Disproportionate%20Share%20Hospital%20Program

1
Oklahoma Health Care AuthorityPresenterStephe
n Weiss Sr. Policy AdvisorJanuary 26, 2007
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Disproportionate Share Hospital Program
DSH Not DISH
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Revised DSH Presentation

• Presentation has been revised to incorporate 2007
  State Plan Amendment
• Also includes new text to addresses comments
  received after initial presentations were made
  during the fall of 2006. The presentations were
  held as follows
• November 7, Oklahoma City
• November 27th, Tulsa
• December 5th, Lawton

4
In Summary

• DSH established in 1981.
• First Concern Address the needs of hospitals
  which serve a high number of Medicaid patients
  and low-income, often uninsured, patients.
• The second concern was that there was the
  potential for a growing gap in 1981 between what
  Medicaid paid hospitals and what the cost of care
  was at the hospitals.

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Background

• OBRA 81 (Pub. L. No. 97-35) gave states
  flexibility to develop Medicaid reimbursement
  systems that differed from Medicare.
• With this flexibility came a concern that states
  would cut Medicaid payments, thereby creating
  difficulties for hospitals serving large numbers
  of Medicaid and uninsured patients.
• To minimize the potential negative impact on
  these hospitals, OBRA 81 included a requirement
  that states make additional Medicaid payments
  to hospitals that serve a disproportionate number
  of low-income patients with special needs.

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Background

• At first the states ignored the law because it
  was broad and vague.
• In 1985, the HCFA (now CMS) ruled that states
  could use hospital taxes and donations as state
  share for the DSH program. The state share is
  the FMAP.
• West Virginia was the first state to enact such a
  provision in 1985.
• OBRA1986 Congress clarified that HCFA had no
  authority to limit in any way the amount of
  payment adjustments made to DSH hospitals (PL
  99-509).

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Background

• OBRA 1987 established a federal definition for
  DSH hospitals and required states to make
  payments to these facilities.
• Definition included hospitals with
• Medicaid utilization rate of one standard
  deviation or more above the mean Medicaid
  utilization rate in the state or
• low-income utilization rate of 25 percent or
  more.
• OBRA 1987 also gave states flexibility to
  designate DSH hospitals and set payment levels.

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Why DSH?

• Easy Money!
• Originally no limits on the amount of DSH a state
  could obtain.
• No one was held accountable for their
  expenditures.
• If a state could prove through a formula how much
  uncompensated care a hospital provided in a
  certain time period then the hospital could
  receive a DSH payment.

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The Results
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Oklahoma Tried to DSH before Reforms limited the
program

• In 1992 the Oklahoma voters rejected a state
  question on a provider tax.
• 1993 An Oklahoma Medicaid Reform Task Force
  recommended adoption of four funding pools based
  on a formula targeting charity care and
  incorporating the federal laws related to low
  income utilization.
• 1993 SB 576 (Section 19) required a DSH formula
  weighted against the University of Oklahomas
  Medical Center.
• Because Oklahoma received less than 25 million
  for DSH, had to weigh the funding toward the
  University of Oklahoma by law and the
  availability of matching funds were limited, the
  University Medical Center received over 80 of
  the available DSH funds annually.

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Congress Reins in DSH

• OBRA 1987 provided that hospitals could receive
  DSH only if they met the following criteria
• Have at least 2 obstetricians who have staff
  privileges at the hospital and who have agreed to
  provide obstetric services to individuals who are
  entitled to medical assistance for such services
  
• or hospitals which serve individuals under 18
  years of age
• For hospitals which did not offer nonemergency
  obstetric services to the general population and
  were in business as of December 22, 1987.
• In the case of a hospital located in a rural area
  the term obstetrician includes any physician
  with staff privileges at the hospital who
  performs nonemergency obstetric procedures.

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Reining in DSH by Law

• 1991 - The Medicaid Voluntary Contribution and
  Provider-Specific Tax Amendments (P.L. 101-234),
  established strict guidelines for provider taxes
  and donations.
• DSH payments were capped at roughly their 1992
  levels and the law limited national DSH payments
  to 12 percent of total Medicaid costs.
• Congress introduced the concept of High and Low
  DSH states using the 12 percent criteria for each
  state.

