Source: https://www.federalregister.gov/articles/2013/09/18/2013-22686/medicaid-program-state-disproportionate-share-hospital-allotment-reductions
Timestamp: 2015-08-27 19:27:10
Document Index: 658587494

Matched Legal Cases: ['§ 447', '§ 447', '§ 447', '§ 447', '§ 447', '§ 447', '§ 455', '§ 447', '§ 447', '§ 447', '§ 447', '§ 447', '§ 447', '§ 447', '§ 447', '§ 447', '§ 447', '§ 447', '§ 447', '§ 455', '§ 447', 'art 447', 'ART 447', 'art 447', '§ 447', '§ 447', '§ 447', '§ 447', '§ 447', '§ 447', '§ 447', '§ 447']

Federal Register | Medicaid Program; State Disproportionate Share Hospital Allotment Reductions
-57313 (21 pages)
Document Number: 2013-22686
Shorter URL: https://federalregister.gov/a/2013-22686 Related Topics
Disproportionate Share Hospital Payment Reduction (CMS-2367-F) 3 actions from May 15th, 2013 to October 2013
ICRs Regarding Reporting Requirements (§ 447.299)
Section 1923(f)(7)(A)(i) of the Act requires that the Secretary of Health and Human Services (the Secretary) implement the aggregate reductions in federal funding for DSH payments through reductions in annual state allotments of federal funding for DSH payments (state DSH allotments), and accompanying reductions in payments to each state. The amount of federal funding for DSH payments for each state is limited to an annual state DSH allotment in accordance with section 1923(f) of the Act. Section 1923(f)(7) of the Act requires the use of a DHRM to determine the percentage reduction in each annual state DSH allotment to achieve the required aggregate annual reduction in federal DSH funding. Section 1923(f)(7)(B) establishes the following five factors that must be considered in the development of the DHRM. The methodology must:
The Omnibus Budget Reconciliation Act of 1981(OBRA'81) (97, enacted on August 31, 1981) amended section 1902(a)(13) of the Act to require that Medicaid payment rates for hospitals “take into account the situation of hospitals that serve a disproportionate share of low-income patients with special needs.” Over the more than 30 years since this requirement was first enacted, the Congress has set forth in section 1923 of the Act policies, payment targets, and limits to ensure greater oversight, transparency, and targeting of funding to hospitals.
Under section 1923(b) of the Act, a hospital meeting the minimum qualifying criteria in section 1923(d) of the Act is deemed as a DSH if the hospital's MIUR is at least one standard deviation above the mean MIUR in the state, or if the hospital's low-income utilization rate exceeds 25 percent. States have the option to define disproportionate share hospitals under the state plan using alternative qualifying criteria as long as the qualifying methodology comports with the deeming requirements of section 1923(b) of the Act. Subject to certain federal payment limits, states are afforded flexibility in setting DSH state plan payment methodologies to the extent that these methodologies are consistent with section 1923(c) of the Act. Section 1923(f) of the Act limits federal financial participation (FFP) for total statewide DSH payments made to eligible hospitals in each federal FY to the amount specified in an annual DSH allotment for each state. Although there have been some special rules for calculating DSH allotments for particular years or sets of years, section 1923(f)(3) of the Act establishes a general rule that state DSH allotments are calculated on an annual basis in an amount equal to the DSH allotment for the preceding FY increased by the percentage change in the consumer price index for all urban consumers for the previous FY. The annual allotment, after the consumer price index increase, is limited to the greater of the DSH allotment for the previous year or 12 percent of the total amount of Medicaid expenditures under the state plan during the FY. Allotment amounts were originally established in the Medicaid Voluntary Contribution and Provider Specific Tax Amendments of 1991 (102 enacted on December 12, 1991) based on each state's historical DSH spending.
Currently, we do not have sufficient information on the relative impacts that would result from state decisions to implement the new coverage group, and thus, we proposed a DHRM only for the first 2 years during which the DSH funding reductions are in effect. We intend to continue evaluating potential implications for accounting for coverage expansion in the DHRM. Accordingly, we proposed to establish a DHRM that would be in effect for FY 2014 and FY 2015 and we did not include a method to account for coverage expansion decisions in Medicaid for FY 2014 and FY 2015.
III. Provisions of the Proposed Regulations and Analysis of and Responses to Public Comments Back to Top
In addition to the comments we received on the proposed rule's discussion of specific aspects of the State DSH Allotment Reductions (which we address later in this final rule), commenters also submitted the following more general observations on the reductions. A discussion of these comments, along with our responses, appears below.
