[Federal Register Volume 60, Number 9 (Friday, January 13, 1995)]
[Notices]
[Pages 3250-3253]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-850]



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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
[MB-089-N]
RIN 0938-AG61


Medicaid Program; Limitations on Aggregate Payments to 
Disproportionate Share Hospitals: Federal Fiscal Year 1995

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Notice.

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SUMMARY: This notice announces the preliminary Federal fiscal year 
(FFY) 1995 national target and individual State allotments for Medicaid 
payment adjustments made to hospitals that serve a disproportionate 
number of Medicaid recipients and low-income patients with special 
needs. We are publishing this notice in accordance with the provisions 
of section 1923(f)(1)(C) of the Social Security Act (the Act) and 
implementing regulations at 42 CFR 447.297 through 447.299. The 
preliminary FFY 1995 State DSH allotments published in this notice will 
be superseded by final FFY 1995 DSH allotments to be published in the 
Federal Register by April 1, 1995.

EFFECTIVE DATE: The preliminary DSH payment adjustment expenditure 
limits included in this notice apply to Medicaid DSH payment 
adjustments that are applicable to FFY 1995.

FOR FURTHER INFORMATION CONTACT:
Richard Strauss, (410) 966-2019.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 1923(f) of the Social Security Act (the Act) and 
implementing Medicaid regulations at 42 CFR 447.297 through 447.299 
require us to estimate and publish in the Federal Register the national 
target and each State's allotment for disproportionate hospital share 
(DSH) payments for each Federal fiscal year (FFY). DSH payments are 
payment adjustments made to Medicaid-participating hospitals that serve 
a large number of Medicaid recipients and other low-income individuals 
with special needs. Preliminary amounts must be published by October 1 
of each FFY and final amounts by April 1 of each FFY.
    The implementing regulations provide that the national aggregate 
DSH limit for a FFY is a target rather than an absolute cap when 
determining the amount that can be allocated for DSH payments. The 
national DSH target is 12 percent of the total amount of medical 
assistance expenditures (excluding total administrative costs) that are 
projected to be made under approved Medicaid State plans during the 
FFY. (Note: Whenever the phrases ``total medical assistance 
expenditures'' or ``total administrative costs'' are used in this 
notice, they mean both the State and Federal share of expenditures or 
costs.)
    In addition to the national DSH target, there is a specific State 
DSH limit for each State for each FFY. The State DSH limit is a 
specified amount of DSH payment adjustments applicable to a FFY above 
which FFP will not be available. This is called the ``State DSH 
allotment''.
    Each State's DSH allotment for FFY 1995 is calculated by first 
determining whether the State is a ``high-DSH State,'' or a ``low-DSH 
State.'' This is determined by using the State's ``base allotment.'' A 
State's base allotment is the greater of: (1) The total amount of the 
State's actual and projected DSH payment adjustments made under the 
State's approved State plan applicable to FFY 1992, as adjusted by 
HCFA; or (2) $1,000,000.
    A State whose base allotment exceeds 12 percent of the State's 
total medical assistance expenditures (excluding administrative costs) 
projected to be made in FFY 1995 is referred to as a ``high-DSH 
