[Federal Register Volume 61, Number 112 (Monday, June 10, 1996)]
[Notices]
[Pages 29418-29423]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14595]



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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
[MB-098-CN]
RIN 0938-AH30


Medicaid Program; Limitations on Aggregate Payments to 
Disproportionate Share Hospitals: Federal Fiscal Year 1996; Correction

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

ACTION: Correction notice.

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SUMMARY: In the May 9, 1996 issue of the Federal Register (61 FR 
21195), we announced 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. In that 
notice, we inadvertently omitted the chart that contained the listing 
of the individual State allotments and the regulation identification 
number (RIN) in the heading of the notice. In addition, only a portion 
of the Catalog of Federal Domestic Assistance identification at the end 
of the document prior to the signatures was included. For the benefit 
of the readers, we are reprinting the entire notice. The corrected 
notice reads as follows:

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

[MB-098-N]

RIN 0938-AH30

Medicaid Program; Limitations on Aggregate Payments to Disproportionate 
Share Hospitals: Federal Fiscal Year 1996

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

ACTION: Notice.

SUMMARY: This notice announces the preliminary Federal fiscal year 
(FFY) 1996 national target and individual

[[Page 29419]]

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(DSH) allotments published in this notice will be superseded by final 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 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

[[Page 29420]]

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 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.

[[Page 29421]]

III. Preliminary FFY 1996 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 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.  
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BILLING CODE 4120-01-P

[[Page 29422]]

[GRAPHIC] [TIFF OMITTED] TN10JN96.002



BILLING CODE 4120-01-C

[[Page 29423]]

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 we certify that a notice would not have a 
significant economic impact on a substantial number of small entities. 
For purposes of the RFA, 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 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 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 with Executive Order 12886, this 
notice was reviewed by the Office of Management and Budget.

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

    Dated: February 21, 1996.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
    Dated: April 5, 1996.
Donna E. Shalala,
Secretary.
(Sec. 1102 of the Social Security Act; 42 U.S.C. 1302)

    Dated: June 4, 1996.
Neil J. Stillman,
Deputy Assistant Secretary for Information Resources Management.
[FR Doc. 96-14595 Filed 6-7-96; 8:45 am]
BILLING CODE 4120-01-P