Medicaid Disproportionate Share Adjustments

The Medicaid program will assist hospitals which carrya disproportionate financialburden of caring for the uninsured and low income persons of the Commonwealth. In accordance with Title XIX rules and requirement, Medicaid will make an additional payment adjustments to hospitals which qualify for such an adjustment under any one or more of the following classification. Eligibility requirements for each type of disproportionate share adjustment and the methodology for calculating these adjustments are described in 114.1 CMR 39.07. (1) To qualify for any type of disproportionate payment adjustment, a hospital must have a Medicaid inpatient utilization rate (calculated by dividing Medicaid patient days by totalpatient days) ofnot less than 1%. (2) The total of all disproportionate share payments awarded to a particular hospital under 114.1 CMR 39.07 shall not exceed the costs incurred during the year of furnishing hospital services to individuals who either are eligible for Medicaid or have no health insurance or source of third part coverage, less payments by Medicaid and by uninsured patients. (3) Data Sources. The Division shall determine for each fiscalyear a federally-mandated Medicaid disproportionate share adjustment, for all eligible hospitals, using the data and methodology described below. The Divisionshalluse the following data sources in its disproportionate share adjustment, unless the specified data source is unavailable. If the specified data source is unavailable, the Division shall determine and use the best alternative data source. (a) The prior year RSC-403 report shall be used to determine Medicaid days, total days, Medicaid inpatient net revenues, total inpatient net revenues, totalinpatient charges and free care charge-offs. If said RSC-403 report is not available, the Division shall use the most recent available previous RSC-403 report to estimate these variables. (b) The hospital's audited financial statements for the prior year shall be used to determine the state and/or local government cash subsidy. (c) The prior year claims data residing on the Division of Medical Assistance’s Massachusetts Medicaid Information System shall be used to determine exceptionallyhigh costs and exceptionally long lengths of stay for the outlier adjustment for medically necessary inpatient hospital services involving exceptionally high costs or exceptionally long lengths of stay of individuals under six years of age pursuant to 114.1 CMR 39.07(7). (4) Determination of Eligibility Under the Medicaid Utilization Method. The Division shall calculate a threshold Medicaid inpatient utilization rate to be used as a standard for determiningthe eligibilityof non-acute care hospitals for the federally-mandated disproportionate share adjustment. The Division shall determine such threshold as follows: (a) First, calculate the statewide weighted average Medicaid inpatient utilization rate. This shall be determined by dividing the sum of Medicaid days for all non-acute care hospitals in the state by the sum of total inpatient days for all non-acute care hospitals in the state. (b) Second, calculate the statewide weighted standard deviation for Medicaid inpatient utilization statistics. (c) Third, add the statewide weighted standard deviation for Medicaid inpatient utilization to the statewide weighted average Medicaid inpatient utilization rate. The sum of these two numbersshall be the threshold Medicaid inpatient utilization rate. (d) The Division shallthencalculate eachhospital's Medicaid inpatient utilization rate by dividing each hospital's Medicaid inpatientdaysby its total inpatient days. If this hospital-specific Medicaid inpatient utilization rate equals or exceeds the threshold Medicaid inpatientutilizationrate calculated pursuant to 114.1 CMR 39.07(4)(c), thenthe hospitalshallbe eligible for the federally-mandated Medicaid disproportionate share adjustment under the Medicaid utilization method. (5) Determination of Eligibility Under the Low-Income Utilization Rate Method. The Division shall calculate each hospital's low-income utilization rate. The Division shall make such determination as follows: (a) First, calculate the Medicaid and subsidy share of net revenues by dividing the sum of Medicaid net revenues plus state and local government subsidies by the sum of total net revenues plus state and local government subsidies. (b) Second, calculate the free care percentage oftotalinpatient charges by dividing the inpatient share of audited free care charge-offs by total inpatient charges. (c) Third, compute the low-income utilization rate by adding the Medicaid and subsidy share of net revenues calculated pursuant to 114.1 CMR 39.07(5)(a) to the free care percentage of total inpatient charges calculated pursuant to 114.1 CMR 39.07(5)(b). If the low-income utilization rate exceeds 25%, the hospital shall be eligible for the federally-mandated Medicaid disproportionate share adjustment under the low-income utilization rate method. (6) Determination of Payment. The payment under the federally-mandated disproportionate share adjustment requirement shall be calculated as follows: (a) For each hospital determined eligible for the federally-mandated Medicaid disproportionate share adjustment under the Medicaid utilization method established