[Federal Register Volume 61, Number 185 (Monday, September 23, 1996)]
[Notices]
[Pages 49781-49785]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-24229]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES
[MB-100-N]
RIN 0938-AH44


Medicaid Program; Final 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 final 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 final FFY 1996 State DSH 
allotments published in this notice supersede the preliminary FFY 1996 
DSH allotments that were published in the Federal Register on May 9, 
1996.

EFFECTIVE DATE: The final DSH payment adjustment expenditure limits 
included in this notice apply to Medicaid DSH payment adjustments for 
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 
(DSH)). The DSH 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

[[Page 49782]]

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'' 
for FFY 1996. 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).
    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. 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. For FFY 1996, no States' final State DSH allotments are 
lower than their final FFY 1995 State DSH allotments.
    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 final FFY 1996 State 
DSH allotment for the District of Columbia, Iowa, and Nebraska has been 
determined in accordance with this exception. We have also redetermined 
the State DSH allotments for FFYs 1993, 1994, and 1995 for the District 
of Columbia and the State DSH allotment for FFY 1995 for Iowa in 
accordance with the provisions of section 1923(c)(1) of the Act.
    We are publishing in this notice the final FFY 1996 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 1995 as 
reported on the State's quarterly expenditure report Form HCFA-64 
submissions and the FFY 1996 projected Medicaid expenditures as 
reported on the February 1996 Form HCFA-37 submission. All data are 
adjusted as necessary.

II. Calculations of the Final FFY 1996 DSH Limits

    The total of the final 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 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 State 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 35 low-DSH States and 15 
high-DSH States for FFY 1996.
    Using the most recent data from the States' February 1996 budget 
projections (Form HCFA-37), we estimate the States' FFY 1996 national 
total medical assistance expenditures to be $159,875,082,000. Thus, the 
overall final national FFY 1996 DSH expenditure target is 
$19,185,010,000 (12 percent of $159,875,082,000).
    In the final FFY 1996 State DSH allotments, we provide a total of 
$368,619,000 ($213,827,000 Federal share) in growth amounts for the 35 
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 actual medical assistance and administrative 
expenditures as reported on the State's four quarterly Medicaid 
expenditure reports (Form HCFA-64) for FFY 1995. Next, we compared 
those expenditures to each low-DSH State's total estimated unadjusted 
FFY 1996 medical assistance and administrative

[[Page 49783]]

expenditures as reported to HCFA on the State's February 15, 1996 
submission of the Medicaid Budget Report (Form HCFA-37).
    The growth factor percentage was multiplied by the low-DSH State's 
final FFY 1995 DSH allotment amount to establish the State's final 
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 ($19,467,072,000) is 
greater than the final FFY 1996 national target ($19,185,010,000), 
there is no final FFY 1996 redistribution pool.
    The low-DSH State's growth amount was then added to the low-DSH 
State's final FFY 1995 DSH allotment amount to establish the final 
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, five of the low-DSH States received 
partial growth amounts, and two low-DSH States received no growth 
amount.
    Also, in accordance with the minimum payment adjustments required 
by Medicare methodology, the final FFY 1996 State DSH allotments for 
the District of Columbia, Iowa, and Nebraska are $61,854,000, 
$15,735,000, and $12,031,000, respectively. In addition in accordance 
with this provision, we have redetermined the State DSH allotments for 
FFYs 1993, 1994, and 1995 for the District of Columbia to be 
$47,849,689, $50,669,700, and $52,219,263, respectively, and the State 
DSH allotment for FFY 1995 for Iowa to be $14,620,261.
    In summary, the total of all final State DSH allotments for FFY 
1996 is $19,467,072,000 ($11,049,723,000 Federal share). This total is 
composed of the prior FFY's final State DSH allotments 
($19,098,453,000) plus growth amounts for all low-DSH States 
($368,619,000), plus supplemental amounts for low-DSH States ($0). The 
total of all final 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 
final DSH allotments for FFY 1996 is $282,062,000 over the FFY 1996 
national target amount of $19,185,010,000.
    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 final 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. Final FFY 1996 DSH Allotments Under Public Law 102-234

Key to Chart:

Column and 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=Final 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 and the supplemental amounts, if 
any, from column D.
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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[GRAPHIC] [TIFF OMITTED] TN23SE96.018



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IV. Regulatory Impact

    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.
    This is not a major rule as defined at 5 U.S.C. 804(2).

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

    Dated: June 26, 1996.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.

    Dated: August 16, 1996.
Donna E. Shalala,
Secretary.
[FR Doc. 96-24229 Filed 9-20-96; 8:45 am]
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