The ACA Medicaid Expansion, Disproportionate Share Hospitals, and Uncompensated Care.

OBJECTIVE: To estimate the effect of the first full year of the ACA Medicaid expansion on hospital provision of uncompensated care, with special attention paid to hospitals that treat a disproportionate share of low-income patients. DATA SOURCES: Data from a balanced panel of short-term, general, nonfederal, Medicare-certified hospitals were obtained from Medicare cost reports from 2011 to 2014. STUDY DESIGN/STUDY SETTING: A series of difference-in-differences analyses were performed using hospitals in nonexpansion states as the control group. The dependent variable is hospital provision of uncompensated care. DATA COLLECTION/EXTRACTION METHODS: The data were downloaded from the National Bureau of Economic Research website. PRINCIPAL FINDINGS: The Medicaid expansion significantly reduced hospital provision of uncompensated care in 2014. In particular, within expansion states, DSH hospitals saw reductions beyond those experienced by non-DSH hospitals. CONCLUSIONS: Evidence from this study indicates that the Medicaid expansion served to widen an already broad gap in provision of uncompensated care between hospitals in expansion and nonexpansion states. In addition, within expansion states, variation in uncompensated care between hospitals that treat a disproportionate share of low-income patients and those that do not was reduced, with the former experiencing significantly larger reductions. Lawmakers considering expanding Medicaid and those deciding appropriate levels of DSH payments should consider these findings.

Medicaid Program; Disproportionate Share Hospital Payments--Treatment of Third Party Payers in Calculating Uncompensated Care Costs. Final rule.

This final rule addresses the hospital-specific limitation on Medicaid disproportionate share hospital (DSH) payments under section 1923(g)(1)(A) of the Social Security Act (Act), and the application of such limitation in the annual DSH audits required under section 1923(j) of the Act, by clarifying that the hospital-specific DSH limit is based only on uncompensated care costs. Specifically, this rule makes explicit in the text of the regulation, an existing interpretation that uncompensated care costs include only those costs for Medicaid eligible individuals that remain after accounting for payments made to hospitals by or on behalf of Medicaid eligible individuals, including Medicare and other third party payments that compensate the hospitals for care furnished to such individuals. As a result, the hospital-specific limit calculation will reflect only the costs for Medicaid eligible individuals for which the hospital has not received payment from any source.

Distribution of Disproportionate Share Hospital Payments to Rural and Critical Access Hospitals.

Purpose: This policy brief provides data assessing effects of Medicaid Disproportionate Share Hospital (DSH) payment on rural hospitals in 47 states. While the allocation of DSH funds to the state is determined by federal legislation utilizing a formula developed by the Centers for Medicare & Medicaid Services (CMS), each state determines distribution to hospitals using an approved State Plan Amendment (SPA) that meets minimum federal requirements. Our findings suggest that distribution to rural hospitals, and critical access hospitals (CAHs) in particular, varies considerably across states. Data presented in this document helps ground any changes to either federal requirements or to SPAs by showing the impact of DSH payment from the most recent data available. Key Findings: (1) Medicaid DSH payment methodology and distribution to hospitals varies considerably across states. (2) The percentage of rural hospitals in a state receiving any Medicaid DSH payment ranged from 0 percent to 100 percent. (3) For rural hospitals receiving Medicaid DSH payments, the impact on total patient revenue ranged from less than 0.5 percent to 8.8 percent.

Contrary To Popular Belief, Medicaid Hospital Admissions Are Often Profitable Because Of Additional Medicare Payments.

It is generally believed that most hospitals lose money on Medicaid admissions. The data suggest otherwise. Medicaid admissions are often profitable for hospitals because of payments from both the Medicaid program and the Medicare program, including payments for uncompensated care and from the Medicare disproportionate-share hospital program. On average, adding a single Medicaid patient day in fiscal year 2017 will increase most hospitals' Medicare payments by more than $300. When added to Medicaid payments, these payments often cause Medicaid patients to be profitable for hospitals. In contrast, adding a single charity care day in the same year will decrease overall Medicare payments by about $20 on average. The Centers for Medicare and Medicaid Services recently announced a proposal to shift some Medicare payments from supporting hospitals' costs for Medicaid patients to directly supporting their costs for uncompensated care. If that proposal is adopted, hospitals' profits on Medicaid patients would decrease, but their losses on care for the uninsured would be reduced.

