Analysis of the Joint Distribution of Disproportionate Share Hospital Payments. New York

09/01/2002

Based on data provided by the Greater New York Hospital Association, New York hospitals received $1.3 billion in Medicaid DSH payments during 1998 (Table 8.7). This included the indigent pool distributions as well as special payments for financially distressed hospitals and public hospitals. The hospitals in our analysis file account for only 50 percent of this amount, or $676.6 million. We were unable to match 22 acute care hospitals in the New York financial database (including the New York Health and Hospitals Corporation hospitals) that received $663.0 million in total Medicaid DSH funds and $630.1 million in "new" Medicaid DSH funds to the hospitals in our analysis file.6 As a result, our analysis file under-represents public hospitals and understates both total DSH and "new" DSH payments. In addition, 14 specialty hospitals received $10 million in total DSH funds and $6 million in "new" Medicaid DSH funds. In calculating the "new" DSH funds, we did not include payer contributions that the hospitals collected and passed through to the indigent care pool.

Table 8.7 
New York DSH Payments For 1998
  All Hospitals
(millions $)
Hospitals in Analysis file
(millions $)
Medicaid DSH Payments 2    
  N hospitals receiving payments 163 138
  Indigent care pool distribution 668.6 510.1
  Public Indigent Care adjustment 405.2 33.6
  Intergovernmental transfer 256.7 132.9
  Total FY1998 Payments 1,350.5 676.6
Medicaid DSH Provider Contributions1,2    
  Inpatient Assessment (178.9) (141.5)
  Medicaid DSH cap reduction loss (2.1) (2.0)
Net FY1998 Medicaid "New" DSH 1,169.5 533.1
Federal Share of Medicaid DSH Payments 675.3 338.3
Medicare DSH Payments    
  N hospitals receiving payments N/A 155
  Current law payments   491.9
Total DSH Payments for Simulation   830.2

1 Hospitals also passed through payer indigent care contributions totaling $73.9 million ($45.8 for hospitals in analysis file).
2 Source: Greater New York Hospital Association


The 188 New York hospitals in the analysis file incurred financial risk (Medicaid shortfalls, bad debt and uncompensated care) of $1.8 billion, or $80 per day (Table 8.8). The hospitals had operating margins net of "new" DSH payments of -12.4% and operating margins with DSH of -6.8%. For comparison, the operating margins of the acute care hospitals that are missing from the analysis file were -24.4% and -6.8 percent without and with DSH, respectively. A higher proportion of the total DSH payments made to the missing hospitals is "new" DSH funds.7 Most hospitals in the analysis file (174 out of 188) received DSH payments from either Medicare or Medicaid or both programs.

  • Ninety-five percent of DSH funds went to safety-net hospitals (none of which had operating margins exceeding 5%).
  • The NY hospitals with large teaching programs had lower operating margins on average than other hospitals in the state (-8.9% with DSH).
  • As was the case with CA hospitals, Medicaid DSH funds are more concentrated on hospitals that serve a high proportion of low-income patients.
  • In general, margins decline as the proportion of care furnished to low-income patients increases. However, NY hospitals with fewer than 10 percent low-income patients had slightly below-average margins after DSH payments are taken into account (- 7.2%); in comparison, hospitals with less than 10% of their revenues attributable to low-income patient had operating margins of -3.6 %. Hospitals with more than 50% of their patient population attributable to low-income patients bore 19% of the financial risk and received 29% of DSH payments.
  • Given overall negative margins, the question raised by the CA results concerning the appropriateness of making DSH payments to hospitals that are financially viable is less important. Nevertheless, 4% of DSH funds went to hospitals that did not incur financial risk. Across the safety net hospital classes, there is no clear pattern in the ratio of DSH payments to financial risk but there are relatively greater gains by hospitals with the lowest operating margins net of DSH payments.

In New York, total Medicaid distributions to all hospitals and to the hospitals in our analysis file are greater than the federal share of DSH payments. Accordingly, DSH funds for the simulations are about 20 percent lower than the joint Medicare and "new" Medicaid funds under current law ($830 million vs. 1.0 million) and result in lower overall margins (-7.8% vs. -6.8%). The results of the simulations are summarized in Table 8.9. More detailed simulation results are in Appendix D, Tables A8.9A-D.