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Reining in DSH by Law

• 1993 - OBRA (P.L. 103-66) capped total DSH
  payments to a single hospital became known as
  the hospital-specific cap or DSH Upper Payment
  Limit (UPL).
• Also prohibited designation of a hospital as a
  DSH hospital unless hospital had a Medicaid
  inpatient utilization rate of at least 1.
• 1997 - BBA (P.L. 105-33) established state
  specific DSH allotments for each year through
  2002.
• Limited how much DSH money IMD can receive based
  on a federal formula using the 1995 as base year.

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Reining in DSH by Law

• 2000 - BIPA (P.L. 106-554) postponed the state
  specific DSH cuts for 2001 and 2002.
• BIPA added a new Special Rule for Extremely Low
  DSH States. States with 1999 DSH expenditures
  that were between 0 and 1 of the states' 1999
  total medical assistance expenditures were
  considered to be low-DSH States.''
• Oklahoma designated a low DSH state.
• 2003 MMA (P.L. 108-173) reversed the BIPA
  declines. For 2004, ceilings for high DSH states
  were increased by 16 for one year.

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Reining in DSH by Law

• MMA changed the definition of Low-DSH State by
  expanding the range of DSH expenditures to
  medical assistance expenditures to 0 to 3 based
  on 2000 expenditure reports.
• Low DSH states received 16 increases in their
  ceilings each year from 2004 through 2008, and
  then a CPI calculation for each year thereafter.
• Finally, the MMA established very strict and
  expanded DSH reporting and auditing requirements
  which states will have to comply with once the
  federal rules are issued.

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The race for quality has no finish line- so
technically, it's more like a death march.
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Unintended Consequences

• The unintended consequence of all these reforms
  was to
• lock states into certain funding situations that
  are in some respects unfair, and
• Penalize states that did not exploit the DSH
  program prior to the enactment of the laws which
  were intended to stop the perceived abuses of the
  program.

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State FY-2005 Actual MAP from CMS 64 FY 2005 DSH Allotment DSH Expenditures as a of Medicaid Expenditures
Top Ten      
Louisiana 5,439,333,030 1,030,349,099 18.94
New Hampshire 1,245,160,455 301,600,000 15.93
New Jersey 7,562,625,095 1,212,722,000 15.50
South Carolina 4,136,556,514 441,377,593 10.67
Alabama 3,837,492,664 408,923,338 10.66
Missouri 6,647,293,717 729,737,694 10.04
Texas 17,264,066,130 1,479,728,931 8.28
Nevada 1,184,019,166 77,931,664 8.26
Connecticut 4,027,600,290 376,768,000 6.85
New York 42,917,838,329 3,025,918,000 6.84
Bottom Ten      
Utah 1,341,242,046 16,410,367 1.22
Oklahoma 2,790,918,244 31,137,851 1.12
Minnesota 5,020,416,339 90,141,744 1.11
Arkansas 2,873,057,622 34,824,642 1.09
Wisconsin 4,780,891,908 97,814,931 0.89
New Mexico 2,381,382,402 16,543,817 0.67
Delaware 868,922,575 10,843,859 0.41
North Dakota 513,843,792 8,540,713 0.36
Iowa 2,393,755,159 37,394,933 0.28
South Dakota 619,515,439 10,093,704 0.12
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Oklahoma After the MMA
Oklahoma Total DSH Ceilings Oklahoma Total DSH Ceilings
Based on 16 Increases from the 2003 MMA Based on 16 Increases from the 2003 MMA
For 2005 through 2008 est. For 2005 through 2008 est.
Year Total Ceiling
2005 31,137,851
2006 37,327,273
2007 43,153,483
2008 est. 50,242,375
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Oklahoma Response

• Initial response in 2004 and 2005 from the
  increases in the MMA was to provide added funds
  to OU Medical Center.
• In 2006 the agency decided that the formulas
  needed to be changed to add more hospitals to the
  mix.
• An initial allocation was made in 2006 but a
  balance was left to distribute under a new
  formula if one could be created.

