[Federal Register Volume 62, Number 178 (Monday, September 15, 1997)]
[Notices]
[Pages 48292-48297]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-24281]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
[MB-110-N]
RIN: 0938-AH93
Medicaid Program; Final Limitations on Aggregate Payments to
Disproportionate Share Hospitals: Federal Fiscal Year 1997
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Notice.
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SUMMARY: This notice announces the final Federal fiscal year (FFY) 1997
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 1997 State
disproportionate share hospital (DSH) allotments published in this
notice supersede the preliminary FFY 1997 DSH allotments that were
published in the Federal Register on January 31, 1997.
EFFECTIVE DATE: The final DSH payment adjustment expenditure limits
included
[[Page 48293]]
in this notice apply to Medicaid DSH payment adjustments for FFY 1997.
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).
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 a national aggregate target and each State's
allotment for DSH payments for each Federal fiscal year (FFY). The
implementing regulations provide that the national DSH payment 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 payment 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 payment target, there is a specific
State DSH payment limit for each State for each FFY. The State DSH
payment 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 1997 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 1997 is referred to as a ``high-DSH State''
for FFY 1997. The FFY 1997 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 1997 is referred to
as a ``low-DSH State.'' The FFY 1997 State DSH allotment for a low-DSH
State is equal to the State's DSH allotment for FFY 1996 increased by
growth amounts and supplemental amounts, if any. However, the FFY 1997
DSH allotment for a low-DSH State cannot exceed 12 percent of the
State's total medical assistance expenditures for FFY 1997 (excluding
administrative costs).
The growth amount for FFY 1997 is equal to the projected percentage
increase (the growth factor) in a low-DSH State's total Medicaid
program expenditures between FFY 1996 and FFY 1997 multiplied by the
State's final DSH allotment for FFY 1996. Because the national DSH
payment 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 DSH payment 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 1996 and FFY 1997. Furthermore, because a low-DSH
State's FFY 1997 DSH allotment cannot exceed 12 percent of the State's
total medical assistance expenditures for FFY 1997, it is possible for
its FFY 1997 DSH allotment to be lower than its FFY 1996 DSH allotment.
This occurs when the State's prior FFY DSH allotment is greater than 12
percent of the total projected medical assistance expenditures for the
current FFY. For FFY 1997, this is the case for the States of
California and Hawaii. For the State of California, even though the
State projected Medicaid program growth from FFY 1996 to FFY 1997, its
FFY 1996 DSH allotment was greater than its FFY 1997 12 percent limit.
For the State of Hawaii, the State projected a decrease in its FFY 1997
medical assistance expenditures such that its FFY 1997 12 percent limit
was lower than its FFY 1996 DSH allotment.
When we published the preliminary State DSH allotments for FFY 1997
in the Federal Register on January 31, 1997, for the first time since
we began publishing the DSH allotments, there were State supplemental
amounts available for redistribution to low-DSH States for FFY 1997.
However, in the final FFY 1997 State DSH allotments published in this
notice, there are no State supplemental amounts. This is due to changes
in the States' estimated expenditures for FFY 1997, and from the use of
the actual Medicaid expenditures for FFY 1996 in these final allotments
from those used in determining the preliminary FFY 1997 State DSH
allotments.
Under section 1923(f)(3) of the Act and implementing regulations at
42 CFR 447.298(e), the State supplemental amount, if any, is equal to a
low-DSH State's relative share of a pool of funds (the redistribution
pool). The redistribution pool is equal to the national 12-percent DSH
payment target reduced by 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 total of the low-DSH State
growth amounts. However, in determining the final FFY 1997 State DSH
allotments published in this notice, the projected FFY 1997 national
12-percent DSH payment target is less than the sum of these amounts.
Therefore, there is no redistribution pool and no supplemental amounts
available for low-DSH States for FFY 1997.
In accordance with section 1923(f)(3) of the Act and 42 CFR
447.298(e), we determine each low-DSH State's supplemental amount by
determining the State's relative share of the national redistribution
pool, if available, on the basis of the State's total medical
assistance expenditures for FFY 1997 compared to the sum of the medical
assistance expenditures for the year for all low-DSH States. However,
we will not provide any low-DSH State with a supplemental amount that
would result in the State's total DSH allotment exceeding 12 percent of
the State's projected medical assistance expenditures. Any supplemental
amounts that cannot be allocated to a low-DSH State because of this
limitation will be reallocated to other low-DSH States whose allotment
does not exceed this 12-percent limit.
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
[[Page 48294]]
Act. The final FFY 1997 State DSH allotments for the District of
Columbia, Iowa, and Nebraska have been determined in accordance with
this exception.
