Analysis of the Joint Distribution of Disproportionate Share Hospital Payments. Claim-based Measures

09/01/2002

Measures 1.1 and 1.2 are based on the amount of care a hospital furnishes to low-income patients as measured through claims data, i.e. the proportion of days or discharges attributable to low-income patients. Inpatient claims data can also be used to measure the hospital's percentage of gross inpatient revenues attributable to low-income patients (1.3). These inpatient claim-based measures involve several assumptions:

  • All utilization on the claim is attributed to the primary payer. For example, the measure is not sensitive to situations where Medicaid is a secondary payer for part of an inpatient stay.
  • The measures assume that low-income patients utilize outpatient services in the same proportion as inpatient services. Low-income patients tend to have a relatively higher outpatient utilization rates than inpatient (because they have less access to community physicians). This is an issue examined in greater detail in our three-state analyses discussed in Chapter 8.
  • The measure implicitly assumes that no-charge patients are charity care and that self-pay patients represent low-income patients that are unable to pay for their care. We know that no-charge patients include those receiving courtesy and employee allowances and that the percentage of no-charge patients is likely to overestimate the percentage of charity care patients. Similarly, some self-pay patients are able to pay for some or all of their care. We examine the relationship between the proportion of self-pay and no-charge patients and bad debts and charity care in our three-state analyses.
  • The HCUP claims data do not include a separate classification for indigent care programs. We used other government days (which is a residual after excluding CHAMPUS and workmen's compensation) as our proxy for local indigent care programs.
Table 6.1
Potential Measures of Care Provided to Low-Income Patients
Measure Formula
1. Utilization measures from claims data based on proportion on low-income inpatients
1.1 
% Low-Income Days
Medicare days*SSI ratio + Medicaid days + self-pay days 
+ no-charge days + Title V days + other government days 
———————————————————————— 
Total inpatient days
1.2 
% Low-Income Discharges
Medicare discharges*SSI ratio + Medicaid discharges + self-pay discharges 
+no-charge discharges + Title V discharges + other government discharges 
——————————————————————————————
Total inpatient discharges
1.3 
% Low-income inpatient revenue

Medicare charges*SSI ratio + Medicaid charges 
+ self-pay charges +no-charge charges + Title V charges 
+ other government charges
——————————————————————
Total inpatient charges

2. Gross revenue measures based on percentage of revenue attributable to low-income patients
2.1 
% gross revenue attributable to low-income Medicare and Medicaid patients, local indigent care programs, bad debt and uncompensated care (MedPAC Model)

Medicare revenue* SSI ratio + Medicaid revenue 
+ local indigent care revenue + bad debt expense 
+ charity care revenue foregone 
———————————————————
Total gross patient revenue

2.2 
% gross revenues attributable to charity and no-charge patients

Gross revenues for charity and no-charge patients 
___________________________________________ 
Total gross revenues

3. Financial risk measures based on losses attributable to low-income patients
3.1 
% total cost attributable to shortfalls from Medicaid and indigent care programs, bad debt & uncompensated care

(Medicaid patient care gross revenue + other government gross revenue + bad debt + uncompensated care) X cost-to-charge ratio - Medicaid payments (exclusive of "new DSH) - payments from other government programs) 
————————————————————————————————————————
Total operating cost

3.2 
Bad debt and uncompensated care as % of total operating cost

(Charity care revenue + bad debt expense) X cost-to-charge ratio 
——————————————————————————
Total operating cost

4. Market share model for urban hospitals based on proportion of financial risk in the community assumed by the hospital
4.1. 
Financial risk measure from 3.2

(Charity care revenue + bad debt expense) X cost-to-charge ratio
——————————————————————————
Summation operator (Charity care revenue + bad debt) X cost-to-charge ratio for the MSA

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