State.'' The FFY 1995 State DSH allotment for a high-DSH State is 
limited to the State's base allotment.
    A State whose base allotment is equal to or less than 12 percent of 
the State's total medical assistance expenditures (excluding 
administrative costs) projected to be made in FFY 1995 is referred to 
as a ``low-DSH State.'' The FFY 1995 State DSH allotment for a low-DSH 
State is equal to the State's DSH allotment for FFY 1994 increased by 
growth amounts and supplemental amounts, if any. However, the FFY 1995 
DSH allotment for a low-DSH State cannot exceed 12 percent of the 
State's total medical assistance expenditures for FFY 1995 (excluding 
administrative costs).
    The growth amount for FFY 1995 is equal to the projected percentage 
increase (the growth factor) in a low-DSH State's total Medicaid 
program expenditures between FFY 1994 and FFY 1995 multiplied by the 
State's final DSH allotment for 1994. Because the national DSH limit is 
considered a target, a low-DSH State whose program grows from one year 
to the next can receive a growth amount that would not be permitted if 
the national limit was viewed as an absolute cap.
    There is no growth factor and no growth amount for any low-DSH 
State whose Medicaid program does not grow (that is, stayed the same or 
declined) between fiscal years FFY 1994 and FFY 1995. Furthermore, 
because a low-DSH State's FFY 1995 DSH allotment cannot exceed 12 
percent of the State's total medical assistance expenditures, it is 
possible for its FFY 1995 DSH allotment to be lower than its FFY 1994 
DSH allotment. This situation occurs when the State experiences a 
decrease in its program expenditures between years and its prior FFY 
DSH allotment is greater than 12 percent of the total projected medical 
assistance expenditures for the current FFY. This situation did not 
occur for FFY 1995. Consequently, there are no States with preliminary 
FFY 1995 State DSH allotments that are lower than the final FFY 1994 
State DSH allotments.
    There is no supplemental amount available for redistribution for 
FFY 1995. The supplemental amount, if any, is equal to a low-DSH 
State's proportional share of a pool of funds (the redistribution 
pool). The redistribution pool is equal to the national 12-percent DSH 
target reduced by the total of the base allotments for high-DSH States, 
the total of the State DSH allotments for the previous FFY for low-DSH 
States, and the total of the low-DSH State growth amounts. Since the 
sum of these amounts is above the projected FFY 1995 national 12 
percent DSH target, there is no redistribution pool and, therefore, no 
supplemental amounts for FFY 1995.
    As prescribed in the law and regulations, no State's DSH allotment 
will be below a minimum of $1 million.
    As an exception to the above requirements, under section 
1923(f)(1)(A)(i)(II) of the Act and regulations at 42 CFR 447.296(b)(5) 
and 447.298(f), a State may make DSH payments for a FFY in accordance 
with the minimum payment adjustments required by Medicare methodology 
described in section 1923(c)(1) of the [[Page 3251]] Act. Nebraska's 
preliminary State DSH allotment has been determined in accordance with 
this exception.
    We are publishing in this notice the preliminary FFY 1995 national 
DSH target and State DSH allotments based on the best available data we 
have at this time from the States as adjusted by HCFA. This data is 
taken from each State's August 1994 Form HCFA-37 and is adjusted as 
necessary. The final FFY 1995 DSH allotments will be published in the 
Federal Register by April 1, 1995.

