguity that would otherwise continue 
into the future; the resulting costs, benefits and transfer impacts are 
thus highly uncertain.
    In order to quantify one point in the relevant uncertainty range, 
we considered excluding days associated with patients enrolled in 
Medicare Part C from the calculation of the SSI ratio and (for patients 
also eligible for Medicaid) including them in the calculation of the 
numerator of the Medicaid fraction. We refer readers to section V.D. of 
this proposed rule for a discussion of this alternative considered.

II. Provisions of the Proposed Regulations--Treatment of Patient Days 
Associated With Patients Enrolled in Medicare Advantage Plans With 
Discharge Dates Before October 1, 2013, in the Medicare and Medicaid 
Fractions of the Disproportionate Patient Percentage (DPP)

    The regulation at 42 CFR 422.2 defines Medicare Advantage (MA) plan 
to mean ``health benefits coverage offered under a policy or contract 
by an MA organization that includes a specific set of health benefits 
offered at a uniform premium and uniform level of cost-sharing to all 
Medicare beneficiaries residing in the service area of the MA plan . . 
. .'' Generally, each MA plan must at least provide coverage of all 
services that are covered by Medicare Part A and Part B, but also may 
provide for Medicare Part D benefits and/or additional supplemental 
benefits. However, certain items and services, such as hospice 
benefits, continue to be covered under Medicare Part A fee-for-service 
(FFS) even if a beneficiary chooses to enroll in an MA plan. Generally, 
under Sec.  422.50 of the regulations, an individual is eligible to 
elect an MA plan if he or she is entitled to Medicare Part A and 
enrolled in Medicare Part B. Dually eligible beneficiaries (individuals 
entitled to Medicare and eligible for Medicaid) also may choose to 
enroll in an MA plan, and, as an additional supplemental benefit, the 
MA plan may pay for Medicare cost-sharing not covered by Medicaid.
    In the FY 2004 IPPS proposed rule (68 FR 27208), in response to 
questions about whether the patient days associated with patients 
enrolled in an MA plan (then called a Medicare + Choice (M+C) plan) 
should be counted in the Medicare fraction or the Medicaid fraction of 
the disproportionate patient percentage (DPP) calculation, we proposed 
that once a beneficiary enrolls in an MA plan, patient days 
attributable to the beneficiary would not be included in the Medicare 
fraction of the DPP. Instead, those patient days would be included in 
the numerator of the Medicaid fraction, if the patient also were 
eligible for Medicaid. In the FY 2004 IPPS final rule (68 FR 45422), we 
did not respond to public comments on this proposal, due to the volume 
and nature of the public comments we received, and we indicated that we 
would address those comments later in a separate document. In the FY 
2005 IPPS proposed rule (69 FR 28286), we stated that we planned to 
address the FY 2004 comments regarding MA days in the IPPS final rule 
for FY 2005. After considering comments on this proposal, we decided 
not to implement the policy as proposed. Instead, in the FY 2005 IPPS 
final rule (69 FR 49099), we determined that, under Sec.  
412.106(b)(2)(i) of the regulations, MA patient days should be counted 
in the Medicare fraction of the DPP calculation. (We note, at the time 
of the FY 2005 rulemaking, Medicare Part C was referred to as M+C; 
however, to avoid confusion we use the current terminology (MA) when 
referring to Medicare Part C.) We explained that, even where Medicare 
beneficiaries enroll in an MA plan, they are still entitled to benefits 
under Medicare Part A. Therefore, we noted that if an MA beneficiary is 
also an SSI recipient, the patient days for that beneficiary would be 
included in the numerator of the Medicare fraction (as well as in the 
denominator) and not in the numerator of the Medicaid fraction. We note 
that, despite our statement in the FY 2005 final rule that the text of 
the regulation at Sec.  412.106(b)(2)(i) would be revised to state 
explicitly that the days associated with MA beneficiaries are included 
in the Medicare fraction, due to a clerical oversight, the regulation 
at Sec.  412.106(b)(2)(i) was not amended to reflect this policy until 
2007 (72 FR 47384).
    In 2012, a district court vacated the final policy adopted in the 
FY 2005 final rule on the basis that the final rule was not a ``logical 
outgrowth'' of the proposed rule. In the FY 2014 IPPS/LTCH PPS proposed 
rule, we proposed to re-adopt the policy of including MA patient days 
in the Medicare fraction prospectively for FY 2014 and subsequent 
fiscal years (78 FR 27578). We finalized this proposal in the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50614). We made no change to the 
regulation text at Sec.  412.106(b)(2)(i) because the text of the 
regulation already reflected the policy we adopted in the FY 2014 IPPS/
LTCH PPS final rule. In 2014, the United States Court of Appeals for 
the D.C. Circuit upheld the district court's holding that the policy 
adopted in the FY 2005 IPPS final rule requiring inclusion of Part C 
days in the Medicare fraction was not a logical outgrowth of the 
proposed rule, but left open the possibility that we could employ the 
same approach through adjudication.
    In Azar v. Allina Health Services, 139 S. Ct. 1804 (June 3, 2019), 
the Supreme Court considered a challenge to the agency's inclusion of 
MA patient days in the Medicare fractions it published for FY 2012. 
Section 1871(a)(2) of the Act requires notice-and-comment rulemaking 
for any Medicare ``rule, requirement, or other statement of policy'' 
that ``establishes or changes a substantive legal standard governing 
the scope of benefits, the payment for services, or the eligibility of 
individuals, entities, or organizations to furnish or receive services 
or benefits.'' The Supreme Court held that section 1871(a)(2) of the 
Act required CMS to engage in notice-and-comment rulemaking before 
adopting its policy regarding treatment of inpatient days for 
beneficiaries enrolled in MA plans for purposes of calculating the DPP.
    Section 1871(e)(1)(A) of the Act authorizes CMS to engage in 
retroactive rulemaking when the Secretary determines that such 
retroactive application is necessary to comply with statutory 
requirements or that a failure to apply a policy retroactively would be 
contrary to the public interest. For example, CMS has invoked its 
authority to engage in retroactive rulemaking under section 
1871(e)(1)(A) of the Act in connection with its policy related to bad 
debt (see the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32867)), 
predicate facts and cost report reopening (see the CY 2014 OPPS final 
rule (78 FR 75165)), and the low-volume hospital adjustment (see the FY 
2020 IPPS/LTCH PPS final rule (84 FR 42349)).
    Section 1886(d)(5)(F) of the Act requires CMS to make DSH payments 
to eligible hospitals. Calculating such payments, in turn, requires CMS 
to calculate a Medicare and a Medicaid fraction for each hospital. 
Under section 1886(d)(5)(F)(vi)(I) of the Act, the

