Disproportionate Share Hospitals
The DSH program was created in 1981 to address two main concerns identified by Congress at the time. The first concern was to address the needs of hospitals which served a high number of Medicaid and low-income, often uninsured, patients. The second concern was that there was the potential for a growing gap in 1981 between what Medicaid paid hospitals and what the cost of care was at the hospitals. Hospitals who served large numbers of Medicaid patients and the uninsured are often referred to as “safety-net” hospitals.
DSH payments were intended to cover the costs of uncompensated care experienced by safety-net hospitals. Congress, however, left it up to each state to define and identify which hospitals were safety-net hospitals and also gave states broad latitude in how those hospitals were to be paid through the DSH program.
Between 1981 and today Congress has attempted to direct states in how to identify “safety-net” hospitals. Federal law establishes both mandatory and minimum criteria for states to follow in defining safety-net hospitals. DSH payments to each hospital are capped by a hospital specific upper payment limit which takes into consideration both charity care and Medicaid payments.
Federal criteria to qualify as a DSH hospital comes in two forms: mandatory and minimum.
- The mandatory federal criterion requires a hospital to meet the following:
- Have at least 2 obstetricians (or in the case of a rural hospital obstetrician means any physician with staff privileges at the hospital) who have agreed to provide nonemergency obstetric services to individuals who are entitled to medical assistance for such services under the State plan; or are considered children’s hospitals because the services they provide are primarily to children under the age of 18; or did not offer obstetric services before December 21, 1987; and
- Have a Medicaid inpatient utilization rate of no less than 1 percent. The calculation divides the hospital's total number of Oklahoma inpatient days attributable to patients who (for such days) were eligible for medical assistance in a period by the total number of the hospital's inpatient days in that same period.
- The minimum federal criterion requires a state to qualify all hospitals who meet one of the following definitions in addition to the mandatory federal criterion:
- The hospital's Medicaid inpatient utilization rate is at least one standard deviation above the mean Medicaid inpatient utilization rate for hospitals receiving Medicaid payments in the State.
- The hospital's low-income utilization rate exceeds 25 percent. The calculation is the sum of two fractions:
- the hospital's total Oklahoma Medicaid revenues divided by the hospital's total revenues from all sources plus the hospital's total amount of charity care attributable to inpatient hospital services divided by the total amount of the hospital's charges for inpatient hospital services in the hospital in the period
Qualifying for DSH in Oklahoma
All hospitals must complete the annual Oklahoma DSH Survey in order to be considered for DSH. The hospital's OHCA provider contract requires that the DSH survey is submitted. In addition, the information from the survey provides useful information to the state concerning the impact of uninsured individuals and uncompensated care in Oklahoma.
Oklahoma provides DSH payments to licensed hospitals located within the boundaries of the State of Oklahoma and to licensed Institutions for Mental Disease (IMD) located within the state.
Licensed hospitals automatically qualify as an Oklahoma disproportionate share hospital if they meet the mandatory federal requirements of the DSH law.
Licensed IMD hospitals must meet both the mandatory and minimum federal criteria.
Hospital Allocation Methodology
The formula and methodology adopted by Oklahoma attempts to capture the essence of the two concerns the DSH program was created to address. There are three funding pools. The first pool is established by the federal government for IMD facilities. The annual amount for IMDs is calculated based on federal law and published in the federal register. The second pool is for High Disproportionate Share Public Hospital / Public - Private Major Teaching Hospital. This pool is established by the state based on historic allocations. The third pool is for Private and Community or Public Hospitals.
Within the third pool for Private and Community or Public Hospitals there are three subsets based on hospital licensed bed size. Each subset receives an allocation of DSH funds based on the aggregate number of Medicaid inpatient days reported by the subset relative to the total number of Medicaid inpatient days reported for all three subsets combined. Hospitals then receive DSH funds based on their calculated uncompensated care relative to the total amount of uncompensated care provided within each subset. While IMD facilities are not grouped by licensed bed size they are funded based on each facilities uncompensated care relative to the total amount of uncompensated care provided by all IMD facilities.
Federal law prohibits the state from paying hospitals more than their calculated hospital specific upper payment limit. If a hospital’s allocation exceeds the limit the allocation is reduced to the limit and the excess funds are redistributed to the remaining hospitals within the subset.