II. Calculations of the Preliminary FFY 1995 DSH Limits

    The total of the preliminary State DSH allotments for FFY 1995 is 
equal to the sum of the base allotments for all high-DSH States, the 
FFY 1994 State DSH allotments for all low-DSH States, and the growth 
amounts for all low-DSH States. A State-by-State breakdown is presented 
in section III of this notice.
    We classified States as high-DSH or low-DSH States. If a State's 
base allotment exceeded 12 percent of its total unadjusted medical 
assistance expenditures (excluding administrative costs) projected to 
be made under the State's approved plan in FFY 1995, we classified that 
State as a ``high-DSH'' State. If a State's base allotment was 12 
percent or less of its total unadjusted medical assistance expenditures 
projected to be made under the State's approved State plan under title 
XIX of the Act in FFY 1995, we classified that State as a ``low-DSH'' 
State. There are 34 low-DSH States and 16 high-DSH States for FFY 1995 
as a result of this classification.
    Using the most recent data from the August 1994 budget projections 
(Form HCFA-37), we estimate the States' FFY 1995 national total medical 
assistance expenditures to be $155,059,961,000. Thus, the overall 
preliminary national FFY 1995 DSH expenditure target is approximately 
$18.6 billion (12 percent of $155.1 billion).
    In addition, in the preliminary FFY 1995 State DSH allotments we 
provide a total of $752,609,000 ($417,509,000 Federal share) in growth 
amounts for the 34 low-DSH States. The growth factor percentage for 
each of the low-DSH States was determined by calculating the Medicaid 
program growth percentage for each low-DSH State between FFY 1994 and 
FFY 1995. To compute this percentage, we first ascertained each low-DSH 
State's estimate of total FFY 1994 medical assistance and 
administrative expenditures as reported on the State's Medicaid Budget 
Report (Form HCFA-37) submitted in August 1994. Next, we compared those 
estimates to each low-DSH State's total estimated unadjusted FFY 1995 
medical assistance and administrative expenditures as reported to HCFA 
on the State's August 1994 Form HCFA-37 submission.
    The growth factor percentage was multiplied by the low-DSH State's 
final FFY 1994 DSH allotment amount to establish the State's 
preliminary growth amount for FFY 1995.
    Since the sum of the total of the base allotments for high-DSH 
States, the total of the State DSH allotments for the previous FFY for 
low-DSH States, and the growth for low-DSH States ($19,242,708,000) is 
greater than the preliminary FFY 1995 national target 
($18,607,195,000), there is no preliminary FFY 1995 redistribution 
pool.
    The low-DSH State's growth amount was then added to the low-DSH 
State's final FFY 1994 DSH allotment amount to establish the 
preliminary total low-DSH State DSH allotment for FFY 1995. If a 
State's growth amount, when added to its final FFY 1994 DSH allotment 
amount, exceeds 12 percent of its FFY 1995 estimated medical assistance 
expenditures, the State only receives a partial growth amount which, 
when added to its final FFY 1994 allotment, limits its total State DSH 
allotment for FFY 1995 to 12 percent of its estimated FFY 1995 medical 
assistance expenditures. For this reason, seven of the low-DSH States 
received partial growth amounts.
    As we explained above, in accordance with the minimum payment 
adjustments required by Medicare methodology, Nebraska's preliminary 
FFY 1995 State DSH allotment is $11 million.
    In summary, the total of all preliminary State DSH allotments for 
FFY 1995 is $19,242,708,000 ($10,978,517,000 Federal share). This total 
is composed of the prior FFY's final State DSH allotments 
($18,490,099,000) plus growth amounts for all low-DSH States 
($752,609,000) plus supplemental amounts for low-DSH States ($0). The 
total of all preliminary FFY 1995 State DSH allotments is 12.6 percent 
of the total medical assistance expenditures (excluding administrative 
costs) projected to be made by these States in FFY 1995. The total of 
all preliminary DSH allotments for FFY 1995 is $635,513,000 over the 
FFY 1995 preliminary national target amount of $18,607,195,000.
    Each State should monitor and make any necessary adjustments to its 
DSH spending during FFY 1995 to ensure that its actual FFY 1995 DSH 
payment adjustment expenditures do not exceed its final State DSH 
allotment for FFY 1995 which will be published by April 1, 1995. As the 
ongoing reconciliation between actual FFY 1995 DSH payment adjustment 
expenditures and the final FFY 1995 DSH allotments takes place, each 
State should amend its plans as may be necessary to make any 
adjustments to its FFY 1995 DSH payment adjustment expenditure patterns 
so that the State will not exceed its final FFY 1995 DSH allotment.
    The FFY 1995 reconciliation of DSH allotments to actual 
expenditures will take place on an ongoing basis as States file 
expenditure reports with HCFA for DSH payment adjustment expenditures 
applicable to FFY 1995. In addition, additional DSH payment adjustment 
expenditures made in succeeding FFYs that are applicable to FFY 1995 
will continue to be reconciled back to each State's final FFY 1995 DSH 
allotment as additional expenditure reports are submitted to ensure 
that the final FFY 1995 DSH allotment is not exceeded. Any DSH payment 
adjustment expenditures in excess of the final DSH allotment will be 
disallowed.
    Any DSH expenditures that are disallowed will be subject to the 
normal Medicaid disallowance procedures.