[[Page 47725]]

Medicare fraction must include the patient days for beneficiaries 
``entitled to benefits under part A.'' The Court of Appeals for the 
D.C. Circuit has held that the Medicare statute does not speak directly 
to how Part C days should be treated for purposes of DSH calculations, 
that is, whether Part C patients are ``entitled to benefits under part 
A'' and should therefore be included in the Medicare fraction, or 
whether they are not so entitled, and should therefore be included in 
the numerator of the Medicaid fraction if they are also eligible for 
Medicaid. (See Ne. Hosp. Corp. v. Sebelius, 657 F.3d 1, 13 (D.C. Cir. 
2011).) However, the court has also found that section 
1886(d)(5)(F)(vi) of the Act requires the Secretary to account for Part 
C days in the DPP calculation by including them in one of the fractions 
(Medicare or Medicaid) and excluding them from the other. (See Allina 
Health Servs. v. Sebelius, 746 F.3d 1102, 1108 (D.C. Cir. 2014).)
    Because the FY 2005 IPPS final rule was vacated, the Secretary 
``has no promulgated rule governing'' the treatment of Part C days for 
fiscal years before 2014.'' (See Allina Health Servs. v. Price, 863 
F.3d 937, 939 (D.C. Cir. 2017).) As a result, in order to comply with 
the statutory requirement to calculate Medicare DSH payments, CMS must 
determine whether beneficiaries enrolled in Part C are ``entitled to 
benefits under part A'' and so must be included in the Medicare 
fraction (and excluded from the numerator of the Medicaid fraction), or 
are not so entitled and so must be excluded from the Medicare fraction 
(and included in the numerator of the Medicaid fraction, if dually 
eligible). The Secretary has therefore determined that, in order to 
comply with the statutory requirement to make DSH payments, it is 
necessary for CMS to engage in retroactive rulemaking to establish a 
policy to govern whether individuals enrolled in MA plans under Part C 
should be included in the Medicare fraction or in the numerator of the 
Medicaid fraction, if dually eligible, for fiscal years before 2014.
    We continue to believe, as we stated in the preamble to the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50614 and 50615) and have consistently 
expressed since the issuance of the FY 2005 IPPS final rule, that 
individuals enrolled in MA plans are ``entitled to benefits under part 
A'' as the phrase is used in the DSH provisions at section 
1886(d)(5)(F)(vi) of the Act. Section 226(a) of the Act provides that 
an individual is automatically ``entitled'' to Medicare Part A when the 
person reaches age 65 or becomes disabled, provided that the individual 
is entitled to Social Security benefits under section 202 of the Act. 
Beneficiaries who are enrolled in MA plans provided under Medicare Part 
C continue to meet all of the statutory criteria for entitlement to 
Medicare Part A benefits under section 226 of the Act. Moreover, 
section 1852(a)(1)(B)(i) of the Act provides that in order to enroll in 
Medicare Part C, or to change from one MA plan to another MA plan 
offered under Part C, a beneficiary must be ``entitled to benefits 
under Part A and enrolled under Part B.'' Thus, by definition, a 
beneficiary must be entitled to Part A to be enrolled in Part C. There 
is nothing in the Act that suggests that beneficiaries who enroll in a 
Medicare Part C plan thereby forfeit their entitlement to Medicare Part 
A benefits. To the contrary, enrollment in a plan under Medicare Part C 
is simply an option that a person entitled to Part A benefits may 
choose as a way to receive their Part A benefits. A beneficiary who 
enrolls in Medicare Part C is entitled to receive benefits under 
Medicare Part A through the MA plan in which he or she is enrolled, and 
the MA organization's costs in providing such Part A benefits are paid 