Simulation A allocates DSH payments to all hospitals with 15% or more Medicaid and self-pay patients and concentrates funding on a smaller set of hospitals (100 versus 174 under current law. The 5 hospitals with 60 percent or more low-income patient days benefit at the expense of the other hospitals. Two of the hospitals have little or no financial risk and account for the high DSH to financial risk ratio and high positive operating margins for the group. Generally, the DSH to financial risk ratio declines as the percentage of low-income utilization or revenue declines. However, hospitals with 50-60% low-income days receive less coverage for their financial risk than hospitals with 40-50% low-income days and, consistent with the California results, 7 hospitals with no financial risk would receive 6 percent of DSH funds.

Simulation B allocates DSH payments using gross revenues attributable to Medicaid, charity care and bad debt. Compared to Simulation A, the DSH to financial risk ratio is somewhat improved across the low-income patient utilization and revenue groups. About $52 million would be re-distributed between hospitals with a relatively high percentage of low-income inpatient days and those with a relatively high percentage of gross revenues attributable to low-income patients (Table A8.9B in Appendix D).

Simulations C and D allocate funds to hospitals with ratios of financial risk to operating expenses above .05. Both simulations improve the operating margins for hospitals with highest financial risk compared to current law policies. There is also a slight improvement for the safety net hospitals with the lowest operating margins net of DSH (less than -25%) compared to current policies after accounting for the overall lower margins in the simulations. Only one hospital in the analysis file benefits from the sliding scale formula used in Simulation D. The results could be quite different if all New York hospitals were included in the analysis. Overall, the ratio of financial risk to operating expenses for the missing acute care hospitals is .15 compared to .08 for the 188 hospitals in the analysis file.