III. Preliminary FFY 1995 DSH Allotments Under Public Law 102-234

                              Key to Chart                              
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       Column                               Description                 
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Column A............   =   Name of State.                               
Column B............   =   Final FFY 1994 DSH Allotments For All States.
                            For a high-DSH State, this is the State's   
                            base allotment which is the greater of the  
                            State's FFY 1992 allowable DSH payment      
                            adjustment expenditures applicable to FFY   
                            1992, or $1,000,000. For a low-DSH State,   
                            this is equal to the final DSH allotment for
                            FFY 1994 which was published in the Federal 
                            Register on May 2, 1994.                    
                 [[Page 3252]]                                          
                                                                        
Column C............   =   Growth Amounts For Low-DSH States. This is an
                            increase in a low-DSH State's final FFY 1994
                            DSH allotment to the extent that the State's
                            Medicaid program grew between FFY 1994 and  
                            FFY 1995.                                   
Column D............   =   Preliminary FFY 1995 State DSH Allotments.   
                            For high DSH States this is equal to the    
                            base allotment from column B. For low-DSH   
                            States, this is equal to the final State DSH
                            allotments for FFY 1994 from column B plus  
                            the growth amounts from column C and the    
                            supplemental amounts, if any, from column D.
Column E............   =   High or Low DSH State Designation. ``High''  
                            indicates the State is a high-DSH State and 
                            a ``Low'' indicates the State is a low-DSH  
                            State.                                      
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Preliminary Federal Fiscal Year 1995 Disproportionate Share Hospital Allotments Under Public Law 102-234 Amounts
                                          are State and Federal Shares                                          
                                         [Dollars are in thousands(000)]                                        
                                                                                                                
                              Final FFY 94 DSH                                     Preliminary FFY   High or low
            State              allotments for      Growth amounts for low DSH       95 state DSH      DSH state 
                                 all states                states (1)                allotments      designation
A                                            B  C...............................                 D  E           
----------------------------------------------------------------------------------------------------------------
AL..........................          $417,458  NOT APPLICABLE..................          $417,458  HIGH.       
AK..........................           $19,589  $1,273..........................           $20,862  LOW.        
AR..........................            $3,039  $203............................            $3,242  LOW.        
CA..........................        $2,191,451  NOT APPLICABLE..................        $2,191,451  HIGH.       
CO..........................          $302,014  NOT APPLICABLE..................          $302,013  HIGH.       
CT..........................          $408,933  NOT APPLICABLE..................          $408,933  HIGH.       
DE..........................            $5,924  $1,063..........................            $6,986  LOW.        
DC..........................           $41,039  NOT APPLICABLE..................           $41,039  LOW.        
FL..........................          $286,478  $76,223.........................          $362,701  LOW.        
GA..........................          $382,344  $34,880.........................          $417,224  LOW.        
HI..........................           $64,078  $3,887..........................           $67,965  LOW.        
ID..........................            $1,985  $126............................            $2,111  LOW.        
IL..........................          $394,993  $69,434.........................          $464,427  LOW.        
IN..........................          $336,799  $31,516.........................          $368,315  LOW.        
IA..........................            $5,497  $689............................            $6,186  LOW.        
KS..........................          $188,935  NOT APPLICABLE..................          $188,935  HIGH.       
KY..........................          $264,289  NOT APPLICABLE..................          $264,289  HIGH.       
LA..........................        $1,217,636  NOT APPLICABLE..................        $1,217,636  HIGH.       
ME..........................          $165,317  NOT APPLICABLE..................          $165,317  HIGH.       
MD..........................          $129,543  $15,000.........................          $144,543  LOW.        
MA..........................          $567,128  $19,052.........................          $586,180  LOW.        
MI..........................          $617,700  $67,497.........................          $685,197  LOW.        
MN..........................           $55,394  $5,225..........................           $60,618  LOW.        
MS..........................          $158,464  $16,481.........................          $174,946  LOW.        
MO..........................          $731,894  NOT APPLICABLE..................          $731,894  HIGH.       
MT..........................            $1,300  $78.............................            $1,378  LOW.        
NE(2).......................           $11,000  NOT APPLICABLE..................           $11,000  LOW.        
NV..........................           $73,560  NOT APPLICABLE..................           $73,560  HIGH.       
NH..........................          $392,006  NOT APPLICABLE..................          $392,006  HIGH.       
NJ..........................        $1,094,113  NOT APPLICABLE..................        $1,094,113  HIGH.       
NM..........................           $15,757  $1,743..........................           $17,501  LOW.        
NY..........................        $2,831,864  $206,729........................        $3,038,594  LOW.        
NC..........................          $389,266  $49,413.........................          $438,679  LOW.        
ND..........................            $1,155  $38.............................            $1,193  LOW.        
OH..........................          $566,925  $73,044.........................          $639,969  LOW.        
OK..........................           $23,568  $529............................           $24,097  LOW.        
OR..........................           $25,058  $5,537..........................           $30,594  LOW.        
PA..........................          $967,407  NOT APPLICABLE..................          $967,407  HIGH.       
RI..........................           $94,432  $7,705..........................          $102,137  LOW.        
SC..........................          $439,759  NOT APPLICABLE..................          $439,759  HIGH.       
SD..........................            $1,302  $137............................            $1,439  LOW.        
TN..........................          $430,611  NOT APPLICABLE..................          $430,611  HIGH.       
TX..........................        $1,513,029  NOT APPLICABLE..................        $1,513,029  HIGH.       
UT..........................            $5,514  $651............................            $6,165  LOW.        
VT..........................           $26,662  $1,351..........................           $28,013  LOW.        
VA..........................          $185,746  $26,038.........................          $211,785  LOW.        
WA..........................          $307,993  $33,210.........................          $341,202  LOW.        
WV..........................          $121,883  $1,710..........................          $123,592  LOW.        
WI..........................           $10,881  $1,978..........................           $12,859  LOW.        
WY..........................            $1,389  $170............................            $1,559  LOW.        
      TOTAL.................       $18,490,099  $752,609........................       $19,242,708  ,           
                             -----------------------------------------------------------------------------------
       [[Page 3253]]                                                                                            
                                                                                                                