for by CMS with money from the Medicare Part A Trust Fund. In addition, 
under certain circumstances, Medicare Part A pays directly for care 
furnished to patients enrolled in Medicare Part C plans, rather than 
indirectly through Medicare Part A Trust Fund payments to MA 
organizations. For example, under section 1852(a)(5) of the Act, if, 
during the course of the year, the scope of benefits provided under 
Medicare Part A expands beyond a certain cost threshold due to 
Congressional action or a national coverage determination, Medicare 
Part A will pay providers directly for the cost of those services 
provided to beneficiaries enrolled in Part C. Similarly, Medicare Part 
A pays directly for hospice care furnished to MA patients who elect 
under section 1812(d)(1) of the Act to receive such care from a 
particular hospice program and, under certain circumstances, for 
federally qualified health center (FQHC) services provided to MA 
patients by FQHCs that contract with MA organizations under sections 
1853(h)(2) and 1853(a)(4) of the Act, respectively. Thus, we continue 
to believe that a patient enrolled in an MA plan remains entitled to 
benefits under Medicare Part A, and should be counted in the Medicare 
fraction of the DPP, and not the numerator of the Medicaid fraction.
    Additionally, the Secretary has determined that it is in the public 
interest for CMS to adopt a policy for the treatment of MA patient days 
in the Medicare and Medicaid fractions through notice and comment 
rulemaking retroactively for discharges before October 1, 2013 (the 
effective date of the FY 2014 IPPS/LTCH PPS final rule). CMS must 
calculate DSH payments for periods that include discharges occurring 
before the effective date of the FY 2014 prospective rule for hundreds 
of hospitals whose DSH payments for those periods are still open or 
have not yet been finally settled, encompassing thousands of cost 
reports. In order to calculate these payments, CMS must establish 
Medicare fractions for each applicable cost reporting period during the 
time period for which there is currently no regulation in place that 
expressly addresses the treatment of Part C days. Because the Supreme 
Court has held that CMS cannot resolve this issue except by notice-and-
comment rulemaking, we have concluded that the only way for CMS to 
resolve this issue and properly calculate DSH payments for time periods 
before FY 2014 is to establish a new regulation that would apply 
retroactively to the determination of Medicare and Medicaid fractions 
for this time period. Consequently, retroactive rulemaking is not only 
necessary to comply with statutory requirements, but is also necessary 
to avoid an outcome that would be contrary to the public interest. 
Absent such a retroactive rule, the Secretary would be unable to 
calculate and confirm proper DSH payments for time periods before FY 
2014, which would be contrary to the public interest of providing 
additional payments to hospitals that serve a significantly 
disproportionate number of low-income patients, as expressed in the DSH 
provisions of the Medicare statute. Moreover, to the extent the 
Secretary must adopt an approach to calculate those payments, it is in 
the public interest to permit interested stakeholders to comment on the 
proposed approach and for the agency to have the benefit of those 
comments in the development of any final rule. Therefore, for the 
purposes of calculating the Medicare and Medicaid fractions for cost 
reporting periods that include discharges before October 1, 2013, we 
are proposing to adopt the same policy of including MA patient days in 
the Medicare fraction that was prospectively adopted in the FY 2014 
IPPS/LTCH PPS final rule and to apply this policy retroactively to any 
cost