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Initial DSH Allocation for 2006  
  Amounts
2006 DSH Allocation 37,327,273

IMD Set Aside 3,273,247
   
OU 18,324,454

Private Community Hospitals 1,741,738
   
Total Initial Allocation 23,339,439
   
Balance to Allocate 13,987,834
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Changes to the Plan

• A new section of the state plan was added in 2006
  to allocate the 13.9 million.
• First, there was a commitment that since we had
  more money there would be no losers from any
  changes made.
• In 2005 OU Medical Center received 25.5 million
  so the first section of the State Plan Amendment
  (SPA) allocated 7.2 million to OU Medical
  Center.
• Second, 840,486 was allocated to the J.D.
  McCarty Center for Handicapped Children located
  in Norman.
• Finally, 5.9 million was allocated to as many
  hospitals as we could qualify under federal law
  for DSH.

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Final Oklahoma DSH Allocation for 2006
Provider Description Amounts
IMD Set Aside 3,273,247
   
OU 25,546,749
   
Private Community Hospitals 7,666,791
   
J.D. McCarty Center 840,486
   

Total Allocation 37,327,273
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Changes to the Plan

• For 2007
• OU Medical Center will receive the same amount as
  it did in 2006 plus an inflation adjustment based
  on the first half of the calendar year.
• The remaining hospitals will then share in the
  balance of funds left after the OU allocation and
  the IMD allocation are subtracted

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Proposed DSH Allocation for 2007
Oklahoma DSH for 2007  
  Amounts
IMD Set Aside 3,273,247

OU (Inflation adjusted from 2006) 26,517,525

Private Community Hospitals 13,362,712

2007 DSH Allocation 43,153,483
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Changes to the Plan for 2006 and 2007 for
Private and Community Hospitals

• The formula and methodology adopted by Oklahoma
  attempts to capture the essence of the main
  concerns expressed by Congress when the DSH
  program was created
• - target hospitals that serve a disproportionate
  number of Medicaid and low income, often
  uninsured, patients.
• Congress gave states broad discretion in defining
  and identifying these hospitals - which are often
  referred to as safety-net hospitals.
• A 2002 RAND reported noted that An important
  distinction of safety net hospitals is that they
  provide care to vulnerable populations.
  Unfortunately, there is no general agreement on
  which groups should be considered vulnerable.

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Changes to the Plan

• The 2002 RAND report
• examined the distribution of both Medicare and
  Medicaid DSH funds across hospitals,
• assessed alternative criteria that could be used
  to identify safety net hospitals,
• developed measures of hospital financial
  vulnerability to identify those safety hospitals
  that are under most financial pressure, and
• explored the extent to which alternative
  allocation policies to the current Medicare and
  Medicaid DSH payment mechanisms would improve the
  distribution of funds to those safety net
  hospitals that are most vulnerable.
• the report found that a formula involving
  Medicaid inpatient hospital days relative to
  total inpatient hospital days may be the most
  effective in achieving the desired goals of the
  DSH program.

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Changes to the Plan

• One of the overriding concerns in adopting the
  methodology for the purpose of distributing DSH
  funds is to insure that the data used in the
  formula can be audited.
• The second concern is that the definition of a
  safety net hospital be broad and inclusive to
  capture as many hospitals as possible within the
  parameters of the federal law.
• The final concern is that the funds be
  distributed as fairly as possible with a minimum
  amount of gamesmanship.

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Changes to the Plan

• The methodology first groups like size hospitals
  with each other based on licensed bed size.
• The larger hospitals tend to offer more acute
  care, high cost services such as trauma care and
  neonatal intensive care and attract patients from
  throughout the state to their facilities in
  search of those high level and more intensive
  services.
• The methodology then weighs the funding for
  Private Community Hospitals to hospitals that
  provide the most amount of the Medicaid inpatient
  days in the state.
• The final portion of the methodology weighs
  indigent care costs among the different hospitals
  within each group. This portion of the
  methodology recognizes that hospitals incur such
  costs and allows each like sized hospital to be
  compared to other like sized hospitals.

