Health Law Daily CMS not required to offer realignment of LIP adjustment calculation
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Thursday, December 21, 2017

CMS not required to offer realignment of LIP adjustment calculation

By Rebecca Mayo, J.D.

A Medicare contractor did not err when calculating a Medicare Low Income Patient (LIP) adjustment for inpatient rehabilitation facilities (IRFs) using a federal fiscal year basis, the Provider Reimbursement Review Board (PRRB) held. The PRRB concluded that although an acute care hospital’s Disproportionate Share Hospital (DSH) adjustment can be calculated based on a provider’s reporting period rather than the federal fiscal year, CMS was not required to apply that same flexibility to the LIP adjustment for IRFs (Toyon 2002-2006 LIP SSI Realignment Group v. Noridian Healthcare Solutions, PRRB Hearing, Dec. No. 2018-D8, Case No. 00-0915G, December 5, 2017).

LIP Adjustment. As part of the Balanced Budget Act of 1997, Congress established the Inpatient Rehabilitation Facilities Prospective Payment System (IRF-PPS) for cost reporting periods beginning on or after October 1, 2002. These rates are subject to certain adjustments, including the LIP adjustment which was intended to pay IRFs for the incremental increase in Medicare costs associated with a facility’s percentage of low-income patients. The LIP adjustment is calculated based on two ratios using patient data for the IRF for the federal fiscal year. Originally, CMS developed the LIP payment using the same measure of low income utilization as used in the DSH adjustment that Medicare pays to acute care hospitals. However, federal regulation allows acute care hospitals to request "realignment" of the calculation of the DSH SSI ratio to use its own cost reporting period rather than the federal fiscal year.

Nine acute care hospitals with inpatient rehabilitation units located in the state of California appealed the Medicare contractor’s LIP adjustment calculations based on the federal fiscal year for the 2002 to 2006 reporting periods and requested that the adjustment be recalculated on the basis of each providers’ cost reporting year. The rehab units point to the language in the pre-amble to the August 7, 2001 IRF Final Rule (66 FR 41316), which states CMS’ intent to "use the same measure of the percentage of low-income patients currently used for the acute care hospital inpatient prospective payment system, which is the DSH variable" because it is "the best current predictor of costs associated with treating low-income patients in IRFs."

Decision. The PRRB did not agree with the rehab units’ interpretation of the preamble and instead interpreted it to mean that the LIP will be calculated using the same methodology that DSH uses but not necessary the identical calculation in all respects. Additionally, the PRRB noted that Congress gave discretionary authority to the Secretary to adjust the IRF-PPS payment rate "by such other factors as the Secretary determines are necessary to properly reflect variations in necessary costs of treatment among rehabilitation facilities." There is no statutory provision that requires CMS to allow IRFs to have their LIP adjustment realigned the way acute care hospitals can. CMS was within its regulatory authority to design the calculation of the SSI LIP differently from the acute care DSH calculation and therefore the Medicare contractor was correcting in calculating those adjustments using ratios based on a federal fiscal year basis.

Cost reporting period ending 2002 – 2006.

Companies: Noridian Healthcare Solutions; Alta Bates Summit Medical Center; Enloe Medical Center; John Muir Medical Center; Little Company of Mary—San Pedro; Miller-Dwan Medical Center; Providence Holy Cross Medical Center; Providence St. Joseph Medical Center; St. Joseph Hospital of Eureka; UC Davis Medical Center

MainStory: TopStory PRRBDecisions IPPSNews CMSNews BillingNews CostReportNews DSHNews IRFNews MedicareContractorNews PaymentNews PartANews ProgramIntegrityNews ProviderNews

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