Financial Loss for Inpatient Care of Medicaid-Insured Children.

Importance: Medicaid payments tend to be less than the cost of care. Federal Disproportionate Share Hospital (DSH) payments help hospitals recover such uncompensated costs of Medicaid-insured and uninsured patients. The Patient Protection and Affordable Care Act reduces DSH payments in anticipation of fewer uninsured patients and therefore decreased uncompensated care. However, unlike adults, few hospitalized children are uninsured, while many have Medicaid coverage. Therefore, DSH payment reductions may expose extensive Medicaid financial losses for hospitals serving large absolute numbers of children. Objectives: To identify types of hospitals with the highest Medicaid losses from pediatric inpatient care and to estimate the proportion of losses recovered through DSH payments. Design, Setting, and Participants: This retrospective cross-sectional analysis evaluated Medicaid-insured hospital discharges of patients 20 years and younger from 23 states in the 2009 Kids' Inpatient Database. The dates of the analysis were March to September 2015. Hospitals were categorized as freestanding children's hospitals (FSCHs), children's hospitals within general hospitals, non-children's hospital teaching hospitals, and non-children's hospital nonteaching hospitals. Financial records of FSCHs in the data set were used to estimate the proportion of Medicaid losses recovered through DSH payments. Main Outcomes and Measures: Hospital financial losses from inpatient care of Medicaid-insured children (defined as the reimbursement minus the cost of care) were compared across hospital types. For our subsample of FSCHs, Medicaid-insured inpatient financial losses were calculated with and without each hospital's DSH payment. Results: The 2009 Kids' Inpatient Database study population included 1485 hospitals and 843 725 Medicaid-insured discharges. Freestanding children's hospitals had a higher median number of Medicaid-insured discharges (4082; interquartile range [IQR], 3524-5213) vs non-children's hospital teaching hospitals (674; IQR, 258-1414) and non-children's hospital nonteaching hospitals (161; IQR, 41-420). Freestanding children's hospitals had the largest median Medicaid losses from pediatric inpatient care (-$9 722 367; IQR, -$16 248 369 to -$2 137 902). Smaller losses were experienced by non-children's hospital teaching hospitals (-$204 100; IQR, -$1 014 100 to $14 700]) and non-children's hospital nonteaching hospitals (-$28 310; IQR, -$152 370 to $9040]). Disproportionate Share Hospital payments to FSCHs reduced their Medicaid losses by almost half. Conclusions and Relevance: Estimated financial losses from pediatric inpatients covered by Medicaid were much larger for FSCHs than for other hospital types. For children's hospitals, small anticipated increases in insured children are unlikely to offset the reductions in DSH payments.

Pay-for-performance schemes that use patient and provider categories would reduce payment disparities.

Providers that care for disproportionate numbers of disadvantaged patients tend to perform less well than other providers on quality measures commonly used in pay-for-performance programs. This can lead to the undesired effect of redistributing resources away from providers that most need them to improve care. We present a new pay-for-performance scheme that retains the motivational aspects of standard incentive designs while avoiding undesired effects. We tested an alternative incentive payment approach that started with a standard incentive payment allocation but then "post-adjusted" provider payments using predefined patient or provider characteristics. We evaluated whether such an approach would mitigate the negative effects of redistributions of payments across provider organizations in California with disparate patient populations. The post-adjustment approach nearly doubled payments to disadvantaged provider organizations and greatly reduced payment differentials across provider organizations according to patients' income, race/ethnicity, and region. The post-adjustment of payments could be a useful supplement to paying for improvement, aligning the goals of disparity reduction and quality improvement.

Medicaid program; disproportionate share hospital payments--uninsured definition. Final rule.