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Changes to the Plan

• Group 1 includes hospitals with 300 or more
  licensed beds.
• Group 2 includes hospitals with more than 100 but
  less than 300 licensed beds.
• Group 3 includes hospitals with less than 100
  licensed beds.

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Allocation to Groups for 2006
2006 Groupings Licensed Beds Medicaid Inpatient Days Days as Total Group SpecificAllocation
Group Beds gt 300 Group Beds gt 300      
Group Totals 8 4,071 171,349 60.03 3,555,032
         
Group Beds gt 100 lt 300 Group Beds gt 100 lt 300      
Group Totals 16 2,755 84,617 29.64 1,777,516
         
Group Beds lt 100 Group Beds lt 100      
Group Totals 40 1,953 29,470 10.32 592,505
Totals 8,779 285,436   5,925,053
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Proposed Allocation to Groups for 2007
2007 Groupings Licensed Beds Medicaid Inpatient Days Days as Total Group SpecificAllocation
Group Beds gt 300        
Group Totals 9 4,465 198,808 57.99 7,748,998
         
Group Beds gt 100 lt 300 Group Beds gt 100 lt 300      
Group Totals 17 2,953 103,819 30.28 4,046,567
         
Group Beds lt 100        
Group Totals 40 1,878 40,207 11.73 1,567,147
         
Totals 9,296 342,833   13,362,712
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Hospital Allocations

• Hospitals in each group receive funds based on
  their relationship to the total amount of
  Indigent Care Costs provided by the group.
  Indigent Care Costs are reported to the Oklahoma
  Health Care Authority by each hospital using the
  annual OHCA DSH Survey.
• Indigent Care Costs are calculated based on the
  following hospital specific formula
• Indigent Care Costs
• (Medicaid Gross Charges Bad Debt Charity
  Care) x
• (The hospital specific cost to charge ratio)

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Upper Payment Limits

• Once allocations are made to each hospital they
  are compared to the hospitals DSH specific upper
  payment limit and then adjusted down, if
  necessary, so as to not exceed the Hospital
  Specific DSH Limit.
• Hospital Specific DSH Limits
• Hospital Specific CCR x (Total Medicaid Gross
  Charges Total Charity Care Charges) (All
  Medicaid Payments)
• For 2007 Hospital Specific CCR one used for DRG
  published on OHCA website
• Gross Charges Actual Billed Amount
• Charity Care Charges Form Question 3.4 adjusted
  for inflation based on the most current CMS
  Market Basket data available
• All Medicaid payments Actual Medicaid Payments

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Hospital Responsibilities

• Each hospital will be responsible for maintaining
  its own supporting documents and records related
  to information reported to the OHCA on the annual
  Disproportionate Share Hospital Payment program.
  
• Hospitals must use Medicare cost reports filed
  with CMS wherever specified and wherever
  information corresponds to the DSH Survey.
• Pursuant to Section 1923(j) of the Social
  Security Act, hospitals will be subject to annual
  audits where information provided on the DSH
  Survey is matched against hospital documents and
  records.
• Hospitals found to be out of compliance as a
  result of the audits will be responsible for
  reimbursing the state.
• Any hospital required to pay back any or all
  portions of DSH funds allocated pursuant to this
  Section will have the right to an appeal pursuant
  to the appeal provisions included in this State
  Plan.

