[Federal Register Volume 60, Number 174 (Friday, September 8, 1995)]
[Notices]
[Pages 46838-46841]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22170]



-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
[MB-094-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.

-----------------------------------------------------------------------

SUMMARY: This notice announces the final 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 final FFY 1995 State 
disproportionate share hospital (DSH) allotments published in this 
notice supersede the preliminary FFY 1995 DSH allotments that were 
published in the Federal Register on January 13, 1995 (60 FR 3250).

EFFECTIVE DATE: The final 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 1902(a)(13)(A) of the Act requires States to ensure that 
their Medicaid payment rates include payment adjustments for Medicaid-
participating hospitals that serve a large number of Medicaid 
recipients and other low-income individuals with special needs 
(referred to as disproportionate share hospitals (DSH)). The payment 
adjustments are calculated on the basis of formulas specified in 
section 1923 of the Act.
    Section 1923(f) of 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 
DSH payments for each Federal fiscal year (FFY). The implementing 
regulations provide that the national aggregate DSH limit for a FFY 
specified in the Act 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 the following amounts: (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 FFY 1994. Because the national DSH 
limit is considered a target, low-DSH States whose programs grow 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 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 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 is the case for the State of Indiana for FFY 1995.
    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 $1,000,000. 

[[Page 46839]]

    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 Act. The State of Nebraska's 
final State DSH allotment has been determined in accordance with this 
exception.
    We are publishing in this notice the final FFY 1995 national DSH 
target and State DSH allotments based on the best available data we 
received to date from the States, as adjusted by HCFA. These data are 
taken from each State's actual Medicaid expenditures for FFY 1994 as 
reported on the State's quarterly expenditure report Form HCFA-64 
submissions and the FFY 1995 projected Medicaid expenditures as 
reported on the February 1995 Form HCFA-37 submission. All data are 
adjusted as necessary.

II. Calculations of the Final FFY 1995 DSH Limits

    The total of the final 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. Based on this classification, there are 34 low-DSH States and 16 
high-DSH States for FFY 1995.
    Using the most recent data from the States' February 1995 budget 
projections (Form HCFA-37), we estimate the States' FFY 1995 national 
total medical assistance expenditures to be $152,830,147,000. Thus, the 
overall final national FFY 1995 DSH expenditure target is 
$18,339,618,000 (12 percent of $152,830,147,000).
    In the final FFY 1995 State DSH allotments, we provide a total of 
$644,305,000 ($356,788,000 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 
total FFY 1994 medical assistance and administrative expenditures as 
reported on the State's quarterly expenditure reports (Form HCFA-64) 
for FFY 1994. Next, we compared the FFY 1994 reported expenditures to 
each low-DSH State's total estimated unadjusted FFY 1995 medical 
assistance and administrative expenditures as reported to HCFA on the 
State's February 1995 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 final 
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 ($19,084,239,000) is 
greater than the final FFY 1995 national target ($18,339,618,000), 
there is no final 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 final 
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 that, 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, nine of the low-DSH States received 
partial growth amounts.
    As explained above, Indiana's final FFY 1995 DSH allotment is lower 
than its final FFY 1994 DSH allotment. Also, in accordance with the 
minimum payment adjustments required by Medicare methodology, 
Nebraska's FFY 1995 State DSH allotment is $11,000,000.
    In summary, the total of all final State DSH allotments for FFY 
1995 is $19,084,239,000 ($10,886,177,000 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 
($644,305,000), minus the amount of reduction in Indiana's FFY 1995 DSH 
allotment ($50,165,000), plus supplemental amounts for low-DSH States 
($0). The total of all final FFY 1995 State DSH allotments is 12.5 
percent of the total medical assistance expenditures (excluding 
administrative costs) projected to be made by these States in FFY 1995. 
The total of all final DSH allotments for FFY 1995 is $744,621,000 over 
the FFY 1995 national target amount of $18,339,618,000.
    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 published in this notice. 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 plan 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. Additional DSH payment adjustment expenditures 
made in succeeding FFYs that are applicable to FFY 1995 will continue 
to be reconciled with 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. As a result, any DSH payment 
adjustment expenditures in excess of the final DSH allotment will be 
disallowed; and therefore, subject to the normal Medicaid disallowance 
procedures.

