The California's DSHprogram is funded entirely through federal match of intergovernmental transfers (IGTs) from public entities (county hospitals and the University of California clinics) to the Medi-Cal Inpatient Adjustment Fund. The amount of IGTs paid by a public entity is based on the ratio of the hospital's projected DSHpayments to that of all public hospitals and is increased by their pro-rata obligation for all DSHpayments to private hospitals. The IGTs, less a state administrative fee, is subject to federal matching.
DSH funding is restricted to hospitals that meet the minimum federal requirements for DSH payments, i.e., either have a Medi-Cal inpatient hospital utilization rate at least one standard deviation above the statewide mean or a low-income utilization rate in excess of 25 percent (with at least one percent Medi-Cal utilization). The low-income utilization rate is defined as the proportion of revenue attributable to Medi-Cal and charity care.
The DSH funds are distributed to eligible hospitals using a per diem formula that takes into account the type of hospital (public, private, and those converted from public to private) and the hospital's low- income utilization rate. The per diem amount rewards Medi-Cal days more heavily than charity care and increases with the hospital's low-income utilization rate. The hospital's projected DSH payment is capped by the OBRA 93 limits (see Chapter 1) and any funds that are not expended in the base payments are distributed through supplemental payments to the remaining DSH hospitals.