Table 8.8
NY Hospital Financial and Utilization Data for Reporting Periods Ending in 1998
  N of
Hospitals
Adjusted
Inp Days
%
Adj. InpDays
Financial Risk
$
% of
Fin Risk
Fin Risk
per Adj Day ($)
Margin
Net of
DSH
All Hospitals 188 22,533,140 100% 1,808,345,853 100% 80 -12.4%
By Geographic Area              
Urban 152 20,143,240 89% 1,752,076,210 97% 87 -13.2%
Large Urban 107 16,005,046 71% 1,620,736,070 90% 101 -14.8%
Other Urban 45 4,138,194 18% 131,340,140 7% 32 -4.7%
Rural 36 2,389,900 11% 56,269,644 3% 24 -0.8%
Urban By Bedsize              
0-49 beds 6 198,321 1% 1,789,233 0% 9 -8.4%
50-99 beds 14 508,865 2% 9,907,161 1% 19 -9.1%
100-199 beds 32 2,413,142 11% 90,029,641 5% 37 -10.7%
200-299 beds 39 3,862,568 17% 156,510,708 9% 41 -8.1%
300-499 beds 34 4,973,294 22% 359,326,718 20% 72 -13.3%
500 or more beds 27 8,187,050 36% 1,134,512,748 63% 139 -15.3%
Rural By Bedsize              
0-49 beds 11 362,020 2% 7,790,414 0% 22 -4.9%
50-99 beds 10 714,418 3% 7,923,024 0% 11 -4.0%
100-149 beds 5 374,445 2% 32,660,492 2% 87 0.8%
150 or more beds 10 939,017 4% 1,789,233 0% 2 0.7%
Type of Ownership
State government 3 451,385 2% 102,619,126 6% 227 -43.5%
County or local government 11 1,528,029 7% 94,006,793 5% 62 -21.9%
Gov. - hosp. dist. 0 - - - - - -
Not-for-profit 164 19,775,969 88% 1,595,288,322 88% 81 -11.3%
For-profit 10 777,757 3% 16,431,612 1% 21 -11.4%
Teaching Status
Non- teaching 105 7,663,244 34% 207,897,373 11% 27 -6.0%
Fewer than 10 residents 17 1,723,193 8% 51,967,412 3% 30 -3.5%
Residents >10 and <100 32 3,836,221 17% 197,496,165 11% 51 -11.5%
Residents => 100 and < 250 20 4,655,349 21% 565,611,769 31% 121 -17.7%
Residents => 250 14 4,655,133 21% 785,373,134 43% 169 -15.7%
Low-Income Patient Gross Days as % of Total Days
More than 60% 5 560,122 2% 33,805,914 2% 60 -17.1%
50-60 % 9 1,178,380 5% 305,060,576 17% 259 -41.1%
40-50 % 11 2,656,218 12% 355,147,421 20% 134 -23.5%
30-40 % 22 3,539,924 16% 452,694,991 25% 128 -15.5%
20-30 % 43 5,290,265 23% 344,100,280 19% 65 -10.2%
10-20 % 69 6,747,140 30% 194,121,520 11% 29 -2.5%
10 % and less 29 2,561,091 11% 123,415,152 7% 48 -7.7%
Low-Income Patient Gross Revenues as % of Total Patient Revenues
More than 60% 1 184,110.00 1% 32,145,549 2% 175 -27.8%
50-60 % 5 559,467.00 2% 89,567,523 5% 160 -23.3%
40-50 % 15 3,201,275.00 14% 503,940,782 28% 157 -26.4%
30-40 % 20 4,097,775.00 18% 548,956,584 30% 134 -18.7%
20-30 % 38 4,358,125.00 19% 190,041,988 11% 44 -8.8%
10-20 % 73 7,228,675.00 32% 348,071,669 19% 48 -6.8%
10 % and less 36 2,903,713.00 13% 95,621,757 5% 33 -3.9%
Financial Risk
More than 25 % 1 197,289.00 1% 55,413,272 3% 281 -55.5%
20-25 % 8 1,297,053.00 6% 347,381,295 19% 268 -35.4%
15-20 % 5 1,486,924.00 7% 236,278,852 13% 159 -21.1%
10-15 % 13 2,684,243.00 12% 351,032,344 19% 131 -24.4%
5-10 % 75 8,545,262.00 38% 670,811,230 37% 79 -9.7%
0-5 % 72 6,885,625.00 31% 174,630,253 10% 25 -4.6%
None 14 1,436,744.00 6% -27,201,393 -2% -19 -6.6%
Safety Net Hospitals:Margin Net of DSH
Less than -25% 21 3,927,171.00 17% 709,022,141 39% 181 -38.1%
-15 to -25% 15 2,122,513.00 9% 243,472,749 13% 115 -20.3%
-5% to -15% 32 4,817,718.00 21% 392,877,367 22% 82 -8.9%
-5% to 5% 22 2,357,507.00 10% 145,436,925 8% 62 -0.9%
5% to 15% 0 - - - - - -
From 15% to25% 0 - - - - - -
25% and higher 0 - - - - - -
All Safety Net Hospitals 90 13,224,909.00 59% 1,490,809,181 82% 113 -17.2%

 

Table 8.8 (con't)
NY Hospitals for Reporting Periods Ending in 1998
Medicare Current Law and Medicaid "New" DSH Funds