This final rule addresses the hospital-specific limitation on Medicaid disproportionate share hospital (DSH) payments under the Social Security Act (the Act). Under this limitation, DSH payments to a hospital cannot exceed the uncompensated costs of furnishing hospital services by the hospital to individuals who are Medicaid-eligible or "have no health insurance (or other source of third party coverage) for the services furnished during the year.'' This rule provides that, in auditing DSH payments, the quoted test will be applied on a service-specific basis; so that the calculation of uncompensated care for purposes of the hospital-specific DSH limit will include the cost of each service furnished to an individual by that hospital for which the individual had no health insurance or other source of third party coverage.

Identifying hospitals that may be at most financial risk from Medicaid disproportionate-share hospital payment cuts.

Medicaid disproportionate-share hospital (DSH) payments are expected to decline by $35.1 billion between fiscal years 2017 and 2024, a reduction brought about by the Affordable Care Act (ACA) and recent congressional action. DSH payments have long been a feature of the Medicaid program, intended to partially offset uncompensated care costs incurred by hospitals that treat uninsured and Medicaid populations. The DSH payment cuts were predicated on the expectation that the ACA's expansion of health insurance to millions of Americans would bring about a decline in many hospitals' uncompensated care costs. However, the decision of twenty-five states not to expand their Medicaid programs, combined with residual coverage gaps, may leave as many as thirty million people uninsured, and hospitals will bear the burden of their uncompensated care costs. We sought to identify the hospitals that may be the most financially vulnerable to reductions in Medicaid DSH payments. We found that of the 529 acute care hospitals that will be particularly affected by the cuts, 225 (42.5 percent) are in weak financial condition. Policy makers should recognize that decreases in revenue may affect these hospitals' ability to give vulnerable populations access to care.

Disproportionate-share hospital payment reductions may threaten the financial stability of safety-net hospitals.

Safety-net hospitals rely on disproportionate-share hospital (DSH) payments to help cover uncompensated care costs and underpayments by Medicaid (known as Medicaid shortfalls). The Affordable Care Act (ACA) anticipates that insurance expansion will increase safety-net hospitals' revenues and will reduce DSH payments accordingly. We examined the impact of the ACA's Medicaid DSH reductions on California public hospitals' financial stability by estimating how total DSH costs (uncompensated care costs and Medicaid shortfalls) will change as a result of insurance expansion and the offsetting DSH reductions. Decreases in uncompensated care costs resulting from the ACA insurance expansion may not match the act's DSH reductions because of the high number of people who will remain uninsured, low Medicaid reimbursement rates, and medical cost inflation. Taking these three factors into account, we estimate that California public hospitals' total DSH costs will increase from $2.044 billion in 2010 to $2.363-$2.503 billion in 2019, with unmet DSH costs of $1.381-$1.537 billion.

Where does the money go? Analyzing the patient experience in safety-net hospitals.

BACKGROUND: Low-income, publicly insured admissions historically cost more to treat than does the average patient. To ensure that hospitals are reimbursed an adequate amount for care of indigent populations, Medicare reimburses hospitals an additional percentage amount according to federally set financial schedule. At 15% of a disproportionate patient percentage, a hospital is reimbursed an extra 2.5% of the standard prospective payment rate. OBJECTIVE: This research seeks to determine whether hospital qualification as a Medicare Disproportionate Share Hospital results in higher patient experience ratings. METHODS: A regression discontinuity method was used to determine the effect of lagged Disproportionate Share Hospital (DSH) status on next year patient experience ratings. The Hospital Consumer Assessment of Healthcare Providers and Systems data provide publicly available patient ratings. RESULTS: On average, hospital ratings increase by 6% as a result of DSH status. Hospital ratings increase by an average of 6.5% when nonprofit hospitals are analyzed. This finding is primarily driven by patient facility cleanliness and medical provider communication ratings. CONCLUSIONS: The federal mandate that individuals purchase health insurance in the United States coupled with the state expansion of Medicaid coverage will theoretically eliminate the need for Medicare DSH payments. It is calculated, however, that hospitals will need increased Medicaid reimbursements of more than $300 per patient to make up for the loss of Medicare DSH reimbursements. Hospitals will likely suffer financially as a direct result of reduced Medicare reimbursements through the DSH program.

The new Medicare DSH payment: what's baked into the pie--and how it's sliced.

