Volume Decrease Adjustment Reimbursement

What is Volume Decrease Adjustment?

Medicare allows for a lump sum payment known as a Volume Decrease Adjustment (VDA) to Sole Community Hospitals (SCH) and Medicare Dependent Hospitals (MDH) that experience more than a 5% decrease in discharges as long as the circumstances are outside the hospital’s control. The COVID-19 global pandemic has adversely impacted almost every hospital at least this much.

In these uncertain times, hospitals are dealing with unprecedented demands on staff while suffering unmatched losses in revenue as a result of the COVID-19 pandemic. Small rural hospitals disproportionately shouldered these impacts as they prepared for a surge in COVID-19 cases, making it harder than ever to balance revenues against valuable resources needed to sustain operations.

HRS has the Experience You Need

Healthcare Reimbursement Solutions has decades of expertise documenting catastrophic events, whether they be a flood, fire, extreme weather, or even labor disputes, so that hospitals receive the correct VDA payment from Medicare. Having our experienced team behind you is the difference between having an adjustment request denied or accepted in full. Given that the COVID-19 pandemic has substantially affected hospitals like yours, we are confident that the 5% threshold mentioned above will be met.

How Can We Help?

Medicare Advantage Bad Debt

  • We are ready to help prepare your Volume Decrease Adjustment request in parallel with your Medicare cost report. This unique approach ensures that mitigation efforts are cataloged while critical staff remain available to our trained interviewers, thereby providing the most accurate reimbursement for your hospital.
  • Partnering with a firm that can provide the specific hands-on attention to detail to collect all the facts ensures the best possible outcome; while many are willing to help, HRS has the experienced staff necessary to assist with this complicated reimbursement mechanism.

Give us a call today to discuss how HRS can help your hospital receive their VDA reimbursement from Medicare.

Recent Changes to VDA Calculation Benefit Hospitals

The Federal Fiscal Year 2018 Hospital Inpatient Prospective Payment System (IPPS) final rule implemented the following beneficial changes to the calculation of the Volume Decrease Adjustment for Sole Community and Medicare-Dependent Hospitals for Medicare Cost Report periods beginning 10/1/2017 and after.

Medicare Administrative Contractors (MAC) will now compare Medicare revenue allocated to fixed costs to the hospital’s fixed costs from the cost reporting period in which the hospital experienced the volume decrease. Prior to this change, MAC’s compared total MS-DRG revenue to the hospital’s fixed costs, which ignored MS-DRG reimbursement for fixed, semi-fixed, and variable costs. As a result, the MAC was comparing adjusted Medicare inpatient costs to total Medicare inpatient payments.
Volume Decrease Adjustment cap will be eliminated and no longer applied to Volume Decrease Adjustment calculation methodology. Previously, MAC’s established a cap for Volume Decrease Adjustment payment as the difference of total MS-DRG payments and adjusted costs using the lessor of current or prior Medicare cost reporting periods.
MAC determines a lump sum adjustment amount equal to the difference between the hospital’s fixed Medicare inpatient operating costs and the hospital’s total MS-DRG revenue. This is based on MS-DRG adjusted prospective payment rates for inpatient operating costs.
The Volume Decrease Adjustment process will no longer require a hospital explicitly demonstrate that it appropriately adjusted the number of staff in inpatient areas of the hospital based on the decrease in the number of inpatient days. MAC’s will no longer adjust for excess staffing.

These changes are 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.