Federally Mandated Disproportionate Share Adjustments

(1) Data Sources. The Division shall determine for each fiscal year a federally-mandated Medicaid disproportionate share adjustment for alleligible hospitals, usingthe 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, then 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, total inpatient 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. (2) 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 determining the eligibility of 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 by dividing the sumof Medicaid days for all non-acute care hospitals in the state by the sum of totalinpatient 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 numbers shall be the threshold Medicaid inpatient utilization rate. (d) The Division shall then calculate each hospital's Medicaid inpatient utilization rate by dividing each hospital'sMedicaid inpatient days by its total inpatient days. If this hospital-specific Medicaid inpatientutilizationrate equalsor exceeds the threshold Medicaid inpatient utilization rate calculated pursuant to 114.1 CMR 40.11(2)(c), then the hospital shall be eligible for the federally-mandated Medicaid disproportionate share adjustment under the Medicaid utilization method. (3) Determination of Eligibility Under the Low-Income Utilization Rate Method. The Division shall then calculate eachhospital'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 and state and local government subsidies by the sum of total net revenues and state and local government subsidies. (b) Second, calculate the free care percentage of total inpatient 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 40.11(3)(a) to the free care percentage of total inpatient charges calculated pursuant to 114.1 CMR 40.11(3)(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. (4) Determination of Payment. The payment under the federally-mandated disproportionate share adjustment shall be calculated as follows: (a) For each hospital determined eligible for the federally-mandated disproportionate share adjustment under the Medicaid utilizationmethod established in 114.1 CMR 40.11(2), the Division shall divide the hospital's Medicaid utilization rate calculated pursuant to 114.1 CMR 40.11(2)(d) by the threshold Medicaid utilization rate calculated pursuant to 114.1 CMR 40.11(2)(c). The ratio resulting from such division shall be the federally-mandated disproportionate share ratio. (b) For each hospital determined eligible for the federally-mandated 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 disproportionate share ratio equal to one. (c) The Division shall then determine, for the group of all eligible hospitals, the sum of federally- mandated disproportionate shareratioscalculated pursuant to 114.1 CMR 40.11(4)(a) and 114.1 CMR 40.11(4)(b). (d) The Division shall then calculate a minimum payment under the federally-mandated disproportionate share adjustment by dividing the amount of funds allocated pursuant to 114.1 CMR 40.11(5) for payments under the federally-mandated disproportionate share adjustment by the sum of the federally-mandateddisproportionate share ratios calculated pursuant to 114.1 CMR 40.11(4)(c). (e) The Division shall then multiply the minimum payment under the federally-mandated Medicaid disproportionate share adjustment by the federally-mandated Medicaid disproportionate share ratio established for eachhospitalpursuant to 114.1 CMR 40.11(4)(a) and (b). Except as provided in 114.1 CMR 40.10(2), the product of such multiplication shall be the payment under the federally-mandated disproportionate share adjustment. (5) 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 one hundred fifty thousand dollars annually. These amounts shall be paid by the Division of Medical Assistance, and distributed among the eligible hospitals as determined pursuant to 114.1 CMR 40.11(4)(e).