[Federal Register Volume 61, Number 91 (Thursday, May 9, 1996)]
[Notices]
[Pages 21195-21198]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-11627]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
[MB-098-N]
Medicaid Program; Limitations on Aggregate Payments to
Disproportionate Share Hospitals: Federal Fiscal Year 1996
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Notice.
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SUMMARY: This notice announces the preliminary Federal fiscal year
(FFY) 1996 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 and implementing
regulations at 42 CFR 447.297 through 447.299. The preliminary FFY 1996
State disproportionate share hospital (DSH) allotments published in
this notice will be superseded by final FFY 1996 DSH allotments to be
published in the Federal Register subsequent to the publication of this
notice.
EFFECTIVE DATE: The preliminary DSH payment adjustment expenditure
limits included in this notice apply to Medicaid DSH payment
adjustments that are applicable to FFY 1996.
FOR FURTHER INFORMATION CONTACT: Richard Strauss, (410) 786-2019.
SUPPLEMENTARY INFORMATION:
I. Background
Section 1902(a)(13)(A) of the Social Security Act (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
(DSHs)). 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
[[Page 21196]]
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 1996 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 1996 is referred to as a ``high-DSH
State.'' The FFY 1996 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 1996 is referred to
as a ``low-DSH State.'' The FFY 1996 State DSH allotment for a low-DSH
State is equal to the State's DSH allotment for FFY 1995 increased by
growth amounts and supplemental amounts, if any. However, the FFY 1996
DSH allotment for a low-DSH State cannot exceed 12 percent of the
State's total medical assistance expenditures for FFY 1996 (excluding
administrative costs).
A State that is classified as a high-DSH State for one year,
because its base allotment exceeds 12 percent of its total medical
assistance expenditures for that year, may not continue to meet the
high-DSH State definition in other years. That is, if the State's base
allotment for another year is equal to or less than 12 percent of its
total medical assistance for that year, the State would be classified
as a low-DSH State for that year. As a low-DSH State, the State could
potentially receive growth for that year.
The growth amount for FFY 1996 is equal to the projected percentage
increase (the growth factor) in a low-DSH State's total Medicaid
program expenditures between FFY 1995 and FFY 1996 multiplied by the
State's final DSH allotment for FFY 1995. 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 1995 and FFY 1996. Furthermore, because a low-DSH
State's FFY 1996 DSH allotment cannot exceed 12 percent of the State's
total medical assistance expenditures, it is possible for its FFY 1996
DSH allotment to be lower than its FFY 1995 DSH allotment. For example,
this occurs when the State experiences a decrease in its program
expenditures between FFY 1995 and FFY 1996 and its 1995 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 Rhode Island for FFY 1996.
There is no supplemental amount available for redistribution for
FFY 1996. 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 1996 national 12-
percent DSH target, there is no redistribution pool and, therefore, no
supplemental amounts for FFY 1996.
As prescribed in the law and regulations, no State's DSH allotment
will be below a minimum of $1,000,000.
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
preliminary State DSH allotment has been determined in accordance with
this exception.
We are publishing in this notice the preliminary FFY 1996 national
DSH target and State DSH allotments based on the best available data we
received from the States' August 1995 submissions of the Medicaid
budget report (Form HCFA-37), as adjusted by HCFA. We intend to publish
the final FFY 1996 DSH allotments in the Federal Register subsequent to
the publication of this notice.
The final allotments are calculated using actual Medicaid
expenditures for FFY 1995 as reported to HCFA on States' quarterly
expenditure reports (Form HCFA-64) for FFY 1995 and estimates of
Medicaid expenditures for FFY 1996 as reported to HCFA on States' Form
HCFA-37 February 1996 submissions.
II. Calculations of the Preliminary FFY 1996 DSH Limits
The total of the preliminary State DSH allotments for FFY 1996 is
equal to the sum of the base allotments for all high-DSH States, the
FFY 1995 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 under title XIX of the Act in
FFY 1996, 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 plan under title XIX of the Act in FFY 1996, we classified
that State as a ``low-DSH'' State. Based on this classification, there
are 36 low-DSH States and 14 high-DSH States for FFY 1996.
Using the most recent data from the States' August 1995 budget
projections (Form HCFA-37), we estimate the States' FFY 1996 national
total medical assistance expenditures to be $160,184,881,000. Thus, the
overall preliminary national FFY 1996 DSH expenditure target is
$19,222,186,000 (12 percent of $160,184,881,000).
In the preliminary FFY 1996 State DSH allotments, we provide a
total of $519,764,000 ($310,963,000 Federal share) in growth amounts
for the 36 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 1995 and FFY 1996.
To compute this percentage, we first ascertained each low-DSH State's
total FFY 1995 medical assistance and
[[Page 21197]]
administrative expenditures as reported on the State's August 15, 1995,
submission of the Medicaid Budget Report (Form HCFA-37) through the
``cutoff'' date of September 8, 1995. The cutoff date is the date
through which the August 1995 Medicaid budget report submission
estimates are accepted and applied in preparing the States' Medicaid
grant award for the upcoming quarter (October through December 1995).
