Analysis of the Joint Distribution of Disproportionate Share Hospital Payments. Results

09/01/2002

Table 4.1 summarizes the distribution of Medicare payments across classes of hospitals using both the FY1998 payment rules and the rules that will be in effect in FY2003. The latter rules reflect the BIPA changes in the payment formula and the expiration of the BBA across-the-board payment reductions. We estimate FY 1998 actual DSH payments at $4.83 billion. If the FY2003 DSH payment rules had been in effect and all other FY1998 payment parameters remained unchanged, payments would have been $358 million higher, or $5.18 billion. Consistent with the changes in the formula, most payment increases occur among rural hospitals and small urban hospitals. Columns B and C show the distribution of hospitals and Medicare inpatient days within each hospital class regardless of whether they received DSH payments.

Following is a summary of key findings.

Urban/Rural Status. Hospitals located in large urban areas (defined as having a population of 1 million or more) received the largest share of FY1998 Medicare DSH payments. Although they provided only 49% of total Medicare inpatient days, they received 65% of total Medicare DSH payments. The BIPA rules reduce this share only slightly to 62%. Although rural hospitals provided 19% of total Medicare inpatient days, they received only 3.1% of the Medicare DSH payments. Under BIPA, the rural share of DSH payments will more than double to 7.2%.

Table 4.1
Medicare DSH Payments by Category, FY 1998 ($ millions)

(Actual and Simulated Under New 2003 Rules)
A B C D E F G H
  No. of Hospitals Medicare Inpatient Days (millions) % of Medicare Days Actual FY1998 Payments % Simulated Payments (FY 2003 Rules, FY98 data) %
All Hospitals 5148 78.5 100.0% 4,825.5   5,183.3  
By Geographic Area
Urban 2918 63.9 81.5% 4,674.2 96.9% 4,812.5 92.8%
Large urban 1689 38.3 48.8% 3,113.0 64.5% 3,202.4 61.8%
Other urban 1229 25.6 32.7% 1,561.2 32.4% 1,610.1 31.1%
Rural 2230 14.5 18.5% 151.2 3.1% 370.9 7.2%
Urban By Region 2918 63.9 100.0% 4,674.2 100.0% 4,812.5 100.0%
East North Central 482 10.9 17.0% 498.0 10.7% 506.1 10.5%
East South Central 171 4.0 6.2% 325.1 7.0% 332.2 6.9%
Middle Atlantic 436 13.0 20.4% 949.3 20.3% 962.1 20.0%
Mountain 138 2.3 3.6% 127.0 2.7% 130.9 2.7%
New England 152 3.2 5.0% 130.0 2.8% 142.1 3.0%
Pacific 472 7.1 11.0% 963.2 20.6% 983.4 20.4%
South Atlantic 462 11.9 18.6% 927.8 19.8% 956.7 19.9%
West North Central 195 4.2 6.6% 157.7 3.4% 161.0 3.3%
West South Central 362 6.7 10.4% 584.5 12.5% 625.8 13.0%
Puerto Rico 48 0.8 1.2% 11.7 0.3% 12.1 0.3%
Urban By Bedsize 2918 63.9 100.0% 4,674.2 100.0% 4,812.5 100.0%
0-49 beds 280 0.9 1.4% 22.2 0.5% 29.0 0.6%
50-99 beds 364 2.1 3.3% 33.4 0.7% 58.7 1.2%
100-199 beds 723 8.2 12.8% 535.0 11.4% 551.6 11.5%
200-299 beds 532 11.6 18.2% 627.8 13.4% 640.3 13.3%
300-499 beds 646 20.8 32.6% 1,452.1 31.1% 1,473.8 30.6%
500 or more beds 373 20.3 31.7% 2,003.8 42.9% 2,059.0 42.8%
Rural By Bedsize 2230 14.5 100.0% 151.2 100.0% 370.9 100.0%
0-49 beds 1087 2.8 19.0% 8.2 5.4% 39.2 10.6%
50-99 beds 628 3.4 23.3% 17.0 11.2% 81.0 21.8%
100-149 beds 244 2.6 17.6% 23.9 15.8% 58.4 15.7%
150-199 beds 125 1.9 13.2% 31.8 21.1% 63.0 17.0%
200 or more beds 146 3.9 26.8% 70.3 46.5% 129.3 34.9%
Type of Hospital 5148 78.5 100.0% 4,825.5 100.0% 5,183.3 100.0%
General 5124 78.0 99.4% 4,773.4 98.9% 5,129.7 99.0%
Children's 3 0.2 0.2% 16.2 0.3% 16.4 0.3%
Psychiatric 21 0.3 0.4% 35.9 0.7% 37.3 0.7%
Rehabilitation 0 0.0 0.0% 0.0 0.0% 0.0 0.0%
Type of Ownership 5148 78.5 100.0% 4,825.5 100.0% 5,183.3 100.0%
Federal 45 0.0 0.0% 2.2 0.0% 3.1 0.1%
State 93 1.6 2.0% 270.5 5.6% 280.9 5.4%
County or local 672 5.6 7.2% 440.6 9.1% 490.4 9.5%
Gov. - hosp. dist 630 5.1 6.5% 325.2 6.7% 405.1 7.8%
Not-for-profit 2997 57.6 73.4% 3,199.5 66.3% 3,371.2 65.0%
For-profit 711 8.5 10.9% 587.5 12.2% 632.8 12.2%
Medicare Case Mix Inde 5148 78.5 100.0% 4,825 100.0% 5,183 100.0%
1st quartile 1288 4.1 5.2% 39 0.8% 87 1.7%
2nd quartile 1289 10.1 12.8% 356 7.4% 453 8.7%
3rd quartile 1288 21.9 27.9% 1,065 22.1% 1,172 22.6%
4th quartile 1283 42.5 54.1% 3,366 69.7% 3,471 67.0%

