(Medicare Claims Processing Manual)

Hospital D is a rural hospital that is a RRC and a sole community hospital.  It has a DSH percentage of 45 percent.  Its DSH payment factor is computed:   (45 -  30) (.6) + 4.0 = 13%   DSH adjustment factor = 13% (.1300)   Rural hospitals that are RRCs and are not sole community hospitals  - the percentage is determined using the following formula:   (DSH % -  30) (.6) + 4.0    Rural hospitals that are sole community hospitals and are not RRCs  - 10 percent.    Rural hospitals not described above  - 4 percent.   For discharges after September 30, 1994:    Urban hospitals with 100 or more beds and rural hospitals with 500 or more beds whose DSH percentage is greater than 20.2  - the percentage is determined using the following formula:   (DSH % -  20.2) (.825) + 5.88   Urban hospitals with 100 or more beds whose DSH percentage is less than or equal to 20.2 -  the following formula is used:   (DSH % -  15) (.65) + 2.5    Rural hospitals that are RRCs and sole community hospitals  - the greater of 10 percent or the percentage determined with the following formula:   (DSH % -  30) (.6) + 4.0   EXAMPLES:   Hospital C is a rural hospital that is an RRC and a sole community hospital.  It has a DSH percentage of 35 percent.  Its October 1994 DSH payment factor is computed:   (35 -  30) (.6) + 4.0 = 7%   DSH adjustment factor = 10% (.1000), the greater rate   Hospital D is a rural hospital that is an RRC and a sole community hospital.  It has a DSH percentage of 45 percent.  Its October 1994 DSH payment factor is computed:   (45 -  30) (.6) + 4.0 = 13%   DSH adjustment factor = 13% (.1300)    Rural hospitals that are RRCs, but not sole community hospitals  - Use the following formula:   (DSH % -  30) (.6) + 4.0    Rural hospitals that are sole community hospitals and are not RRCs  - 10 percent.    Rural hospitals not described above  - 4 percent.   The amount of the operating cost DSH adjustment is computed by multiplying the Federal portion of the hospital's operating cost DRG revenues by the appropriate DSH adjustment factor.   EXAMPLE:  Hospital A's DSH payment adjustment factor is 5.5 percent (.0550).  The Federal portion of its DRG revenues including appropriate outlier payments, but excluding any payments for indirect medical education costs, equals $100,000.  Federal DRG revenues x DSH adjustment factor = DSH adjustment amount $100,000 x .055 = $5,500  The A/B MAC (A) will accumulate a record of the DSH amount paid, the Federal portion of the operating cost DRG and any outlier amount for hospital discharges after April 30, 1986, to use at cost settlement.  C. - Computation of DSH Adjustment   Compute the amount of the DSH adjustment by multiplying the Federal portion of the hospital's DRG revenues by the appropriate DSH adjustment factor.  EXAMPLE:  Hospital A's DSH payment adjustment factor is 5.5 percent (or .0550).  The Federal portion of its DRG revenues (including appropriate outlier payments, but excluding any payments for indirect medical education costs) equals $100,000.  Federal DRG revenues x DSH adjustment factor = DSH adjustment amount $100,000 x .055 = $5,500  D. - DSH Exception   The law contains a provision whereby a hospital can qualify for an operating cost DSH adjustment of:    15 percent for discharges prior to October 1, 1988;    25 percent for discharges between October 1, 1988, and April 1, 1990;    30 percent for discharges from April 1, 1990, through September 31, 1991;    35 percent for discharges on or after October 1, 1991, if:    It is located in  an urban area and has 100 or more beds; and   It demonstrates that, during its cost reporting period, more than 30 percent of its total inpatient care revenues were derived from State and local government payments for indigent care furnished to patients not covered by Medicare or Medicaid.   It is incumbent upon the hospital to demonstrate that more than 30 percent of its total inpatient care revenues are from State and local government sources and that they are specifically earmarked for the care of indigents (that is, none of the money may be used for any purpose other than indigent care).  The following are the types of care that are not included as indigent care:    Free care furnished to satisfy a hospitals Hill -Burton obligation.   Free care or care a hospital furnished at reduced rates to its employees or by a government hospital to any category of public employee.   Funds furnished to a hospital to cover general operating deficits.    The adjustment is not automatic from year to year but must be applied for on an annual basis.   Documentation to support the application includes the hospital's complete audited financial statements and their accompanying notes.  The hospital must provide detailed schedules related to State and local revenue appropriations and outline their purpose.   Unless the appropriations are specifically earmarked for indigent patient care, the A/B MAC (A) shall assume that a portion of the funds was intended to cover the costs of other uncompensated care, such as bad debts for non-indigent patients, free care to employees, etc., as well as to cover general operating deficits.  The A/B MAC (A) shall calculate the percentage of charity care included in all uncompensated care and apply the percentage to the appropriate funds to determine the amount appropriated for c harity care.   Hospitals must submit documentation to support amounts claimed as indigent patient care.  This includes a copy of their procedures for determining indigence, steps used to verify a patient's financial information, and methods used to distinguish bad debts from indigence.   The A/B MAC (A) shall review the documentation submitted in support of the provider's request for a disproportionate share adjustment under 42 CFR 412.106(c)(2) of the regulations.  Beginning with Federal Fiscal Year (FY) 2011 A/B MACs (A) shall submit to CMS annually by February 28 documentation for the hospitals they determine meet the qualifying standards for receiving disproportionate share hospital (DSH) payments under section 42 CFR 412.106(c)(2).  This review can be accomplished in conjunction with t he audit/settlement of the cost report for the period subject to the adjustment.  