Comment: One commenter recommended that we analyze state-by-state Medicaid and Medicare payment differentials to lower DSH allotment reduction amounts for states with payment disparity between the two programs. The commenter also recommended that we offset Medicaid DSH reduction amounts for states that have global, risk-based payment arrangements.
Comment: One commenter recommended corrections and clarification corrections to multiple terms defined in § 447.294(b).
Response: We addressed the need for technical correction and clarification by modifying the language of § 447.294(b) in this final rule. Specifically, we modified the definitions in § 447.294(b) for “Mean high level of uncompensated care factor (HUF) reduction percentage,” “State group,” “Total Medicaid cost,” and “Uncompensated care costs” by correcting a typographical error and adding clarifying language. Comment: One commenter recommended that CMS clarify for which years states are required to submit annual MIUR data as proposed at § 447.294(d).
Response: We are finalizing § 447.294(d) to include additional clarifying language regarding the required state submission of MIUR data. We finalized this section to specify that states must initially provide the data for following Medicaid State Plan Rate Years (SPRY) as defined in § 455.301: 2008, 2009, 2010, 2011 by June 30, 2014. States must also provide this data for each subsequent SPRY to CMS by June 30 of each year. To determine which SPRY data must be submitted, subtract three years from the calendar year in which the data is due. This means that the SPRY 2012 data must be submitted to CMS by June 30, 2015.
Comment: One commenter requested changes to § 447.294(f) to clarify that the state-specific DSH allotment reduction amounts in the proposed rule only applies to FY 2014 and FY 2015 DSH allotments.
Response: We are finalizing § 447.294(f) to specify that the state-specific DSH allotment reduction amounts in the proposed rule only applies to FY 2014 and FY 2015 DSH allotments.
Comment: One commenter recommended corrections to multiple instances when § 447.294(e)(10) was mistakenly referenced instead of § 447.294(e)(12). The commenter also noted that § 447.294(e)(10) mistakenly refers to the “HMF” instead of the “HUF.”
Response: We disagree that the proposed methodology would unfairly penalize states that do not extend coverage to low-income adults under section 1902(a)(10)(A)(i)(VIII) of the Act. The data that the reductions are based on for these 2 years will not reflect state decisions to implement the new coverage group. Data reflecting the effects of the decision to implement the new coverage group may not be available to consider the impact of such a decision until 2016. We intend to address this issue more completely in separate rulemaking for DSH allotment reductions for FY 2016 and thereafter.
Response: The DHRM builds upon the existing unreduced DSH allotments because the statutory DHRM authority does not authorize reallocation of state DSH allotments under section 1923(f) of the Act. This section of the Act establishes the specific methodology required for calculating annual state DSH allotments. Although there have been some special rules for calculating DSH allotments for particular years or sets of years, section 1923(f)(3) of the Act establishes a general rule that state DSH allotments are calculated on an annual basis in an amount equal to the DSH allotment for the preceding FY increased by the percentage change in the consumer price index for all urban consumers for the previous FY. Neither the statute nor this rule affects this calculation.
Comment: Many commenters expressed support for CMS's assignment of a 33 and1/3percent weight to the Uninsured Percentage Factor (UPF) and a 66 and2/3percent combined weight for the two DSH payment targeting factors (a 33 and1/3percent weight for the HUF, and a 33 and1/3percent weight for the HMF). The commenters indicated that this was the most reasonable approach for assigning factor weights.
Comment: One commenter recommended that CMS increase the weight of the UPF, based on the importance of DSH payments to hospitals that serve patients regardless of their ability to pay.
Response: Medicaid DSH payment amount data sources used in the DHRM rely on existing federal statute and regulatory definitions of DSH payments. Changes to these existing definitions are outside the scope of this rule. Comment: A few commenters recommended that we finalize our proposal to rely on state-specific thresholds when ranking hospitals for purposes of the HMF and HUF. One commenter stated that the method is a more accurate gauge of a hospital's true level of Medicaid volume and uncompensated care than a national comparison.
Response: The Medicaid DSH audit and reporting data is the only comprehensive reported data available that is consistent with Medicaid program requirements. We have finalized reliance on this data in the DHRM because it represents the best available data that is consistent with existing program definitions. To date, we have received rich, comprehensive audit and reporting data from each state that makes Medicaid DSH payments. To facilitate the provision of high quality data, we provided explicit parameters in the 2008 DSH final rule and associated policy guidance for calculating and reporting data elements. The 2008 DSH final rule included a transition period in which states and auditors could develop and refine audit and reporting techniques. This transition period covered data reported relating to state plan rate years 2005 through 2010. We recognize that the DSH audit and reporting data during this transition period may vary in its quality and accuracy from state to state and have finalized the collection of additional information that will allow us to ensure collection of the information necessary to best implement state-specific DSH allotment reductions beyond FY 2015. Consistent with ongoing efforts to ensure that the reported data is of the highest quality possible as we move through the transition period, we intend to issue additional detailed guidance to states by the end of CY 2013 that would be applicable to audits and reports due to us by the end of CY 2014.