in 114.1 CMR 39.07(4), the Division shall divide the hospital's Medicaid utilization rate calculated pursuant to 114.1 CMR 39.07(4)(d) by the threshold Medicaid utilization rate calculated pursuant to 114.1 CMR 39.07(4)(c). The ratio resulting from such division shall be the federally-mandated Medicaid disproportionate share ratio. (b) For each hospital determined eligible for the federally-mandated Medicaid disproportionate share adjustment under the low-income utilization rate method, but not found to be eligible for the federally-mandated Medicaid disproportionate share adjustment under the Medicaid utilization method, the Division shall set the hospital's federally-mandated Medicaid disproportionate share ratio equal to one. (c) The Division shall then determine, for the group of all eligible hospitals, the sum of federally- mandated Medicaid disproportionate share ratios calculated pursuant to 114.1 CMR 39.07(6)(a) and 114.1 CMR 39.07(6)(b). (d) The Division shall then calculate a minimum payment under the federally-mandated Medicaid disproportionate share adjustment requirement by dividing the amount of funds allocated pursuant to 114.1 CMR 39.07(8) for payments under the federally-mandated Medicaid disproportionate share adjustment requirement by the sum of the federally-mandated Medicaid disproportionate share ratios calculated pursuant to 114.1 CMR 39.07(6)(c). (e) The Division shall then multiply the minimum payment under the federally-mandated Medicaid disproportionate share adjustment requirement by the federally-mandated Medicaid disproportionate share ratio established for each hospital pursuantto 114.1 CMR 39.07(6)(a) and (b). The product of such multiplication shall be the payment under the federally-mandated disproportionate share adjustment requirement. (7) Determination of Eligibility of Disproportionate Share Non-Acute Care Hospitals for an Outlier Adjustment in Payment Amount for Medically Necessary Inpatient Hospital Services Provided to Individuals under Six Years of Age Involving Exceptionally Long Lengths of Stay or exceptionally high Cost. The Division shall make such a determination as follows: (a) Exceptionally long lengths of stay. 1. First, calculate a statewide weighted average Medicaid inpatient length of stay. This shall be determined by dividing the sum of Medicaiddays for all non-acute care hospitals in the state by the sum of total discharges for all non-acute care hospitals in the state. 2. Second, calculate the statewide weighted standard deviation for Medicaid inpatient length of stay statistics. 3. Third, add 1½ time the statewide weighted standarddeviationfor Medicaid inpatient length ofstayto the statewide weighted average Medicaid inpatient length of stay. The sumofthese two numbers shall be the threshold Medicaid exceptionally long length of stay. (b) Exceptionally high cost. For each disproportionate share hospital providing services to individuals under six years of age, the Division shall: 1. First, calculate the average cost per Medicaid inpatient discharge for each hospital. 2. Second, calculate the standard deviation for the cost per Medicaid inpatient discharge for each hospital. 3. Third, add 1½ times the hospital’s standard deviation for the cost per Medicaid inpatient discharge to the hospital’s average cost per Medicaid inpatient discharge. The sum of these two numbers shall be each hospital’s threshold Medicaid exceptionally high cost. (c) Eligibility for an outlier adjustment in the payment amount. For each disproportionate share hospital providing services to individuals under six years of age, the Division shall perform the following: 1. Calculate the average Medicaid inpatient length of stay involving individuals under six years of age. If this hospital-specific average Medicaid inpatient length of stay equals or exceeds the threshold Medicaid exceptionally long length of stay calculated pursuant to 114.1 CMR 39.07(7)(a), then the hospital shall be eligible for an outlier adjustment in the payment amount. 2. Calculate the cost per inpatient discharge involving individuals under six years of age. If this cost per discharge equals or exceeds the hospital’s own threshold Medicaid exceptionally high cost calculated pursuant to 114.1 CMR 39.09(7)(b), then the hospital shall be eligible for an outlier adjustment in the payment amount. (8) Allocation of Funds. The total amount of funds allocated for payment to non-acute care hospitals under the federally-mandated Medicaid disproportionate share adjustment requirement shall be $150,000 annually. These amounts shallbe paid by the Division of Medical Assistance and distributed among the eligible hospitals as determined pursuant to 114.1 CMR 39.07(6)(e). If any hospitals qualify for an Outlier Adjustment to the payment amount pursuant to 114.1 CMR 39.07(7), each hospital shall receive on-half of one percent ofthe totalfunds allocated for payment to non-acute hospitals under the federally-mandated Medicaid disproportionate share adjustment. The amounts in each fiscal year to be distributed pursuant to 114.1 CMR 39.07(6)(e) shall be reduced commensurately. That is, if in fiscal year 1997, two hospitals qualify under 114.1 CMR 39.07(7), the $150,000 which would have been other wise allocated shall be reduced by one percent for distribution pursuant to 114.1 CMR 39.07(6)(e).