This project included several inter-related tasks:
- Examine the distribution of both Medicare and Medicaid DSH funds across hospitals;
- Assess alternative criteria that could be used to identify safety net hospitals;
- Develop measures of financial vulnerability to identify those safety net hospitals that are under most financial pressure; and,
- Explore the extent to which alternative allocation policies to the current Medicare and Medicaid DSH payment mechanisms would improve the distribution of funds to vulnerable safety net hospitals.
Overall, we found that despite the known issues with the current Medicare and Medicaid DSH policies, the current distribution targets financially vulnerable safety net hospitals at least as well as the alternatives that we examined. The multiple Medicare formula and the flexibility of the Medicaid program may allow for better targeting than a single formula-driven allocation policy. Nevertheless, it is clear that there is room for improvement in the current policies and that further study is warranted. In particular, a multi-variate analysis of the factors affecting financial risk and financial viability is needed. Ideally, the analysis would involve a national database with information on each's hospitals uncompensated care and shortfalls from Medicaid and local indigent care programs. Given the diversity of Medicaid DSH program, a national database is needed to fully understand the potential impact of alternative allocation policies at both the national and market levels.