Response: We appreciate all comments and recommendations regarding future rulemaking. The Affordable Care Act provides an increase in coverage options available through the Marketplace and state Medicaid programs that will coincide with the DSH allotment reductions implemented through this rule. We intend to consider the valuable input from these comments and the information that will be available to us beginning in 2014 for determining the methods for DSH allotment reductions for FY 2016 and thereafter.
The proposed UPF is determined separately for each state group as described in greater detail in the proposed rule (78 FR 28556). We proposed to utilize preliminary DSH allotment estimates to develop the DSH reduction factors. We received a number of public comments on the proposed Factor 2—UPF. A discussion of these comments, with our responses, appears below.
The calculation of the HMF will rely on extant data that should be readily available to states. The following data elements are used in the HMF calculation: the preliminary unreduced DSH allotment for each state, the DSH hospital payment amount reported for each DSH in accordance with § 447.299(c)(17), the MIUR for each DSH reported in accordance with § 447.299(c)(3), and the value of one standard deviation above the mean MIUR for hospitals receiving Medicaid payments in the state reported separately.
Response: The threshold used in the DHRM for the HMF to designate a high volume Medicaid hospital is expressly identified by statute. We believe that this threshold is appropriate and anticipate that the DHRM will incentivize and promote state targeting of DSH payments to any hospitals exceeding this threshold.
DSH hospital payment amounts reported for each DSH in accordance with § 447.299(c)(17);
Uncompensated care cost amounts reported for each DSH in accordance with § 447.299(c)(16);
Total Medicaid cost amounts reported for each DSH in accordance with § 447.299(c)(10); and
Total uninsured cost amounts reported for each DSH in accordance with § 447.299(c)(14).
Response: We have finalized the proposed DHRM that promotes state targeting of payments to hospitals that would qualify for DSH payments based on MIUR deeming requirements defined in section 1923(b)(1)(A) of the Act. The final rule establishes this targeting factor consistent with the statutory direction to impose larger percentage reductions on states that do not target their DSH payments on hospitals with high volumes of Medicaid inpatients and do not target their DSH payments on hospitals with high levels of uncompensated care. The HMF provides mitigation of the state-specific DSH reduction amount for states that have been targeting and would in the future target DSH payments to these types of hospitals. Hospitals with high levels of indigent care levels may also have high levels of uncompensated care costs. If those hospitals have high levels of uncompensated care, the HUF will provide mitigation of the state-specific DSH reduction amount for states that have been targeting and would in the future target DSH payments to those hospitals.
Response: The statute requires that the uncompensated care definition used in the UPF exclude bad debt. We have finalized the rule to rely on the uncompensated care cost data derived from Medicaid DSH audit and reporting data. Consistent with statutory direction, this uncompensated care data excludes bad debt, including unpaid copayments and deductibles, associated with individuals with a source of third party coverage for the service received during the year. Additionally, changes to calculating the hospital-specific DSH limit are outside the scope of the proposed rule. We issued policy on hospital-specific DSH limits through separate rulemaking. The regulation does not implement or otherwise address the calculation of hospital- specific DSH payment limits under section 1923(g) of the Act.
Comment: One commenter recommended that CMS modify the BNF to include safety net care pool and uncompensated care pool amounts to be treated the same as coverage expansion initiatives. Another commenter expressed support for the exclusion of uncompensated care and safety net care pools from consideration as coverage expansion for purposes of the BNF.
Comment: A commenter stated that the burden estimate of 4 hours to comply with the added DSH reporting requirements at § 447.299 is understated due to the amount of time required for the state to review the requirements, modify state rules, consult legal counsel, hold public hearings, and otherwise implement the new requirements.
Beginning with each state's Medicaid state plan rate year 2005, for each Medicaid state plan rate year, the state must submit to CMS, at the same time as it submits the completed DSH audit required under § 455.204, the following information for each DSH hospital to which the state made a DSH payment to permit verification of the appropriateness of such payments.
