Table 5.8 summarizes the main financial indicators by low-income patient utilization and three categories of hospitals based on the decile rankings for: FY 1998 total margins net of DSH, the three-year average of total margins net of DSH, and the 3-year average composite index. (See Appendix C for summaries of the financial indicators by other hospital classes). Columns 3 and 4 report the discharge- weighted means for FY 1998 total margin and total margin net of DSH payments, respectively. For hospital classes with positive margins, the differences in total margins and total margins net of DSH are slight compared to the differences for hospitals with negative margins. For example, for hospitals with total margins net of DSH between -10% and -20%, the average total margin (net of DSH) increases from -14.0% to -7.0 % when DSH payments are taken into account.
Column 5 reports the 3-year average (discharge-weighted) ranking for each hospital class based on margins net of DSH payments. The average discharge-weighted ranking is in the 54.8 percentile of hospitals. Column 6 shows the discharge-weighted average rankings for FY 1998 total margins net of DSH. The average rankings for each hospital class for FY 1998 are very similar to the rankings for a three-year average. Column 7 reports the weighted average rankings based on the three-year composite index are reported in Column 7.
Across the various utilization measures for low-income populations, the financial indicator rankings of the hospitals serving a higher proportion of low-income patients are lower than those of hospitals serving a relatively low proportion of low-income patients. However, the changes in rankings as the proportion of low-income patients increases are not consistently monotonic. For example, rankings based on total margins net of DSH are lower for hospitals with a low-income patient ratio between .40 and .60 than for hospitals with low- income patient ratios between .60 and .80.2 Our decision to remove only the federal share of Medicaid DSH in computing the margin may contribute to this result.
The relationship between Medicaid utilization and margins is evident in the lower rankings for hospitals with higher Medicaid utilization (and may be indicative of Medicaid shortfalls and uncompensated care). The discharge-weighted average ranking for hospitals one standard deviation above the mean Medicaid utilization for the state is 38.0% compared to 58.1% for those within one standard deviation from the mean. Overall, the difference in rankings across low-income patient categories is greater using total margins net of DSH than the composite index. For example, the mean composite index ranking for hospitals one standard deviation above the mean Medicaid utilization rate is 41.7% compared to 52.6 % for those within one standard deviation from the mean.
Columns 8-11 report the distribution of FY1998 Medicare and Medicaid (federal share only) DSH funds. Key findings include the following:
- Except for the 32 hospitals with lowest margins (-50 to -70 percent), the average FY 1998 DSH payment per discharge increases as the total margin net of DSH decreases.
- Across the total margin net of DSH deciles, the average FY 1998 DSH payment to the hospitals in Decile 1 is nearly twice the average payment to the hospitals in the Decile 2. Using the deciles for the 3-year average net of DSH payments, the average per discharge DSH payment in Decile 1 is $1,378 compared to $701 in Decile 2. The concentration of DSH payments in Decile 1 is attributable to Medicaid payments. The average payment per discharge decreases with each decile through the eighth decile. The average DSH payment per discharge for hospitals in Deciles 9-10 is slightly larger than the payment to hospitals in Deciles 6-7.
- Medicaid DSH payments are more concentrated than Medicare payments in the hospitals in the lower margin deciles. Using the 3-year average margin deciles, 61 percent of Medicare DSH and 82% of Medicaid DSH payments are concentrated in the hospitals in Deciles 1-5. Thirty-five percent of Medicaid DSH payments go to hospitals in Decile 1 compared to 12% of Medicare DSH payments.
- While the average DSH payment per discharge declines as the composite index decile increases, the differences in payments across these deciles are not as great as those for the total margin deciles. The overall concentration of DSH payments in Deciles 1-5 is similar to the finding with respect to the total margin deciles (60% of Medicare DSH and 82% of Medicaid DSH). However, only 13.1% of Medicaid DSH payments go to hospitals in Decile 1 of the composite index.
Table 5.9 summarizes the financial indicators by state using the same columns as Table 5.8.
2. The low-income patient ratio for this analysis is defined as the percentage of inpatient days attributable to Medicare SSI and Medicaid (non-Medicare) patients.