      NOTES:................                                                                                    
(1) There was 1 low DSH State which had negative growth and 7 low DSH States which got partial growth up to 12% 
  of FFY 95 Map.                                                                                                
(2) Allotment based upon minimum payment adjustment amount.                                                     

IV. Regulatory Impact Statement

    We generally prepare a regulatory flexibility analysis that is 
consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 
through 612), unless the Administrator certifies that a notice would 
not have a significant economic impact on a substantial number of small 
entities. For purposes of a RFA, States and individuals are not 
considered small entities. However, providers are considered small 
entities. Additionally, section 1102(b) of the Act requires the 
Secretary to prepare a regulatory impact analysis if a notice may have 
a significant impact on the operations of a substantial number of small 
rural hospitals. Such an analysis must conform to the provisions of 
section 604 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital as a hospital that is located outside of 
a Metropolitan Statistical Area and has fewer than 50 beds.
    This notice does not contain rules; rather, it reflects the DSH 
allotments for each State as determined in accordance with 
Secs. 447.297 through 447.299.
    We have discussed the method of calculating the preliminary FFY 
1995 national aggregate DSH target and the preliminary FFY 1995 
individual State DSH allotments in the previous sections of this 
preamble. These calculations should have a positive impact on payments 
to DSHs. Allotments will not be reduced for high-DSH States since we 
are now interpreting the 12-percent limit as a target. Low-DSH States 
will get their base allotments plus their growth amounts.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

(Catalog of Federal Assistance Program No. 93.778, Medical 
Assistance Program)

    Dated: October 28, 1994.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
    Dated: November 16, 1994.
Donna E. Shalala,
Secretary.
[FR Doc. 95-850 Filed 1-12-95; 8:45 am]
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