The ongoing burden associated with the requirements under § 447.299 is the time and effort it would take each of the 50 state Medicaid Programs and the District of Columbia to complete the annual Medicaid DSH reporting requirements. Based on the information in this rule, we estimate that it will take an additional 4 hours per state (from 38 approved hours to 42 total hours) to complete the DSH reporting spreadsheets. Consequently, we also estimate an additional 204 (4 hr × 51 respondents) annual hours for all states and the District of Columbia and an additional aggregate cost of $8,136.54 (51 × [$51 × 2 hr] + [$28.77 × 2 hr]).
To obtain copies of the supporting statement and any related forms for the proposed paperwork collections referenced above, access CMS' Web site at http://www.cms.hhs.gov/Paperwork@cms.hhs.gov, or call the Reports Clearance Office at 410-786-1326.
We invite public comments on this rule's information collection requirements. If you would like to comment, please submit your comments to the Office of Information and Regulatory Affairs, Office of Management and Budget, Attention: CMS Desk Officer, (CMS-2367-F) Fax: (202) 395-6974; or Email: OIRA_submission@omb.eop.gov.
We have examined the impact of this rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, 96), section 1102(b) of the Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999) and the Congressional Review Act (5 U.S.C. 804(2).
The final rule will affect certain providers through the reduction of state DSH payments. However, we cannot estimate the impact on individual providers or groups of providers. This final rule will not affect the considerable flexibility afforded states in setting DSH state plan payment methodologies to the extent that these methodologies are consistent with section 1923(c) of the Act and all other applicable statute and regulations. States will retain the ability to preserve existing DSH payment methodologies or to modify methodologies by submitting state plan amendments to us. Some states may determine that implementing a proportional reduction in DSH payments for all qualifying hospitals is the preferred method to account for the reduced allotment. Alternatively, states could determine that the best action is to propose a methodology that will direct DSH payments reductions to hospitals that do not have high Medicaid volume or do not have high levels of uncompensated care. Regardless, the rule incentivizes states to target DSH payments to hospitals that are most in need of Medicaid DSH funding based on their serving a high volume of Medicaid inpatients and having a high level of uncompensated care.
As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4/), we have prepared an accounting statement in Table 1 showing the classification of the impacts associated with implementation of this final rule.
Table 1—Accounting Statement Back to Top
Cost of Reporting Requirement (in millions)
Reductions in Disproportionate Share Hospital Allotment (in millions)
Federal Government to the States on behalf of the Beneficiaries
List of Subjects in 42 CFR Part 447 Back to Top
PART 447 —PAYMENTS FOR SERVICES Back to Top
1.The authority citation for part 447 continues as follows: Authority:
Subpart E—Payment Adjustments for Hospitals That Serve a Disproportionate Number of Low-Income Patients Back to Top
2.Section 447.294 is added to read as follows: § 447.294 Medicaid disproportionate share hospital (DSH) allotment reductions for Federal fiscal year 2014 and Federal fiscal year 2015.
DSH payment means the amount reported in accordance with § 447.299(c)(17).
High volume of Medicaid inpatients factor (HMF) is a factor incorporated in the DHRM that results in larger percentage DSH allotment reduction for States that do not target DSH payments on hospitals with high volumes of Medicaid inpatients.
State group means similarly situated States that are collectively identified by DHRM as defined in § 447.294(e)(1).
Total Medicaid cost means the amount for each hospital reported in accordance with § 447.299(c)(10).
Total uninsured cost means the amount reported for each DSH in accordance with § 447.299(c)(14).
Uncompensated care cost means the amount reported for each hospital in accordance with § 447.299(c)(16).
(i) UPF—33 and1/3percent.
(ii) HMF—33 and1/3percent.
(iii) HUF—33 and1/3percent.
(7) UPF application and reduction amount. CMS will determine the UPF portion of the final aggregate DSH allotment reduction allocation for each State by multiplying the State's UPF by the aggregate DSH allotment reduction allocated to the UPF factor under paragraph (e)(5) of this section for the respective State group.
3.Section 447.299 is amended by: A. Redesignating paragraph (c)(18) as (c)(21).
B. Adding paragraphs (c)(18), (c)(19) and (c)(20).
C. Revising newly redesignated paragraph (c)(21).
§ 447.299 Reporting Requirements.
(21) Reporting. States must report DSH payments made to all hospitals under the authority of the approved Medicaid State plan. This includes both in-State and out-of-State hospitals. For out-of-State hospitals, States must report, at a minimum, the information identified in § 447.299(c)(1) through (c)(6), (c)(8), (c)(9), (c)(17), (c)(18), and (c)(19).