 

Table 4.1(continued) 
Medicare DSH Payments by Category, FY 1998 ($ millions)

(Actual and Simulated Under New 2003 Rules)
Category No. of Hospitals Medicare Inpatient Days (millions) % of Medicare Days Actual FY1998 Payments % # of H. Medicare Inp. Days (mln) % Simulated Payments (FY 2003 Rules, FY1998 data) %
Medicare SSI Days and Medicaid Days as Percent of Total Inpatient Days 5148 78.5 100.0% 4,825 100.0% 5148 78.5 100.0% 5,183 100.0%
<.10 1509 20.7 26.3% 33 0.7% 1509 20.7 26.3% 36 0.7%
= >.10 and <.20 1715 28.7 36.6% 867 18.0% 1715 28.7 36.6% 998 19.2%
= >.20 and < .30 947 16.1 20.6% 1,462 30.3% 947 16.1 20.6% 1,579 30.5%
=>.30 and <.40 474 7.4 9.4% 1,173 24.3% 474 7.4 9.4% 1,216 23.5%
=>.40 and <.50 211 2.9 3.7% 634 13.1% 211 2.9 3.7% 674 13.0%
=>.50 and <.60 96 1.2 1.6% 304 6.3% 96 1.2 1.6% 311 6.0%
=>.60 and <.70 55 0.8 1.0% 226 4.7% 55 0.8 1.0% 233 4.5%
=>.70 and <.80 21 0.3 0.4% 83 1.7% 21 0.3 0.4% 88 1.7%
=>.80 9 0.1 0.1% 8 0.2% 9 0.1 0.1% 8 0.2%
Missing 111 0.2 0.2% 36 0.7% 111 0.2 0.2% 41 0.8%
Medicare Inpatient Days As Percent of Total Inpatient Days 5148 78.5 100.0% 4,825 100.0% 5148 78.5 100.0% 5,183 100.0%
0-24 274 3.2 4.0% 472 9.8% 274 3.2 4.0% 521 10.0%
25-49 1312 25.7 32.7% 2,661 55.2% 1312 25.7 32.7% 2,734 52.8%
50-64 2027 35.6 45.3% 1,407 29.2% 2027 35.6 45.3% 1,568 30.3%
65-79 1243 12.6 16.0% 151 3.1% 1243 12.6 16.0% 220 4.3%
80 and over 165 0.8 1.0% 5 0.1% 165 0.8 1.0% 8 0.1%
Missing 127 0.7 0.9% 129 2.7% 127 0.7 0.9% 132 2.5%
Medicare SSI Days As Percent of Total Medicare Days 5148 78.5 100.0% 4,825 100.0% 5148 78.5 100.0% 5,183 100.0%
<.10 3152 51.3 65.3% 1,333 27.6% 3152 51.3 65.3% 1,453 28.0%
= >.10 and <.20 1216 20.3 25.8% 2,236 46.3% 1216 20.3 25.8% 2,380 45.9%
= >.20 and < .30 436 4.7 6.0% 758 15.7% 436 4.7 6.0% 825 15.9%
=>.30 and <.40 162 1.4 1.7% 292 6.1% 162 1.4 1.7% 308 5.9%
=>.40 and <.50 45 0.4 0.5% 88 1.8% 45 0.4 0.5% 90 1.7%
=>.50 and <.60 17 0.1 0.2% 39 0.8% 17 0.1 0.2% 40 0.8%
=>.60 and <.70 9 0.1 0.2% 44 0.9% 9 0.1 0.2% 48 0.9%
=>.70 0 0.0 0.0% 0 0.0% 0 0.0 0.0% 0 0.0%
Missing 111 0.2 0.2% 36 0.7% 111 0.2 0.2% 41 0.8%
Medicaid Inpatient Days As a Percent of Total Non-Medicare Days 5148 78.5 100.0% 4,825 100.0% 5148 78.5 100.0% 5,183 100.0%
<.10 857 10.9 13.8% 27 0.6% 857 10.9 13.8% 31 0.6%
= >.10 and <.20 972 15.1 19.2% 173 3.6% 972 15.1 19.2% 194 3.7%
= >.20 and < .30 1073 19.9 25.3% 861 17.9% 1073 19.9 25.3% 942 18.2%
=>.30 and <.40 867 14.9 19.0% 1,187 24.6% 867 14.9 19.0% 1,297 25.0%
=>.40 and <.50 518 7.6 9.6% 892 18.5% 518 7.6 9.6% 953 18.4%
=>.50 and <.60 317 5.2 6.6% 746 15.5% 317 5.2 6.6% 786 15.2%
=>.60 and <.70 150 1.7 2.2% 315 6.5% 150 1.7 2.2% 328 6.3%
=>.70 and <.80 86 1.5 2.0% 303 6.3% 86 1.5 2.0% 314 6.1%
=>.80 86 0.8 1.1% 160 3.3% 86 0.8 1.1% 169 3.3%
Missing 222 0.9 1.1% 162 3.4% 222 0.9 1.1% 169 3.3%
Medicaid Inpatient Days As Percent of Total Inpatient Days 5148 78.5 100.0% 4,825 100.0% 5148 78.5 100.0% 5,183 100.0%
1st state quartile 1223 16.1 20.5% 85 1.8% 1223 16.1 20.5% 103 2.0%
2nd state quartile 1274 19.1 24.3% 485 10.1% 1274 19.1 24.3% 566 10.9%
3rd state quartile 1257 20.9 26.6% 1,206 25.0% 1257 20.9 26.6% 1,316 25.4%
4th state quartile 1283 22.2 28.3% 3,014 62.5% 1283 22.2 28.3% 3,157 60.9%
1 s.d. Above State Average 1120 16.3 20.8% 1,892 39.2% 1120 16.3 20.8% 1,987 38.3%
Missing 111 0.2 0.2% 36 0.7% 111 0.2 0.2% 41 0.8%
Teaching Status 5148 78.5 100.0% 4,825 100.0% 5148 78.5 100.0% 5,183 100.0%
Non- teaching 3993 41.5 52.9% 1,592 33.0% 3993 41.5 52.9% 1,859 35.9%
Fewer than 10 residents 369 8.1 10.4% 454 9.4% 369 8.1 10.4% 468 9.0%
Residents >10 and <100 509 16.9 21.6% 1,121 23.2% 509 16.9 21.6% 1,138 22.0%
Residents => 100 and < 250 149 6.8 8.7% 900 18.7% 149 6.8 8.7% 919 17.7%
Residents => 250 88 5.0 6.4% 742 15.4% 88 5.0 6.4% 782 15.1%
Missing 40 0.0 0.0% 17 0.4% 40 0.0 0.0% 18 0.3%