  N Receiving
DSH
Joint DSH Funds
$
% of DSH New Funds DSH To
Fin Risk
Margin w/
Medicare
DSH
Margin w/
Medicaid
DSH
Margin w/
Joint DSH
All Hospitals 174 1,024,960,992 100% 0.57 -9.7% -9.4% -6.8%
By Geographic Area              
Urban 142 1,011,467,032 99% 0.58 -10.2% -10.0% -7.2%
Large Urban 102 943,187,384 92% 0.58 -11.5% -11.2% -8.1%
Other Urban 40 68,279,648 7% 0.52 -3.4% -3.5% -2.3%
Rural 32 13,493,960 1% 0.24 -0.2% -0.3% 0.4%
Urban By Bedsize              
0-49 beds 5 632,188 0% 0.35 -8.0% -8.0% -7.6%
50-99 beds 13 2,986,130 0% 0.30 -8.8% -8.1% -7.8%
100-199 beds 31 48,677,225 5% 0.54 -9.0% -8.8% -7.1%
200-299 beds 35 83,314,560 8% 0.53 -6.3% -6.9% -5.1%
300-499 beds 32 266,634,840 26% 0.74 -10.3% -9.5% -6.7%
500 or more beds 26 609,222,088 59% 0.54 -11.7% -11.4% -8.1%
Rural By Bedsize              
0-49 beds 10 1,393,795 0% 0.18 -3.3% -3.1% -3.8%
50-99 beds 5 3,190,973 0% 0.40 1.6% 1.2% -2.5%
100-149 beds 9 2,377,184 0% 0.07 1.2% 1.2% 2.0%
150 or more beds 5 6,532,008 1% 3.65 -8.0% -8.0% 1.8%
Type of Ownership
State government 3 125,469,713 12% 1.22 -38.2% -19.5% -15.8%
County or local government 8 96,890,885 9% 1.03 -18.7% -6.0% -3.6%
Gov. - hosp. dist. 0 - - - - - -
Not-for-profit 155 790,059,425 77% 0.50 -8.5% -9.2% -6.5%
For-profit 8 12,540,968 1% 0.76 -8.8% -11.0% -8.4%
Teaching Status    
Non- teaching 96 71,556,406 7% 0.34 -4.8% -5.4% -4.2%
Fewer than 10 residents 15 18,373,381 2% 0.35 -2.3% -3.2% -2.0%
Residents >10 and <100 30 95,730,474 9% 0.48 -9.7% -9.9% -8.2%
Residents => 100 and < 250 20 455,671,001 44% 0.81 -12.7% -11.0% -6.5%
Residents => 250 13 383,629,729 37% 0.49 -12.4% -12.1% -8.9%
Low-Income Patient Gross Days as % of Total Days
More than 60% 5 76,547,383 7% 2.26 -9.5% -6.7% -0.4%
50-60 % 8 226,952,274 22% 0.74 -33.6% -22.2% -16.5%
40-50 % 11 248,108,795 24% 0.70 -17.1% -15.4% -9.9%
30-40 % 22 260,877,227 25% 0.58 -11.2% -12.9% -8.8%
20-30 % 43 164,059,030 16% 0.48 -7.9% -8.5% -6.2%
10-20 % 65 37,686,150 4% 0.19 -1.9% -2.2% -1.6%
10 % and less 20 10,730,133 1% 0.09 -7.5% -7.4% -7.2%
Low-Income Patient Gross Revenues as % of Total Patient Revenues
More than 60% 1 25,465,915 2% 0.79 -20.4% -13.6% -7.8%
50-60 % 5 90,357,267 9% 1.01 -15.2% -10.2% -3.7%
40-50 % 15 358,155,254 35% 0.71 -19.7% -15.7% -10.1%
30-40 % 19 305,344,174 30% 0.56 -14.0% -15.5% -11.1%
20-30 % 36 118,747,939 12% 0.62 -6.5% -7.1% -4.9%
10-20 % 71 119,229,090 12% 0.34 -5.7% -5.7% -4.6%
10 % and less 27 7,661,353 1% 0.08 -3.7% -3.8% -3.6%
Financial Risk
More than 25 % 1 20,900,421 2% 0.38 -45.4% -42.3% -33.8%
20-25 % 8 231,271,389 23% 0.67 -27.9% -18.7% -13.0%
15-20 % 5 128,765,465 13% 0.54 -14.9% -14.2% -8.6%
10-15 % 13 278,374,933 27% 0.79 -18.5% -16.5% -11.3%
5-10 % 71 263,618,684 26% 0.39 -7.5% -8.3% -6.3%
0-5 % 65 63,349,284 6% 0.36 -3.6% -4.4% -3.4%
None 11 38,680,816 4% -1.42 -3.8% -4.7% -1.9%
Less than -25% 21 462,752,562 45% 0.65 -31.6% -26.6% -21.1%
-15 to -25% 14 189,396,369 18% 0.78 -15.7% -13.8% -9.6%
-5% to -15% 32 241,159,396 24% 0.61 -5.4% -7.1% -3.7%
-5% to 5% 22 83,236,382 8% 0.57 1.8% 0.3% 2.9%
5% to 15%   - - - - - -
From 15% to25%   - - - - - -
25% and higher   - - - - - -
All Safety Net Hospitals 89 976,544,709 95% 0.66 -13.0% -12.5% -8.5%

Table 8.9 Alternative DSH Allocation Policies: Distribution of Funds to NY Hospitals


6.  The starting point for our analysis file for this project was hospitals that were on HCRIS. The New York HHC facilities file manual cost reports and are not included on HCRIS.

7.  We note that direct comparisons should not be made between the CA and NY hospitals both because of the missing hospitals and the use of operating margins in NY and total margins in CA.

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