Analysis of the Joint Distribution of Disproportionate Share Hospital Payments. Distribution of Specific DSH Payments by Classes of Hospitals


Table 4.6 describes the distribution of Medicare, Medicaid, and total FY1998 DSH payments. In column C, we report Total Adjusted Patient Days from the AHA survey. It is defined as: Total Inpatient Days + (Total Inpatient Days * (Gross Outpatient Revenue/Gross Inpatient Revenue)). By converting outpatient days into equivalent inpatient days, we obtain a measure of the total capacity of the hospital. The measure is for all patients: Medicare, Medicaid, and other. With the shift of services to outpatient departments, we believe that it is preferable to a measure of inpatient services only.

Major observations from the summary of the distribution of total actual FY1998 DSH funds include the following:

  • Urban/Rural Status. Both Medicare and Medicaid DSH payments are concentrated predominantly in urban areas. Although rural areas have 22% of total adjusted patient days, they received only 6% of total DSH funds (3% of the Medicare DSH payments and 7% of the Medicaid DSH payments). Among urban areas, a higher share of total DSH payments go to hospitals located in large urban areas (54% of total DSH funds vs. 45% of total adjusted patient days). The differences are greater for Medicare payments than Medicaid. Large urban areas receive 65% of Medicare DSH payments and 51% of Medicaid DSH payments.
  • Bed Size. Among urban hospitals, hospitals with 500 or more beds receive 46% of DSH payments, while they provide only 32% of adjusted patient days. Small rural hospitals (less than 100 beds) receive 33% of total rural DSH. Medicare DSH payments tend to be more highly concentrated in large hospitals than Medicaid DSH payments.
  • Hospital Type. Acute care (general) hospitals receive the biggest share of total DSH payments (81%), because DSH program is mainly targeted to these hospitals. However, DSH share of psychiatric hospitals (16%) is disproportionately larger than their share of patient days (4%). Payments to psychiatric hospitals and other institutions for mental disease comprise 22% of Medicaid DSH funds.
  • Ownership. Not-for-profit providers receive the largest share of total DSH payments (38%), but this share is considerably less than their share of the total patient days (67%). In contrast, state and local hospitals together receive 48% of the DSH funds, while providing only16% of the total adjusted patient days. The differences are caused by the Medicaid payments. Medicare payments by type of ownership approximate total adjusted patient days.

Table 4.6.1 Actual Hospital-Spesific DSH Payments Category, FY 1998 ($millions)

Table 4.6.2 Actual Hospital-Spesific DSH Payments Category, FY 1998 ($millions)

  • Case-mix index. We are missing the Medicare case mix index for 490 facilities that received Medicaid DSH funding (unidentified specific hospitals and IMDs). As is the case with Medicare payments, the remaining payments to identified hospitals are skewed towards hospitals with a higher case mix index.
  • Low-income Patients. We are missing information needed to categorize about 600 facilities receiving Medicaid DSH payments. When we examine only the distribution of the remaining funds to identifiable hospitals, we find the following:
    • A significant portion of the remaining Medicaid DSH funds (3.4%) are paid to hospitals in which less than 10 percent of the inpatient days are attributable to Medicare beneficiaries entitled to SSI or non-Medicare patients entitled to Medicaid. Most of these are psychiatric facilities.
    • Compared to Medicare DSH funds, a greater proportion of Medicaid DSH funds are directed towards the hospitals in which 40 percent or more of inpatient days are attributable to Medicare beneficiaries entitled to SSI or non-Medicare patients entitled to Medicaid. There are 392 hospitals in this category that receive about 36 % of identifiable DSH funds from Medicare and Medicaid.
    • Facilities with the very highest proportion of non-Medicare patients who are entitled to Medicaid (.70 and above) receive a higher proportion of Medicare funds than Medicaid funds. The facilities with a non-Medicare/Medicaid ratio of .40-.70 receive a higher proportion of Medicaid DSH funds relative to Medicare DSH.
    • More than one-third of the total DSH funds to identifiable hospitals flow to facilities with less than 25 percent Medicare utilization. This is because about half of Medicaid funding is concentrated in these facilities.
    • Not surprisingly, Medicaid DSH funds are more concentrated than Medicare funds in those hospitals that have the highest Medicaid utilization as a proportion of total patient days. Hospitals that are in the upper quartile of Medicaid utilization for their state receive about 75 % of Medicaid DSH funds compared to 63% of Medicare DSH funds. When the two funding sources are combined, about 72 % of identifiable DSH funds flow to hospitals in the upper quartile of Medicaid utilization for the state in which they are located. About 55 % of total DSH funds flow to hospitals with Medicaid utilization that is at least one standard deviation above the mean Medicaid utilization rate for the state.
  • Teaching Status. We are missing information on 530 identifiable facilities that receive Medicaid DSH funding. When we examine the distribution of the remaining funds to identifiable hospitals, we find that Medicaid DSH funding is considerably more concentrated than Medicare DSH payments in major teaching facilities. When considered together, hospitals with 100 or more residents account for about 16 % of adjusted inpatient days but receive nearly half of total DSH funds.

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