Understanding Worksheet S-10 Revenue for Hospitals

March 1, 2021


The complexity of Worksheet S-10 reporting can stun at times. And accurate records are central to reimbursement that could mean millions of dollars for your hospital. But you have to keep smart patient data and stay alert to regular changes in both the reporting requirements and the total pool available (several billion) for reimbursement. We take a look at the latest methods and advice for success in this area of uncompensated care revenue.

A couple of years ago, hospitals and revenue cycle teams did not well know Worksheet S-10 for hospital reimbursement. As Modern Healthcare reported in 2018, “The S-10 is relatively new to hospitals, and there’s some evidence that the amounts reported on the form aren’t always accurate. A 2017 Medicare -commissioned study by Dobson DaVanzo & Associates compared uncompensated-care data reported on S-10 forms with numbers reported on Internal Revenue Service Form 990s between 2011 and 2013. The study found that although the data were highly correlated, there were big differences in what hospitals reported between the measures. For more than half of the hospitals, for example, the difference between the uncompensated care reported on the two forms was around 40%.”

Now, Worksheet S-10 revenue is a critically important part of the revenue stream for hospitals that treat indigent patients through the Medicare Disproportionate Share Hospital (DSH) programs. The Medicare program began issuing Uncompensated Care (UCC) payments in Federal Fiscal Year (FFY) 2014 but did not use Worksheet S-10 to distribute these funds until FFY 2018. Between FFYs 2018 and 2020 there was a transition to the use of the Worksheet S-10. In FFY 2018, one-third of the UCC payment was based on the Worksheet S-10, in FFY 2019 UCC was based two-thirds on the Worksheet S-10 and for FFY 2020 and beyond 100% of the UCC payment is based on Worksheet S-10.

An article from the American Bar explains that “hospitals are wise to ensure that they are fully capturing their allotted share of a multi-billion dollar pie.” This ‘pie’ is the National Uncompensated Care Pool which now totals over $8.2 billion dollars.

In a webinar from January 2020, R1’s Emily Auten, VP and Lawrence Millner, Ph.D., Director of Medicare Reimbursement presented strategies to optimize Medicare bad debt with a focus on its important role on Worksheet S-10.

  • Dr. Millner discussed the then current $8.35 Billion payment pool and how Medicare will take a hospital’s final S-10 value as a percentage of all DSH hospital’s total S-10 value. This value is the hospital’s “Factor 3” percentage which Medicare multiplies to determine the hospital’s UCC compensation.
  • In 2020, CMS used the Worksheet S-10 for 2015 to determine hospital’s remuneration.
  • After showing a number of hospitals compensation, the advice to all hospital clients is to “understand the relationship between DSH, MBD, and the S-10 and develop an internal work plan to include all of them.”
  • Ms. Auten covered the latest requirements for reporting by all hospitals on bad debt by a patient as part of S-10’s newer regulations. There are 19 specific data elements required. She pointed out that now they’re asking for things like social security numbers, revenue codes, and more. There’s lots of new information now required that may be a little bit harder to gather.
  • One important strategy is to use a common approach to dealing with Medicare Bad Debt and the Worksheet S-10.

What do the hospital associations think of the current Worksheet S-10 situation?

Healthcare Dive reported in 2018 that the American Hospital Association (AHA) agrees that Worksheet S-10 has the potential to provide a more accurate measure of uncompensated care costs. However, Erika Rogan, senior associate director of policy at AHA, told Healthcare Dive in a statement that the group has concerns about the “accuracy and consistency of the S-10.” In 2019, the AHA issued another statement of support, along with some recommendations:

“The AHA has a longstanding position supporting audits of the S-10 data in order to improve its accuracy and consistency, and we greatly appreciate CMS’s efforts to do so. We continue to believe that audits – and, by extension, ongoing refinements to the audit process – result in data that are more appropriate for use in Medicare disproportionate share hospital (DSH) payments. Thus, we support the use of FY 2015 S-10 data to determine each Medicare DSH hospital’s share of uncompensated care in FY 2020.

Furthermore, given the improvements made to the S-10 instructions for the FY 2017 cost report, we strongly recommend that CMS audit the FY 2017 data in the near term and use it in determining FY 2021 uncompensated care payments. In addition, we believe that there is room for improvement in the audit process and have outlined several recommendations that support clarity, consistency and completeness in audit implementation. We also recommend, in light of the potential for undue fluctuations when using a single year of data, that CMS monitor payments over time and, if necessary, consider using more than one year of data after FY 2021.”

Meanwhile, Healthcare Dive also reported that America’s Essential Hospitals, a trade group that represents more than 325 member hospitals with a high percentage in the uncompensated care category, sent a 44-page letter to CMS in 2018 listing a series of concerns and recommendations to resolve the issues. As with most CMS programs, the calculations are cumbersome, and each calendar year brings a spate of rules changes.

R1 has compiled a CMS Memorandum for Fiscal Year 2021 that includes the IPPS changes as well as the current regulatory updates effective October 1, 2020. Access the complete report online HERE.

Additional information can be found on the CMS FY 2021 IPPS Final Rule Home Page.

Four Hospital Medicare Reimbursement Solutions from R1

R1 is pleased to offer solutions that address the issues covered in this article and help providers maximize Medicare reimbursement. Our comprehensive approach brings together an experienced team of Medicare reimbursement professionals for the best results with minimal disruption. These solutions address the following hospital revenue challenges:

  • Disproportionate Share Hospital: The United States government provides funding to hospitals that treat indigent patients through the Disproportionate Share Hospital (DSH) programs, under which facilities are able to receive at least partial compensation. Although 3,109 hospitals receive this adjustment, Medicare DSH payments are highly concentrated.
  • Medicare Bad Debt: On average, the government program pays hospitals about 87 cents for every dollar of their costs, compared with private insurers that pay $1.45. Some hospitals make money on Medicare, but most rely on higher private payments to cover their overall costs.
  • Worksheet S10: Worksheet S-10 is part of a hospital’s cost report and is used by the Centers for Medicare & Medicaid Services (CMS) to determine the level of uncompensated care provided by a hospital. Both Prospective Payment System (PPS) and Critical Access Hospitals (CAHs) complete the S-10.
  • 340B Discovery: Hospitals fail to periodically review their internal operational process in order to detect drugs that should have qualified for 340B savings but went undetected due to errors internally or operationally.

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