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3 Tricks for Finding Hidden Cash in Medicare Cost Reports

Karen Minich-Pourshadi, for HealthLeaders Media, October 4, 2010

“[After going through this process] we found one large, inner city Detroit hospital was capturing $4-$5 million in Medicare bad debt, but they were still missing about a million dollars a year,” says Soper. “Everyone should do this review either internally or externally, to look for potentially unclaimed Medicare bad debt.”

Trick #2: Medicaid Disproportionate Share.  To maintain access for their low-income beneficiaries, Medicare added a special payment adjustment to its prospective payment system, the Medicaid disproportionate share hospital (DSH) designation. With the creation of DSH, hospitals are compensated for higher operating costs incurred for inpatient treatment of low-income patients.

The DSH payment is a percentage add-on to the basic DRG payment, and this percentage can be computed by totaling two ratios: the proportion of all Medicare days that are attributable to beneficiaries of supplemental security income and the proportion of all patient days for which Medicaid is the primary payer, and the formula used changes depending primarily on urban or rural location and hospital size.

Soper notes that while hospitals already track their Medicaid patients, they may be overlooking opportunities. For instance, hospitals may have patients who pay them through worker’s compensation or even through another insurance provider, however, that doesn’t mean that the hospital isn’t eligible to submit a claim to Medicaid. To find out if they are missing Medicaid payments, hospitals should go back a year in their files and run each of their patients through a state eligibility database. Once they’ve found all their DSH patients, they need to see how many days these patients were at the hospital to be sure they get the maximum allowable payment. The key criteria to watch for:

  1. the patient must be Medicaid-eligible
  2. the care must be inpatient
  3. the patient cannot be a Medicare patient
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