At a minimum, the A/B MAC (A) shall:   Verify total inpatient revenues;   Verify that State and local government appropriations on the financial statements are consistent with amounts contained in governmental appropriations bills;    Review, on the basis of a sample of cases, the provider's implementation of procedures for identifying indigent patients.  Ensure that amounts for "indigent" patients do not include charges associated with:    Titles XIX and XVIII patient care;    Hill- Burton care;    Free care to employees; and    Bad debts for patients who are not indigent.   E. - Reporting for PS&R and CWF   The A/B MAC (A) 's PPS Pricer identifies the amount of the DSH adjustment on each bill.  The A/B MAC (A) reports this amount with value code 18 to its PS&R, and to CWF.  20.3.1 - Clarification of Allowable Medicaid Days in the Medicare Disproportionate Share Hospital (DSH) Adjustment Calculation  (Rev. 1, 10-01-03)  20.3.1.1 - Clarification for Cost Reporting Periods Beginning On or After January 1, 2000 (Rev. 1, 10-01-03)  PM A -01-03  Under 1886(d)(5)(F)  of the Social Security Act (the Act), the Medicare disproportionate share patient percentage is made up of two computations.  The first computation includes patient days that were furnished to patients who, during a given month, were entitled to both Medi care Part A and Supplemental Security Income (SSI) (excluding State supplementation).  This number is divided by the number of covered patient days utilized by patients under Medicare Part A for that same period.  The second computation includes patient da ys associated with beneficiaries who were eligible for medical assistance (Medicaid) under a State plan approved under Title XIX but who were not entitled to Medicare Part A.  (See 42 CFR 412.106(b)(4).)  This number is divided by the total number of patient days for that same period.  Included Days   In calculating the number of Medicaid days, the hospital must determine whether the patient was eligible for Medicaid under a State plan approved under Title XIX on the day of service.  If the patient was so eligible, the day counts in the Medicare disproportionate share adjustment calculation.  The statutory formula for "Medicaid days" reflects several key concepts.  First, the focus is on the patient's eligibility for Medicaid benefits as determined by the State, not the hospital's "eligibility" for some form of Medicaid payment.  Second, the focus is on the patient's eligibility for medical assistance under an approved Title XIX State plan, not the patient's eligibility for general assistance under a State -only program.  Third, the focus is on eligibility for medical assistance under an approved Title XIX State plan, not medical assistance under a State-only program or other program.  Thus, for a day to be counted, the patient must be eligible on that day for medical assistance benefits under the Federal -State cooperative program known as Medicaid (under an approved Title XIX State plan).  In other words, for purposes of the Medicare disproportionate share adjustment calculation, the term "Medicaid days" refers to days on which the patient is eligible for m edical assistance benefits under an approved Title XIX State plan.  The term "Medicaid days" does not refer to all days that have some relation to the Medicaid program, through a matching payment or otherwise; if a patient is not eligible for medical assistance benefits under an approved Title XIX State plan, the patient day cannot become a "Medicaid day" simply by virtue of some other association with the Medicaid program.   Medicaid days, for purposes of the Medicare disproportionate share adjustment calculation, include all days during which a patient is eligible, under a State plan approved under Title XIX, for Medicaid benefits, even if Medicaid did not make payment for any services.  Thus, Medicaid days include, but are not limited to, days that are determined to be medically necessary but for which payment is denied by Medicaid because the provider did not bill timely, days that are beyond the number of days for which a S tate will pay, days that are utilized by a Medicaid beneficiary prior to an admission approval but for which a valid enrollment is determined within the prescribed period, and days for which payment is made by a third party.  In addition, we recognize in t he calculation days that are utilized by a Medicaid beneficiary who is eligible for Medicaid under a State plan approved under Title XIX through a managed care organization (MCO) or health maintenance organization (HMO).  However, in accordance with 42 CFR 412.106(b)(4) , a day does not count in the Medicare disproportionate share adjustment calculation if the patient was entitled to both Medicare Part A and Medicaid on that day.  Therefore, once the eligibility of the patient for Medicaid under a State plan approved unde r Title XIX has been verified, the A/B MAC (A) must determine whether any of the days are dual entitlement days and, to the extent that they are, subtract them from the other days in the calculation.  Excluded Days   Many States operate programs that include both State -only and Federal -State eligibility groups in an integrated program.  For example, some States provide medical assistance to beneficiaries of State- funded income support programs.  These beneficiaries, ho wever, are not eligible for Medicaid under a State plan approved under Title XIX, and, therefore, days utilized by these beneficiaries do not count in the Medicare disproportionate share adjustment calculation.  If a hospital is unable to distinguish betwe en Medicaid beneficiaries and other medical assistance beneficiaries, then it must contact the State for assistance in doing so.  In addition, if a given patient day affects the level of Medicaid DSH payments to the hospital but the patient is not eligible for Medicaid under a State plan approved under Title XIX on that day, the day is not included in the Medicare DSH calculation.   It should be noted that the types of days discussed above are not necessarily the only types of excluded days.  Please see the chart  in 140.2.4.1, which summarizes some, but not necessarily all, of the types of days to be excluded from (or included in) the Medicare DSH adjustment calculation.