We are publishing in this notice the final FFY 1997 national DSH
payment 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
1996 as reported on the States' quarterly expenditure report Form HCFA-
64 submissions and the FFY 1997 projected Medicaid expenditures as
reported on the February 15, 1997 Medicaid Budget Report (Form HCFA-37)
submission. All data are adjusted as necessary.
II. Calculations of the Final FFY 1997 DSH Limits
The total of the final State DSH allotments for FFY 1997 is equal
to the sum of: the base allotments for all high-DSH States, the FFY
1996 State DSH allotments for all low-DSH States (including any
adjustments required because of the 12 percent limitation), the growth
amounts for all low-DSH States, and the supplemental 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 1997, 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 1997, we classified
that State as a ``low-DSH'' State. Based on this classification, there
are 37 low-DSH States and 13 high-DSH States for FFY 1997.
Using the most recent data from the States' February 1997 budget
projections (Form HCFA-37), we estimate the States' FFY 1997 national
total medical assistance expenditures to be $169,259,338,000. Thus, the
overall final FFY 1997 national DSH payment target is $20,311,121,000
(12 percent of $169,259,338,000).
In the final FFY 1997 State DSH allotments, we provide a total of
$873,722,000 ($461,188,000 Federal share) in growth amounts for 35 of
the 37 low-DSH States. The FFY 1997 growth amounts for low-DSH States
are determined by multiplying the low-DSH States' final FFY 1996 State
DSH allotments by the growth factor percentage for those States. The
growth factor percentage for each of the low-DSH States is determined
by calculating the States' percentage change in Medicaid program
expenditures (including administrative expenditures) between FFY 1996
and FFY 1997. To compute this percentage, we first ascertained each
low-DSH State's total FFY 1996 actual medical assistance and
administrative expenditures as reported on the State's four quarterly
Medicaid expenditure reports (Form HCFA-64) for FFY 1996. Next, we
compared those expenditures to each low-DSH State's total estimated
unadjusted FFY 1997 medical assistance and administrative expenditures,
as reported to HCFA on the State's February 15, 1997 Form HCFA-37
through the ``cutoff'' date of March 26, 1997. The cutoff date is the
date through which the State's budget estimates reported on the
February 15, 1997 Form HCFA-37 are accepted and applied in preparing
the State's Medicaid grant award for the upcoming quarter (in this
case, April through June 1997).
No final FFY 1997 redistribution pool is available, since the final
FFY 1997 national DSH payment target of $20,311,121,000 is less than
$20,335,510,000, representing the sum of: the total of the base
allotments for high-DSH States ($7,375,265,000), the total of the State
DSH allotments for the previous FFY for low-DSH States
($12,091,807,000), and the growth amounts for low DSH States
($873,722,000) and the negative adjustment for the States of California
and Hawaii due to the 12 percent limitation requirement ($3,003,000 and
$2,281,000, respectively). That is, this sum exceeds the national
target by $24,390,000.
The supplemental amount for each low-DSH State is the low-DSH
State's relative share of the redistribution pool, determined by
allocating the redistribution pool on the basis of the low-DSH State's
medical assistance expenditures compared to the national total medical
assistance expenditures for low-DSH States.
A low-DSH State's growth amount and supplemental amounts, if any,
are added to the low-DSH State's final FFY 1996 DSH allotment amount to
establish the final total low-DSH State's DSH allotment for FFY 1997.
If a low-DSH State's growth amount and supplemental amount (if any),
when added to its final FFY 1996 DSH allotment amount, exceed 12
percent of its FFY 1997 estimated medical assistance expenditures, the
State can only receive a partial growth amount that, when added to its
final FFY 1996 allotment, limits its total State DSH allotment for FFY
1997 to 12 percent of its estimated FFY 1997 medical assistance
expenditures. Eleven of the low-DSH States were affected by the 12
percent limitation requirement. Nine of these low-DSH States received
partial growth amounts, and two low-DSH States' (California and Hawaii)
final FFY 1997 State DSH allotment are lower than their final FFY 1996
State DSH allotments.
Also, in accordance with the minimum payment adjustments required
by Medicare methodology, the final FFY 1997 State DSH allotments for
the District of Columbia, Iowa, and Nebraska are $79,920,000,
$16,910,000, and $13,366,000, respectively.
In summary, the total of all final State DSH allotments for FFY
1997 is $20,335,510,000 ($11,475,206,000 Federal share). This total is
composed of the high-DSH States' base allotments ($7,375,265,000), the
low-DSH States' prior FFY's final State DSH allotments
($12,091,807,000), and the growth amounts for all low-DSH States
($873,722,000), and the negative adjustment for the States of
California and Hawaii due to the 12 percent limitation requirement
($3,003,000 and $2,281,000, respectively), plus supplemental amounts
for low-DSH States ($0). The total of all final FFY 1997 State DSH
allotments is 12.0 percent of the total medical assistance expenditures
(excluding administrative costs) projected to be made by these States
in FFY 1997.
