Ideally, all required data needed to evaluate the distribution of DSH funds would be available for all hospitals across the country for the same time period. Substantial information on individual hospital characteristics is available from national sources, including cost reports filed by Medicare participating providers. However, some utilization and financial data that are needed to measure hospital services to low-income populations (or at least the resources devoted to Medicaid patients and self-pay patients) are not directly available. Detailed inpatient utilization data on self-pay patients are available only for the 20 percent sample of hospitals from the 24 states included in the Agency for Healthcare Research and Quality’s Hospital Cost and Utilization Project (HCUP) database. Much of the needed information on revenues by payer and on uncompensated care is collected in the American Hospital Association (AHA)’s Annual Survey, but confidentiality considerations preclude using that information for detailed exploratory analyses requiring hospital-level information. Thus, we supplemented the available national data with the HCUP national sample and detailed claims and financial data from three states: California, New York, and Wisconsin. The state financial data have detailed information by payer source on inpatient and outpatient gross revenues and on uncompensated care. In addition, we had access to 100% of their 1997 inpatient claims through HCUP.
Medicare DSH Payments: We drew on several public use files maintained by CMS to simulate Medicare FY1998 DSH payments and the payments that would have been made under FY2003 DSH payment assuming all other FY1998 payment parameters remained unchanged.
Medicaid DSH Payments: We relied primarily on the state reports submitted to CMS on FY 1998 DSH payments to individual hospitals. An issue is the extent to which the reported DSH funds represent “new” money to the hospitals. It is commonly recognized that the states often use the Medicaid DSH program not only to finance hospitals serving a disproportionately large share of low-income patients (the program’s direct purpose), but also to secure additional federal funds for the state budget. To evaluate the effect of the program on the financial positions of hospitals, we needed to understand the underlying composition of total Medicaid DSH funds. We were limited in our analysis to information on “new” DSH for the three states for which we had comprehensive financial data.
Low-Income Patient Measures:
Claim-based Measures. These measures 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. 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 secondary payer for part of an inpatient stay.
- 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).
Including self-pay and no-charge patients in the statistic 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 (and some, such as wealthy foreign patients are able to pay full charges).
Utilization Measures Derived From Financial Data. Financial data can be used to measure the percentage of gross revenue attributable to low-income patients. These measures have several advantages over those derived from inpatient claims data.
- Secondary payers are accounted for (assuming the reporting is accurate).
- Both inpatient and outpatient volume are directly measured.
- Implicit recognition is given to differences in severity across the hospital’s patient population.
Financial Risk Measures. Instead of measuring low-income patients utilization, financial data can also be used to measure the financial risk associated with serving low-income patients. In this report, we define financial risk in terms of shortfalls from Medicaid and local indigent care programs, bad debt, and uncompensated care. Under this definition, Medicare SSI patients and Medicaid patients to the extent the Medicaid payment covers the cost of their care do not contribute to financial risk.