Next, we compared those estimates to each low-DSH State's total
estimated unadjusted FFY 1996 medical assistance and administrative
expenditures as reported to HCFA on the States' August 1995 Form HCFA-
37 submission.
The growth factor percentage was multiplied by the low-DSH States'
final FFY 1995 DSH allotment amount to establish the States'
preliminary growth amount for FFY 1996.
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 ($19,602,716,000) is
greater than the preliminary FFY 1996 national target
($19,222,186,000), there is no preliminary FFY 1996 redistribution
pool.
The low-DSH States' growth amount was then added to the low-DSH
States' final FFY 1995 DSH allotment amount to establish the
preliminary total low-DSH State DSH allotment for FFY 1996. If a
State's growth amount, when added to its final FFY 1995 DSH allotment
amount, exceeds 12 percent of its FFY 1996 estimated medical assistance
expenditures, the State only receives a partial growth amount that,
when added to its final FFY 1995 allotment, limits its total State DSH
allotment for FFY 1996 to 12 percent of its estimated FFY 1996 medical
assistance expenditures. For this reason, six of the low-DSH States
received partial growth amounts.
As explained above, Rhode Island's preliminary FFY 1996 DSH
allotment is lower than its final FFY 1995 DSH allotment. Also, in
accordance with the minimum payment adjustments required by Medicare
methodology, Nebraska's FFY 1996 State DSH allotment is $11,000,000.
In summary, the total of all preliminary State DSH allotments for
FFY 1996 is $19,602,716,000 ($11,137,851,000 Federal share). This total
is composed of the prior FFY's final State DSH allotments
($19,084,239,000) plus growth amounts for all low-DSH States
($519,764,000), minus the amount of reduction in Rhode Island's FFY
1996 DSH allotment ($1,286,000), plus supplemental amounts for low-DSH
States ($0). The total of all preliminary FFY 1996 State DSH allotments
is 12.2 percent of the total medical assistance expenditures (excluding
administrative costs) projected to be made by these States in FFY 1996.
The total of all preliminary DSH allotments for FFY 1996 is
$380,531,000 over the FFY 1996 national target amount of
$19,222,186,000.
Each State should monitor and make any necessary adjustments to its
DSH spending during FFY 1996 to ensure that its actual FFY 1996 DSH
payment adjustment expenditures do not exceed its preliminary State DSH
allotment for FFY 1996 published in this notice. As the ongoing
reconciliation between actual FFY 1996 DSH payment adjustment
expenditures and the FFY 1996 DSH allotments takes place, each State
should amend its plan as may be necessary to make any adjustments to
its FFY 1996 DSH payment adjustment expenditure patterns so that the
State will not exceed its FFY 1996 DSH allotment.
The FFY 1996 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 1996. Additional DSH payment adjustment expenditures
made in succeeding FFYs that are applicable to FFY 1996 will continue
to be reconciled with each State's FFY 1996 DSH allotment as additional
expenditure reports are submitted to ensure that the FFY 1996 DSH
allotment is not exceeded. As a result, any DSH payment adjustment
expenditures for FFY 1996 in excess of the FFY 1996 DSH allotment will
be disallowed; and therefore, subject to the normal Medicaid
disallowance procedures.
III. Preliminary FFY 1996 DSH Allotments Under Public Law 102-234
Key to Chart:
Column/Description
Column A = Name of State
Column B = Final FFY 1995 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 1995, which was published in
the Federal Register on September 8, 1995.
Column C = Growth Amounts for Low-DSH States. This is an increase in a
low-DSH State's final FFY 1995 DSH allotment to the extent that the
State's Medicaid program grew between FFY 1995 and FFY 1996.
Column D = Preliminary FFY 1996 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 1995
from column B plus the growth amounts from column C.
Column E = High- or Low- DSH State Designation for FFY 1996. ``High''
indicates the State is a high-DSH State and ``Low'' indicates the State
is a low-DSH State.
IV. Regulatory Impact Statement
We generally prepare a regulatory flexibility analysis that is
consistent with the Regulatory Flexibility Act (R.A.) (5 U.S.C. 601
through 612), unless we certify that a notice would not have a
significant economic impact on a substantial number of small entities.
For purposes of an R.A., States and individuals are not considered
small entities. However, providers are considered small entities.
Additionally, section 1102(b) of the Act requires us 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 R.A.
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 preliminary FFY
1996 national aggregate DSH target and the preliminary FFY 1996
individual State DSH allotments in the previous sections of this
notice. 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 12886, this
notice was reviewed by the Office of Management and Budget.
(No. 93.778, Medical Assistance Program)
[[Page 21198]]
Dated: February 21, 1996.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
Dated: April 5, 1996.
Donna E. Shalala,
Secretary.
[FR Doc. 96-11627 Filed 5-8-96; 8:45 am]
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