Each State should monitor and make any necessary adjustments to its
DSH spending during FFY 1997 to ensure that its actual FFY 1997 DSH
payment adjustment expenditures do not exceed its State DSH allotment
for FFY 1997 published in this notice. As the ongoing reconciliation
between actual FFY 1997 DSH payment adjustment expenditures and the FFY
1997 DSH allotments takes place, each State should amend its plan as
may be necessary to make any adjustments to its FFY 1997 DSH payment
adjustment expenditure patterns so that the State will not exceed its
FFY 1997 DSH allotment.
The FFY 1997 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 1997. Additional DSH payment adjustment expenditures
made in succeeding FFYs that are applicable to FFY 1997 will continue
to be reconciled with each State's FFY 1997 DSH allotment as additional
[[Page 48295]]
expenditure reports are submitted to ensure that the FFY 1997 DSH
allotment is not exceeded. As a result, any DSH payment adjustment
expenditures for FFY 1997 in excess of the FFY 1997 DSH allotment will
be disallowed, and therefore, subject to the normal Medicaid
disallowance procedures.
III. Final FFY 1997 DSH Allotments
Key to Chart:
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Column Description
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Column A =.......................................... Name of State
Column B =.......................................... High or Low DSH State Designation for FFY 1997. ``High''
indicates the State is a high-DSH State and ``Low''
indicates the State is a low-DSH State.
Column C =.......................................... Final FFY 1996 DSH Allotments for All States. These were
published in the Federal Register on September 23, 1996
(61 FR 49781).
Column D =.......................................... Base Allotments for High-DSH States. The base allotment is
the greater of the high-DSH State's FFY 1992 allowable
DSH payment adjustment expenditures applicable to FFY
1992, or $1,000,000. ``NA, LOW DSH'' entries in this
column refer to low-DSH States.
Column E =.......................................... Growth Amounts for Low-DSH States. The growth amount is an
increase in a low-DSH State's final FFY 1996 DSH
allotment to the extent that the State's Medicaid program
grew between FFY 1996 and FFY 1997. ``NA, HIGH DSH''
entries in this column refer to high-DSH States, which
receive no growth. ``NONE, NO GROWTH'' entries in this
column refer to low-DSH States whose Medicaid program had
no increase or a decrease from FFY 1996 to FFY 1997.
Column F =.......................................... Supplemental Amounts for Low-DSH States. The supplemental
amount is the low-DSH State's relative share of the
national redistribution pool. ``NA, HIGH DSH'' entries in
this column refer to high-DSH States, which do not
receive supplemental amounts. ``NONE, LOW AT 12%''
entries in this column refer to low-DSH States which do
not receive any supplemental amounts because their DSH
allotments are already at the State specific 12 percent
limit.
Column G =.......................................... Final FFY 1997 State DSH Allotments. For a high-DSH State,
this is equal to the base allotment from column D. For a
low-DSH State, this is equal to the final State DSH
allotment for FFY 1996 from column C plus, if any, the
growth amount from column E and the supplemental amount
from column F.
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IV. Regulatory Impact Statement
The Regulatory Flexibility Act, 5 U.S.C. 601 through 612, requires
a regulatory flexibility analysis for every rule subject to proposed
rulemaking procedures under the Administrative Procedure Act, 5 U.S.C.
552, unless we certify that the rule will not have a significant
economic impact on a substantial number of small entities. For purposes
of a 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.
We do not believe that this notice will have a significant economic
impact on a substantial number of small entities because it reflects no
new policies or procedures, and should have an overall positive impact
on payments to disproportionate share hospitals by informing States of
the extent to which DSH payments may be increased without violating
statutory limitations. This notice sets forth no changes in our
regulations; rather, it reflects the DSH allotments for each State as
determined in accordance with 42 CFR 447.297 through 447.299.
We have discussed the method of calculating the preliminary FFY
1997 national DSH payment target and the preliminary FFY 1997
individual State DSH allotments in the previous sections of this
preamble. These calculations should have a positive impact on payments
to disproportionate share hospitals. Allotments will not be reduced for
high-DSH States since we interpret the 12-percent limit as a target.
Low-DSH States' allotments are equal to their prior FFY DSH allotments
plus their growth and supplemental amounts, if any.
In accordance with the provisions of Executive Order 12866, this
notice was reviewed by the Office of Management and Budget.
(Catalog of Federal Assistance Program No. 93.778, Medical
Assistance Program)
Dated: June 5, 1997.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
Dated: July 24, 1997.
Donna E. Shalala,
Secretary.
[FR Doc. 97-24281 Filed 9-12-97; 8:45 am]
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