We have started to see a number of Medicare Cost Report settlements come through over the past month related to the CMS Ruling 1498-R3. The issue is related to the Medicare SSI percentage that accounts for a major piece of the Medicare Disproportionate Share (DSH) calculation. 1498-R3, issued March 4, 2024, revokes Ruling 1498-R2 and applies to each properly pending claim in a DSH appeal or open cost report involving patient discharges prior to October 1, 2004.
Background on CMS Ruling 1498-R3
CMS notes Ruling 1498-R3 is needed to comply with the Supreme Court ruling in Becerra v. Empire Health Foundation, for Valley Hospital Medical Center that evaluated the Medicare statute as it relates to the Medicare SSI percentage.
CMS previously issued Ruling 1498-R2 on April 22, 2015. This ruling amended Ruling 1498-R issued April 28, 2010, and allowed hospitals to choose between two methods for calculating the Medicare SSI percentage for use in the DSH calculation.
The difference between the two methods incorporated the treatment of the Medicare Part A non-covered days and Medicare Part A patients who have exhausted their benefits.
Ruling 1498-R2 is now withdrawn, which means SSI percentages must be calculated using total days, not covered days. For most hospitals, the total days calculation results in a lower SSI percentage and providers can anticipate a payable settlement to CMS.
Next Steps
It is still unclear as to the exact providers and fiscal years that will be impacted but we have seen settlements come through for fiscal years ending 1997 through 2004. These settlements are technically a new cost report NPR so the PRRB appeal window for DSH items does start again. There are discussions taking place regarding the potential for appeal but an appeal will not prohibit the initial settlement from taking place.
All providers that receive a settlement related to 1498-R3 should verify the adjustment amounts are accurate before accepting. Providers should also consider the opportunity the revised SSI percentages will have on SSI Realignment filings related to the impacted fiscal years.
Contact Blue & Co.’s Medicare DSH Team
If you have any questions or concerns about the CMS Ruling 1498-R3 and how it impacts Medicare Cost Report settlements, please reach out to a member of the Medicare DSH Team or your local Blue & Co. advisor. We can assist in confirming accurate adjustment amounts, discuss appeal options and help identify all SSI Realignment opportunities that may exist.
Nick Ficklin, CPA, FHFMA, Director