Medicare's new disproportionate share hospital (DSH) payment method combines a payment amounting to 25 percent of what a hospital would have traditionally received with an additional amount that is the product of three factors: An estimate of the aggregate amount of DSH payments that the Medicare program would have paid in FFY14 under the traditional payment method. An adjustment to that figure to account for an estimated percentage change in the national uninsured rate between FFY13 and FFY14. Each hospital's estimated percentage of the total uncompensated care costs incurred by all hospitals that are expected to qualify for DSH payments.

Medicare program; FY 2014 inpatient prospective payment systems: changes to certain cost reporting procedures related to disproportionate share hospital uncompensated care payments. Interim final rule with comment period.

: In the fiscal year (FY) 2014 inpatient prospective payment systems (IPPS)/long-term care hospital (LTCH) PPS final rule, we established the methodology for determining the amount of uncompensated care payments made to hospitals eligible for the disproportionate share hospital (DSH) payment adjustment in FY 2014 and a process for making interim and final payments. This interim final rule with comment period revises certain operational considerations for hospitals with Medicare cost reporting periods that span more than one Federal fiscal year and also makes changes to the data that will be used in the uncompensated care payment calculation in order to ensure that data from Indian Health Service (IHS) hospitals are included in Factor 1 and Factor 3 of that calculation.

Medicaid program; state disproportionate share hospital allotment reductions. Final rule.

The statute, as amended by the Affordable Care Act, requires aggregate reductions to state Medicaid Disproportionate Share Hospital (DSH) allotments annually from fiscal year (FY) 2014 through FY 2020. This final rule delineates a methodology to implement the annual reductions for FY 2014 and FY 2015. The rule also includes additional DSH reporting requirements for use in implementing the DSH health reform methodology.

CMS's proposed rule implementing the ACA-mandated Medicaid DSH reductions.

State Medicaid programs make Medicaid disproportionate share hospital (DSH) payments to hospitals to help offset costs of uncompensated care for Medicaid and uninsured patients. Unlike most Medicaid spending, annual DSH allotments for each state are capped. Under the Patient Protection and Affordable Care Act of 2010 (ACA), DSH payments will decrease starting in fiscal year (FY) 2014 and continuing through FY 2020. This paper describes the proposed rule for reducing these federal allotments, which was released on May 15, 2013, by the Centers for Medicare & Medicaid Services (CMS). Comments on the proposed rule are due July 12, 2013.

Changes in latitudes, changes in attitudes: FQHCs and community clinics in a reformed health care market.

The Patient Protection and Affordable Care Act of 2010 and the Supreme Court's related decision have significantly shifted the health care landscape for safety net providers. Federally qualified health centers (FQHCs) are a mainstay of primary care for the uninsured and those with limited access to care. This paper focuses on the impact of health reform on FQHCs given the significant federal investment in them through grants, Medicaid, and Medicare reimbursement. Where noteworthy, the effect on non-FQHC community clinics is also discussed. The implications of Medicaid coverage expansions (or lack thereof in states that choose not to expand), Medicaid disproportionate share hospital program cuts, discretionary budgets and sequestration, Medicare payment changes, contracting with qualified health plans in state health insurance exchanges, and delivery system reforms are explored.

The second market failure phenomenon in safety-net health systems: the case of a municipal academic medical center from 1980 to 2000.

The specific aim of this analysis is to demonstrate how the trade-off between efficiency and equity policy approaches affects the ability of at-risk children to access quality health care services at the King/Drew Medical Center of Los Angeles County from 1980 to 2000. The concept of a second market phenomenon is used as a framework to illustrate how efficiency-seeking behaviors of federal, state, and local government actors affected government intervention efforts initiated to remedy health care access hardships created by market failure in low-income communities. A second market failure occurs when government failure results from the reintroduction of market protocols in an environment where the market had originally failed to facilitate the distribution of basic goods and services. The review suggest that financial austerity at the Los Angeles County Department of Health Services in the context of federal, state, and local government policies that emphasized allocative efficiencies, compromised equity values by undermining access to quality pediatric services at the King/Drew Medical Center which was a municipal academic medical center.