[[Page 47726]]

reports that remain open for cost reporting periods starting before 
October 1, 2013. We do not expect this proposal to have an effect on 
payments as the payments previously made reflect the proposed policy. 
We are not proposing any change to the regulation text because the 
current text at Sec.  412.106(b)(2)(i) reflects the policy being 
proposed for fiscal years before FY 2014.
    Because we are proposing to establish this policy retroactively, it 
would cover cost reporting periods for which many cost reports have 
already been final settled. Consistent with Sec.  405.1885(c)(2), any 
final rule retroactively adopting the policy at Sec.  412.106(b)(2)(i) 
for fiscal years before FY 2014 would not be a basis for reopening 
these final settled cost reports.
    We seek comments on our proposal to include MA patient days in the 
Medicare fraction for fiscal years before FY 2014, and also on the 
alternative, which is discussed in detail in section V. of this 
proposed rule, of including MA patient days for dually eligible 
beneficiaries in the numerator of the Medicaid fraction for those 
fiscal years.

III. Collection of Information Requirements

    This document does not impose information collection requirements, 
that is, reporting, recordkeeping, or third-party disclosure 
requirements. Consequently, there is no need for review by the Office 
of Management and Budget under the authority of the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501 et seq.).

IV. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

V. Regulatory Impact Analysis

A. Statement of Need

    This proposal is necessary to create a policy governing the 
treatment of days associated with beneficiaries enrolled in Medicare 
Part C for discharges occurring prior to October 1, 2013, for the 
purposes of determining additional Medicare payments to subsection (d) 
hospitals under section 1886(d)(5)(F) of the Act.

B. Overall Impact

    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (5 U.S.C. 
603), section 1102(b) of the Act, section 202 of the Unfunded Mandates 
Reform Act of 1995 (2 U.S.C. 1532), Executive Order 13132 on Federalism 
(August 4, 1999), the Congressional Review Act (5 U.S.C. 804(2)), and 
Executive Order 13771 on Reducing Regulation and Controlling Regulatory 
Costs (January 30, 2017).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule: (1) Having an 
annual effect on the economy of $100 million or more in any 1 year, or 
adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) creating a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impact of 
entitlements, grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in Executive Order 12866.
    The discussion accompanying our proposal along with this Regulatory 
Impact Analysis (RIA) demonstrate that this proposed rule has been 
analyzed consistent with the regulatory philosophy and principles 
identified in Executive Orders 12866 and 13563, the RFA, and section 
1102(b) of the Act. We note that Medicare DSH payments affect a 
substantial number of small rural hospitals, as well as other classes 
of hospitals, and the effect of Medicare DSH payments on some hospitals 
is significant.
    An RIA must be prepared for major rules with economically 
significant effects ($100 million or more in any 1 year). This 
rulemaking is ``economically significant'' as measured by the $100 
million threshold, and hence also a major rule under the Congressional 
Review Act, 5 U.S.C. 804(2). Accordingly, we have prepared an RIA that 
to the best of our ability presents the costs and benefits of the 
rulemaking.

C. Detailed Economic Analysis

    Medicare DSH payments have already been made under the policy 
reflected in the proposal (prior to the policy having been vacated by 
the Court of Appeals, which was affirmed by the Supreme Court's 
decision). Therefore, the effect of this proposed rule would be to 
avoid the consequences of legal ambiguity that would otherwise continue 
into the future; the resulting costs, benefits and transfer impacts are 
thus highly uncertain. In other words, given that there is currently no 
regulation governing the treatment of Part C days, it is not clear what 
to compare an estimate of DSH payments under our proposed policy to in 
order determine the effect of our proposed policy on DSH payments. 
There are multiple possible trajectories whereby agency actions could 
be made consistent with the Supreme Court's ruling requiring notice-
and-comment rulemaking. Our proposed policy is one such trajectory and 
DSH payments made under our proposed policy would not differ from 
hospitals' historical DSH payments. This comparison between DSH 
payments under our proposed policy and hospitals' historical DSH 
payments quantifies one point within the relevant uncertainty range of 
potential costs, benefits, and transfer impacts. However, in order to 
explore another possible trajectory (and thus to quantify an additional 
point within the relevant uncertainty range), we considered an approach 
of excluding days associated with patients enrolled in Medicare Part C 
from the calculation of the SSI ratio and including them in the 
numerator of the Medicaid fraction (for those patients who are dually 
eligible). We are not proposing such a policy because we continue to 
believe, as we stated in the preamble to the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50614 and 50615) and have consistently expressed 
since the issuance of the FY 2005 IPPS final rule, that individuals 
enrolled in MA plans are ``entitled to benefits under part A'' as the 
phrase is used in the DSH provisions at section 1886(d)(5)(F)(vi) of 
the Act.
    We created a public use data file in order to facilitate public 
comment and analysis of our proposal and the alternative approach. This 
file is available in the Downloads section of the Disproportionate 
Share Hospital