Bed Size. Larger urban hospitals receive a disproportionately greater share of Medicare DSH payments. Hospitals with 500 beds or more provided 32% of Medicare inpatient days and received 43% of Medicare DSH funds in FY1998. Actual FY1998 payments to rural hospitals had the same bias towards larger hospitals as urban hospital payments. Rural hospitals with 200 beds or more provided 27% of Medicare inpatient days but received 47% of Medicare DSH payments to rural hospitals. At the same time, hospitals with less than 100 beds provided 42% of Medicare inpatient days but received only 17% of Medicare DSH payments. Among rural hospitals, the BIPA rules will reduce the share of DSH payments to those with more than 200 beds to 35%, and raise the share of DSH payments to those with fewer than 100 beds to 32%. The BIPA rules will not affect the relative distribution of Medicare DSH funds among urban hospitals.Region. The Pacific and East North Central regions have the largest disparities between the share of Medicare DSH payments they received and their share of Medicare inpatient days (20% vs. 11%, and 10.5% vs. 17%, respectively). The differences are largely attributable to the factors other than DSH patient percentage that affect payment distribution. Payments are made on a per discharge basis and are a function not only of the hospital's DSH patient percentage but also its case mix and wage index. The hospitals in the Pacific region are characterized by a shorter length of stay, high case mix, and high hospital wages. Hospitals in the East North Central have a longer length of stay, lower wages, and a lower case mix index. The distribution across regions was not affected by the BIPA changes.