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

Key to Chart

------------------------------------------------------------------------
              Column                            Description             
------------------------------------------------------------------------
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 46840]]
                                                                        
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 =.......................  Final 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 for
                                    FFY 1995. ``High'' indicates the    
                                    State is a high-DSH State and       
                                    ``Low'' indicates the State is a low-
                                    DSH State, after calculation of the 
                                    final State DSH allotments.         
------------------------------------------------------------------------



       Final 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    Growth amounts                                          
              State                  allotments for      for low DSH     Final FFY95 state     High or low DSH  
                                       all states         states\1\        DSH allotments     state designation 
  A                                                B                  C                  D  E                   
----------------------------------------------------------------------------------------------------------------
AL...............................           $417,458     Not applicable           $417,458  High.               
AK...............................             19,589              1,011             20,600  Low.                
AR...............................              3,039                300              3,338  Low.                
CA...............................          2,191,451     Not applicable          2,191,451  High.               
CO...............................            302,014     Not applicable            302,014  High.               
CT...............................            408,933     Not applicable            408,933  High.               
DE...............................              5,924              1,145              7,069   Low.               
DC...............................             41,039              5,466             46,505  Low.                
FL...............................            286,478             47,706            334,183  Low.                
GA...............................            382,344             26,799            409,142  Low.                
HI...............................             64,078             18,608             82,686  Low.                
ID...............................              1,985                100              2,085  Low.                
IL...............................            394,993             57,178            452,172  Low.                
IN \2\...........................            336,799     Not applicable            286,634  Low.                
IA...............................              5,497                623              6,121  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             13,557            143,100  Low.                
MA...............................            567,128              8,162            575,289  Low.                
MI...............................            617,700             56,305            674,005  Low.                
MN...............................             55,394              6,004             61,398  Low.                
MS...............................            158,464             24,736            183,200  Low.                
MO...............................            731,894     Not applicable            731,894  High.               
MT...............................              1,300                 42              1,342  Low.                
NE \3\...........................             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              1,546             17,303  Low.                
NY...............................          2,831,864            192,007          3,023,871  Low.                
NC...............................            389,266             40,840            430,106  Low.                
ND...............................              1,155                 48              1,203  Low.                
OH...............................            566,925             62,999            629,925  Low.                
OK...............................             23,568                658             24,225  Low.                
OR...............................             25,058              6,356             31,413  Low.                
PA...............................            967,407     Not applicable            967,407  High.               
RI...............................             94,432             16,470            110,901  Low.                
SC...............................            439,759     Not applicable            439,759  High.               
SD...............................              1,302                140              1,443  Low.                
TN...............................            430,611     Not applicable            430,611  High.               
TX...............................          1,513,029     Not applicable          1,513,029  High.               

[[Page 46841]]
                                                                                                                
UT...............................              5,514                429              5,943  Low.                
VT...............................             26,662              2,419             29,081  Low.                
VA...............................            185,746             19,051            204,798  Low.                
WA...............................            307,993             28,535            336,527  Low.                
WV...............................            121,883              4,211            126,094  Low.                
WI...............................             10,881                724             11,605  Low.                
WY...............................              1,389                131              1,520  Low.                
                                  ---------------------------------------------------------                     
    Total........................        $18,490,099           $644,305       $19,084,239                       
Notes                                                                                                           
\1\ There was 1 low DSH state which had negative growth and 9 low DSH states which got partial growth up to 12% 
  of FFY 95 MAP.                                                                                                
\2\ Due to negative growth, allotment limited to 12% of FFY 95 MAP.                                             
\3\ 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 Secretary 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 sets forth no changes in our regulations; 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 final FFY 1995 
national aggregate DSH target and the final 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 interpret 
the 12 percent limit as a target. Low-DSH States will get their prior 
FFY DSH 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: June 26, 1995.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
[FR Doc. 95-22170 Filed 9-7-95; 8:45 am]
BILLING CODE 4120-01-P