[[Page 47727]]

web page on the CMS website: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh. The file contains an 
illustrative model at the hospital level of the potential effect on the 
DSH adjustment of excluding days associated with patients enrolled in 
Medicare Part C from the SSI ratio and including them in the numerator 
of the Medicaid fraction (for those patients who are dually eligible).
    In constructing the model, we used data from hospital cost reports 
for hospitals that were eligible for and received Medicare DSH payments 
for their longest cost reporting period ending between January 1, 2013, 
and December 31, 2013, inclusive of those dates, as reflected in the 
Healthcare Cost Report Information System (HCRIS) data. (For more 
information on the HCRIS data, see https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/Cost-Reports/Hospital-2010-form.) We chose this time period to model because these 
cost reports generally contain the bulk of the most recent cost report 
data for hospitals prior to our readopting the policy of including MA 
patient days in the Medicare fraction in the FY 2014 IPPS/LTCH PPS 
final rule. We also incorporated relevant data from the MedPAR data 
files and the SSI eligibility files pertaining to that time period. 
These are the same source files used to construct the FY SSI Ratio 
files also found in the Downloads section of the Disproportionate Share 
Hospital web page on the CMS website.
    In order to model the Medicare fraction for each hospital, we 
estimated the SSI ratio applicable to that hospital's cost report after 
excluding days associated with patients enrolled in Medicare Part C.
    In order to model the Medicaid fraction for each hospital, we used 
the days associated with patients enrolled in Medicare Part C who were 
also eligible for SSI, based on the applicable SSI eligibility data, as 
a proxy for the Medicaid days associated with patients enrolled in 
Medicare Part C. We used this proxy, because we do not have readily 
available specific data on Medicaid eligibility for beneficiares who 
are eligible for SSI benefits. However, we believe this proxy is 
reasonable because the majority of states provide Medicaid eligibility 
to people eligible for SSI benefits. The Part C SSI days for each 
hospital were then added to the numerator of the otherwise applicable 
Medicaid fraction for that hospital as reflected in the hospital's cost 
report data.
    We then used these alternative Medicare and Medicaid fractions to 
model the percent change in the Medicare DSH adjustment for the 
hospital.
    The modelled percent change in the Medicare DSH adjustment was 
applied to an annualized Medicare DSH payment from the hospital's cost 
report to estimate the 12-month change in Medicare DSH payments to that 
hospital.
    Based on this model, most hospitals' Medicare DSH payments would 
increase relative to their historical Medicare DSH payments; however, 
some hospitals' Medicare DSH payments would decrease or not change. In 
aggregate, the modelled Medicare DSH payments would increase by 6 
percent relative to the historical Medicare DSH payments, which for the 
hospitals represented in the model was approximately a net $0.6 billion 
annualized increase for this time period.
    We note that these estimates are for illustrative purposes and 
involve modelling assumptions (for example, use of a proxy for the 
Medicaid days associated with patients enrolled in Medicare Part C, as 
described previously), which may differ from actual calculations that 
would be done during cost report review and settlement processes by 
contractors if such a policy were adopted. These expenditures (or, as 
regards payments already made for past years, the avoidance of 
potentially necessary reimbursements from providers to the Trust Fund) 
would be classified as transfers to Medicare providers.
    We are seeking comments on this illustrative model and the 
assumptions used in this analysis.