Hospital Type. To be consistent with tables on Medicaid DSH payments that follow, we used the type of hospital assigned by the state in reporting Medicaid payments as the first determinant of provider type. We found several situations in the Medicaid data where a Medicare acute care hospital was classified as a psychiatric facility by the state even though the hospital had a Medicare acute care provider number. It appears that in these cases the Medicaid DSH payments are based on the psychiatric care provided by the institution rather than its acute care services. Ideally, the Medicaid DSH payments would be assigned to the distinct part psychiatric units in these situations and would not be considered acute care hospital payments. However, a provider-by-provider basis determination would be needed that this is the correct interpretation and that the discrepancy does not result from errors in state reporting of provider type or our assignment of provider numbers. In the interim, this accounts for the seemingly anomalous situation where psychiatric facilities receive Medicare DSH funds.2

Ownership. DSH payments are more evenly distributed across hospitals by type of ownership than might be expected based on the traditional role of governmental providers in providing care to low-income patients. Not-for-profit hospitals received the bulk of Medicare DSH payments - 66% of the total - but somewhat less than their share of total Medicare inpatient days (73%). Consistent with their role in providing a significant amount of care to low-income patients, a somewhat larger share of DSH payments went to state and local hospitals. Governmental hospitals provided 16% of Medicare inpatient days and received 21% of Medicare DSH funds. The BIPA changes do not influence this pattern significantly. Interestingly, proprietary hospitals are not generally viewed as safety net hospitals; however, their share of DSH payments (12%) approximates their share of inpatient days (11%).

Case Mix. The relative share of Medicare DSH payments increases as the Medicare case mix index increases. The hospitals in the highest quartile of Medicare case mix index provided 54% of the Medicare inpatient days and received 67% of the payments. This result is consistent with larger tertiary care facilities providing a higher proportion of care to low-income patients.

As expected, Medicare DSH payments are skewed towards hospitals that serve a high percentage of Medicare beneficiaries on SSI and Medicaid patients.3 Hospitals for which Medicare beneficiaries on SSI and Medicaid patients constitute at least 20 percent of the patient census provide about 37% of Medicare inpatient days but receive more than 80 % of the DSH payments.

  • Even though the DSH payment is an add-on to Medicare DRG payments, payments decrease as the percentage of Medicare utilization increases. For example, hospitals with 25-49 percent Medicare utilization account for 33% of the days but receive 53% of the DSH payments under FY2003 rules. Hospitals with 50-64 percent Medicare utilization account for 45.3 % of the days but receive only 30% of DSH payments. This is probably a result of the Medicaid utilization in the DSH formula being expressed as a percentage of total inpatient days. By definition, hospitals that have high Medicare utilization will have a low Medicaid percentage in their DSH patient percentage.
  • Less than 10% of Medicare patients in most hospitals are entitled to SSI. Once this threshold is passed, hospitals begin to receive a higher percentage of DSH payments relative to their inpatient utilization. For example, hospitals with 10-20 percent of their Medicare population eligible for SSI account for 26 % of Medicare inpatient days but receive 46 % of Medicare DSH payments.
  • Medicaid utilization can be expressed either as a percentage of non-Medicare days (the better measure of the proportion of the patient population that is low-income) or as a percentage of total inpatient days (which is used in the Medicare DSH formula). When looked at as a percentage of non-Medicare patients, hospitals on average do not benefit from Medicare DSH until their Medicaid utilization rate exceeds 30 percent. When looked at as a percentage on total inpatient days, hospitals in the upper quartile of Medicaid utilization rates for their state benefit the most. They account for 28% of Medicare inpatient days and 62.5% of the Medicare DSH payments. Hospitals with a Medicaid utilization rate that is at least one standard deviation above the state mean furnish 21% of Medicare inpatient days and receive 38% of DSH payments.

Teaching Status. The distribution of payments across classes of teaching hospitals reflects the commitment of most major teaching hospitals to serving low-income patients. The 237 teaching hospitals in the analysis file with 100 or more residents account for 36 % of Medicare inpatient days and receive 55% of Medicare DSH payments.


2.  By design, the Medicare DSH program applies only to acute care hospitals that are paid under the prospective payment system. Hospitals that are excluded from the prospective payment system are reimbursed on a reasonable cost basis subject to rate of increase (TEFRA) limits and do not receive DSH payments. Excluded units of acute care hospitals are assigned separate provider numbers (and, under the Medicare convention for assigning Medicare provider numbers, an acute care unit of a psychiatric facility would receive the main provider number). We found a several situations in the Medicaid data where a Medicare acute care hospital was classified as a psychiatric facility by the state.

3.  We use as our measure the percentage of total inpatients that are either Medicare beneficiaries on SSI or non-Medicare patients who are entitled to Medicaid. This differs from the DSH patient percentage, which is the percentage of Medicare patients who are entitled SSI plus the percentage of total patients who are non-Medicare patients entitled to Medicaid.

View full report

Preview
Download

"report.pdf" (pdf, 829.97Kb)

Note: Documents in PDF format require the Adobe Acrobat Reader®. If you experience problems with PDF documents, please download the latest version of the Reader®