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SEC. 1923. 42 U.S.C. 1396r-4 (a) IMPLEMENTATION
OF REQUIREMENT. ADJUSTMENT IN PAYMENT FOR
INPATIENT HOSPITAL SERVICES FURNISHED BY
DISPROPORTIONATE SHARE HOSPITALShttp//www.ssa.go
v/OP_Home/ssact/title19/1923.htm

• (j) ANNUAL REPORTS AND OTHER REQUIREMENTS
  REGARDING PAYMENT ADJUSTMENTS.With respect to
  fiscal year 2004 and each fiscal year thereafter,
  the Secretary shall require a State, as a
  condition of receiving a payment under section
  1903(a)(1) with respect to a payment adjustment
  made under this section, to do the following
• (1) REPORT.The State shall submit an annual
  report that includes the following
• (A) An identification of each disproportionate
  share hospital that received a payment adjustment
  under this section for the preceding fiscal year
  and the amount of the payment adjustment made to
  such hospital for the preceding fiscal year.
• (B) Such other information as the Secretary
  determines necessary to ensure the
  appropriateness of the payment adjustments made
  under this section for the preceding fiscal year.

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SEC. 1923. 42 U.S.C. 1396r-4 (a) IMPLEMENTATION
OF REQUIREMENT. ADJUSTMENT IN PAYMENT FOR
INPATIENT HOSPITAL SERVICES FURNISHED BY
DISPROPORTIONATE SHARE HOSPITALShttp//www.ssa.go
v/OP_Home/ssact/title19/1923.htm

• (2) INDEPENDENT CERTIFIED AUDITThe State shall
  annually submit to the Secretary an independent
  certified audit that verifies each of the
  following
• (A) The extent to which hospitals in the State
  have reduced their uncompensated care costs to
  reflect the total amount of claimed expenditures
  made under this section.
• (B) Payments under this section to hospitals that
  comply with the requirements of subsection (g).

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SEC. 1923. 42 U.S.C. 1396r-4 (a) IMPLEMENTATION
OF REQUIREMENT. ADJUSTMENT IN PAYMENT FOR
INPATIENT HOSPITAL SERVICES FURNISHED BY
DISPROPORTIONATE SHARE HOSPITALShttp//www.ssa.go
v/OP_Home/ssact/title19/1923.htm

• (C) Only the uncompensated care costs of
  providing inpatient hospital and outpatient
  hospital services to individuals described in
  paragraph (1)(A) of such subsection are included
  in the calculation of the hospital-specific
  limits under such subsection.
• (D) The State included all payments under this
  title, including supplemental payments, in the
  calculation of such hospital-specific limits.
• (E) The State has separately documented and
  retained a record of all of its costs under this
  title, claimed expenditures under this title,
  uninsured costs in determining payment
  adjustments under this section, and any payments
  made on behalf of the uninsured from payment
  adjustments under this section.

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Code of Federal Regulations Title 42 Public
HealthPART 433STATE FISCAL ADMINISTRATION

• 433.32 Fiscal policies and accountability.
• A State plan must provide that the Medicaid
  agency and, where applicable, local agencies
  administering the plan will
• (a) Maintain an accounting system and supporting
  fiscal records to assure that claims for Federal
  funds are in accord with applicable Federal
  requirements
• (b) Retain records for 3 years from date of
  submission of a final expenditure report
• (c) Retain records beyond the 3-year period if
  audit findings have not been resolved and
• (d) Retain records for nonexpendable property
  acquired under a Federal grant for 3 years from
  the date of final disposition of that property.

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Proposed DSH Audit RegulationsFederal Register /
Vol. 70, No. 165 / Friday, August 26, 2005 /
Proposed Rules
41
Department of Health and Human Services OFFICE OF
INSPECTOR GENERAL

• Audit Of Selected States Medicaid
  Disproportionate Share Hospital Programs March
  2006(A-06-03-00031)
• SUMMARY OF FINDINGS Nine of the ten States
  reviewed did not comply with the
  hospital-specific DSH limits imposed by section
  1923(g) of the Act. As a result, DSH payments
  exceeded the hospital-specific limits by
  approximately 1.6 billion (902 million Federal
  share).

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Department of Health and Human Services OFFICE OF
INSPECTOR GENERAL

• Four States (California, Illinois, Texas, and
  Washington) did not later adjust the payments
  using actual costs.
• Eight States included unallowable costs in their
  calculations of hospital-specific limits.
  Unallowable costs consisted of costs for
  institutions for mental diseases and non-hospital
  services as well as unallowable costs such as bad
  debts, miscalculations, and other accounting
  errors.