Medicare managed care days are now counted in a way that will tend to reduce DSH percentages.
March 28, 2012—Some hospitals whose disproportionate share (DSH) patient percentages hover just above the level needed to qualify them for 340B drug pricing might lose their eligibility due to recent action by the Centers for Medicare and Medicaid Services (CMS).
To obtain 340B pricing, DSH hospitals must have a DSH patient percentage greater than 11.75 percent. Likewise, free-standing children's and cancer hospitals must have a payer mix that would give them a DSH patient percentage greater than 11.75 percent. Sole community hospitals and rural referral centers must have a DSH patient percentage greater than 8 percent.
The DSH patient percentage is made up of two computations known as the Medicare fraction and the Medicaid fraction. The Medicare fraction is computed by dividing the number of patient days furnished to patients entitled to both Medicare Part A and Supplemental Security Income (SSI) benefits by the total number of patient days furnished to patients entitled to Medicare Part A benefits. The Medicaid fraction is computed by dividing the number of patient days furnished to patients who, for those days, were eligible for Medicaid but not to benefits under Medicare Part A by the number of total hospital patient days in the same period.
For several years, CMS delayed issuing final SSI percentages for 2007 and subsequent years pending the outcome of several lawsuits, including one on whether Medicare managed care days should be included in the Medicare fraction or the Medicaid fraction. Adding Medicare managed care days to the Medicare fraction usually lowers a hospital's DSH patient percentage.
Last September, a federal appeals court issued a decision indicating that CMS could include Medicare managed care days in the Medicare fraction from 2004 forward. On March 16, CMS posted final SSI percentages for 2006 through 2009 that include Medicare managed care days. For 340B eligibility purposes, the Office of Pharmacy Affairs (OPA) uses the most recent SSI percentages posted by CMS, which are now the 2009 percentages.It normally takes OPA a few weeks to incorporate new DSH data from CMS and to begin to notify hospitals about their eligibility status. The new 2009 SSI percentages are posted on the CMS Web site at http://www.cms.gov/AcuteInpatientPPS/05_dsh.asp. Hospitals can access OPA's list of hospital DSH patient percentages on http://www.hrsa.gov/opa/dsh.htm. Information for challenging OPA's DSH information is available on the same Web page.