Proposed Changes to Volume Decrease Adjustment for Sole Community and Medicare-Dependent Hospitals

InsightsClient Alert

The federal fiscal year (FY) 2018 hospital inpatient prospective payment system proposed rule includes the following beneficial changes to the computation of the volume decrease adjustment for sole community and Medicare-dependent hospitals.
1. Prospectively requires the MACs compare Medicare inpatient revenue allocable to fixed costs from the cost reporting period when the hospital experienced the volume decrease to the hospital’s fixed costs from that same cost reporting period when calculating a volume decrease adjustment. To calculate revenue allocable to fixed costs, MACs would apply the ratio of the hospital’s fixed costs to total costs to the hospital’s total Medicare inpatient revenue. Currently, MACs compare total Medicare inpatient revenue to fixed costs.
2. No longer apply a cap to the volume decrease adjustment calculation methodology in future periods.
3. Prospectively modifies the volume decrease adjustment process to no longer require a hospital explicitly demonstrate it appropriately adjusted the number of staff in inpatient areas of the hospital based on the decrease in the number of inpatient days and to no longer require the MACs to adjust the volume decrease adjustment payment amount for excess staffing.
These changes would be effective for cost reporting periods beginning on or after October 1, 2017. The Centers for Medicare and Medicaid Services estimates the above changes would increase aggregate volume decrease adjustment payments by approximately $15 million for cost reporting periods beginning in FY 2018.
If you have any questions or need assistance applying for the volume decrease adjustment, please contact our Albany office at (229) 883-7878 or our Atlanta office at (404) 220-8494.