D. Alternative Considered

    We considered as an alternative to our proposal excluding days 
associated with patients enrolled in Medicare Part C from the 
calculation of the SSI ratio and including them in the calculation of 
the Medicaid fraction. However, we are not proposing such a policy 
because we continue to believe, as we stated in the preamble to the FY 
2014 IPPS/LTCH PPS final rule (78 FR 50614 and 50615) and have 
consistently expressed since the issuance of the FY 2005 IPPS final 
rule, that individuals enrolled in MA plans are ``entitled to benefits 
under part A'' as the phrase is used in the DSH provisions at section 
1886(d)(5)(F)(vi) of the Act.
    Similar to the discussion in section V.C. of this proposed rule 
regarding DSH payments under our proposed policy, because it is not 
clear what DSH payments prior to FY 2014 would be given that there is 
currently no regulation governing the treatment of Part C days, it is 
not clear what to compare an estimate of DSH payments under the 
alternative to in order to determine the change in DSH payments. Taking 
the quantitative impact estimate that appears earlier that DSH payments 
made under the alternative policy would represent an increase of $0.6 
billion over hospitals' historical DSH payments for the relevant time 
period--that is, projecting a transfer of the same $0.6 billion 
magnitude -- yields an estimate of the alternative's impact relative to 
hospitals' historical DSH payments. As in the analysis of the policy as 
proposed, the alternative's impact estimate represents a boundary on an 
especially wide uncertainty range.

E. Accounting Statement

    As required by OMB Circular A-4, in the following Table 1, we have 
prepared an accounting statement showing the classification of the 
expenditures associated with the provisions of this proposed rule as 
they relate to hospitals receiving Medicare DSH payments. This table 
provides our best estimate of the change in Medicare DSH payments to 
hospitals as a result of our proposal. All expenditures are classified 
as transfers to Medicare providers.

 Table 1--Accounting Statement: Classification of Estimated Medicare DSH
                      Expenditures Prior to FY 2014
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $0 to-$0.6 billion.
From Whom to Whom.........................  Federal Government to
                                             Hospitals Receiving
                                             Medicare DSH Payments.
------------------------------------------------------------------------

F. Regulatory Flexibility Act (RFA)

    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Most hospitals and most other providers and 
suppliers are small entities, either by nonprofit status or by having 
revenues of less than $7.5 million to $38.5 million in any 1 year. 
Individuals and states are not included in the definition of a small 
entity. We are not preparing an analysis for the RFA because we have 
determined, and the Secretary certifies, that if we adopted our 
proposal there would not be any additional costs or

[[Page 47728]]

benefits relative to Medicare DSH payments that have already been made. 
Therefore, this proposed rule will not have a significant economic 
impact on a substantial number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare an 
RIA if a rule may have a significant impact on the operations of a 
substantial number of small rural hospitals. This analysis must conform 
to the provisions of section 603 of the RFA. For purposes of section 
1102(b) of the Act, we define a small rural hospital as a hospital that 
is located outside of a Metropolitan Statistical Area and has fewer 
than 100 beds. We are not preparing an analysis for section 1102(b) of 
the Act because we have determined, and the Secretary certifies, that 
if we adopted our proposal there would not be any additional costs or 
benefits for small rural hospitals relative to Medicare DSH payments 
that have already been made to these hospitals. Therefore, this 
proposed rule would not have a significant impact on the operations of 
a substantial number of small rural hospitals.

G. Unfunded Mandates Reform Act (UMRA)

    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2020, that 
threshold is approximately $156 million. This proposed rule will have 
no consequential effect on state, local, or tribal governments or on 
the private sector.

H. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on state 
and local governments, preempts state law, or otherwise has Federalism 
implications. Since this regulation does not impose any costs on state 
or local governments, the requirements of Executive Order 13132 are not 
applicable.

I. Regulatory Reform Analysis Under Executive Order 13771

    Executive Order 13771, titled Reducing Regulation and Controlling 
Regulatory Costs, was issued on January 30, 2017, and requires that the 
costs associated with significant new regulations ``shall, to the 
extent permitted by law, be offset by the elimination of existing costs 
associated with at least two prior regulations.'' OMB's Guidance 
Implementing Executive Order 13771, Titled ``Reducing Regulation and 
Controlling Regulatory Costs'', issued on April 5, 2017, available at 
https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2017/M-17-21-OMB.pdf, explains that ``E.O. 13771 deregulatory actions 
are not limited to those defined as significant under E.O. 12866 or 
OMB's Final Bulletin on Good Guidance Practices.'' It has been 
determined that this proposed rule imposes no more than de minimis 
costs, and therefore is not considered a regulatory action under 
Executive Order 13771.
    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget.

    Dated: March 24, 2020.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: April 09, 2020.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2020-16896 Filed 8-4-20; 4:15 pm]
BILLING CODE 4120-01-P