oversight

Medicaid: More Transparency of and Accountability for Supplemental Payments Are Needed

Published by the Government Accountability Office on 2012-11-26.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                             United States Government Accountability Office

GAO                          Report to the Committee on Finance,
                             U.S. Senate



November 2012
                             MEDICAID

                             More Transparency of
                             and Accountability for
                             Supplemental
                             Payments Are Needed




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GAO-13-48
                                                 November 2012

                                                 MEDICAID
                                                 More Transparency of and Accountability for
                                                 Supplemental Payments Are Needed
Highlights of GAO-13-48, a report to the
Committee on Finance, U.S. Senate




Why GAO Did This Study                           What GAO Found
In 2011, states reported making                  The recently implemented annual audits and reports for states’ disproportionate
$43 billion in Medicaid supplemental             share hospital (DSH) payments could improve oversight by the Centers for
payments—payments above regular                  Medicare & Medicaid Services (CMS)—the federal agency that oversees
payments for Medicaid services—to                Medicaid—by illuminating needed changes. States are required to submit audits
certain providers, mainly hospitals. The         and reports to CMS as a condition for receiving federal funds for their DSH
federal government shares in the cost            payments. The first set of DSH audits was submitted by states in 2010 and
of these payments. By law, states                covers states’ 2007 DSH payments. The audits give CMS information on how
make certain supplemental payments,              well states are complying with six DSH requirements, including whether
known as DSH payments, for
                                                 payments are limited to hospitals’ uncompensated care costs and are accurately
uncompensated care costs
                                                 calculated. Under a transition period, CMS will not act on audit findings until the
experienced by hospitals serving large
numbers of low-income and Medicaid
                                                 2014 audits are complete; however, findings from GAO’s analysis of the 2010
patients. States also make other                 DSH audits show that 44 states will likely need to make changes to their DSH
supplemental payments—referred to                payments to come into compliance. For example,
here as non-DSH payments—to                      •   41 states made DSH payments to 717 hospitals that exceeded the individual
hospitals and other providers who, for               hospitals’ uncompensated care costs as calculated by the auditors, and
example, serve high-cost Medicaid
                                                 •   9 states did not accurately calculate the uncompensated care costs of
beneficiaries. Past GAO reports have
found gaps in federal oversight of
                                                     206 hospitals in those states for purposes of making DSH payments.
these high-risk payments: a lack of              The DSH reports can also improve oversight because they provide hospital-
information on the providers receiving           specific information that CMS can use to better align capped federal DSH funds
them, inaccurate payment calculation             with hospitals’ uncompensated care costs. Federal law reduces national DSH
methods, and a lack of assurances the            funding beginning in fiscal year 2014, and requires CMS to implement a method
payments were used for Medicaid                  for corresponding reductions in each state’s DSH funding. GAO analysis of DSH
purposes. CMS has required states to             reports shows that some states’ DSH payments are not proportionally targeted to
submit annual audits and reports on
                                                 hospitals with the highest uncompensated care.
DSH payments since 2010. GAO was
asked to review federal oversight of             CMS lacks similar information for overseeing non-DSH payments; available
supplemental payments and examined               information suggests that better reporting and audits of non-DSH payments could
(1) how information in DSH audits and            improve CMS’s ability to oversee them. Reporting of non-DSH payments that
reports facilitates CMS’s oversight of           states make to individual hospitals and other providers relative to the providers’
DSH payments, and (2) the extent to              Medicaid costs could improve the transparency of these payments. Audits could
which similar information exists for             improve accountability by providing information on how non-DSH payments are
non-DSH payments. GAO analyzed                   calculated and the extent to which payments to individual providers are
2010 DSH audits and reports and
                                                 consistent with the Medicaid payment principles of economy and efficiency. GAO
interviewed CMS officials.
                                                 analysis of the limited hospital-specific information available found that 39 states
What GAO Recommends                              made non-DSH payments to 505 DSH hospitals that, along with their regular
                                                 Medicaid payments, exceeded those hospitals’ total costs of providing Medicaid
Congress should consider requiring the           care by a total of about $2.7 billion. Although regular and non-DSH Medicaid
Administrator of CMS to improve                  payments are not required to be limited to a provider’s costs of delivering
transparency of and accountability for           Medicaid services, payments that greatly exceed these costs raise questions, for
non-DSH supplemental payments by
                                                 example, as to whether payments are being used for Medicaid. As of November
requiring facility-specific payment
                                                 2012, CMS has no plans to require states to report provider-specific non-DSH
reporting and annual audits, among
other steps.
                                                 payments, clarify permissible methods for calculating non-DSH payments, and
                                                 require annual independent audits of states’ non-DSH payments, because in its
                                                 view legislation was crucial to implementing similar DSH requirements.
View GAO-13-48. For more information,
contact Katherine Iritani at (202) 512-7114 or   In reviewing a draft of this report, the Department of Health and Human Services
iritanik@gao.gov.                                agreed with GAO about the need to improve reporting and oversight of non-DSH
                                                 payments and noted some efforts under way to do so.
                                                                                          United States Government Accountability Office
Contents


Letter                                                                                      1
               Background                                                                   7
               DSH Audits and Reports Provide Information That Can Improve
                  Federal Oversight by Illuminating Needed Changes to DSH
                  Payments                                                                12
               Information on Non-DSH Payments Does Not Exist to the Same
                  Extent as for DSH Payments, and Available Reports Suggest
                  That Such Information Could Enhance Oversight                           21
               Conclusions                                                                30
               Matter for Congressional Consideration                                     31
               Agency Comments                                                            31

Appendix I     Scope and Methodology                                                      33



Appendix II    Extent of Compliance with DSH Audit Requirements in
               2010 DSH Audits                                                            38



Appendix III   Overview of the 17 Data Elements on DSH Reports                            45



Appendix IV    Percentage of DSH Payments and Uncompensated Care for
               DSH Hospitals in 2010 DSH Reports                                          48



Appendix V     DSH Hospitals’ Non-DSH Payments and Medicaid
               Uncompensated Care Costs in 2010 DSH Reports                               51



Appendix VI    DSH Payments and Uncompensated Care Costs for Selected
               DSH Hospitals in 2010 DSH Reports                                          54




               Page i                    GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix VII           DSH Hospitals with Medicaid Payments in Excess of Medicaid
                       Costs in 2010 DSH Reports                                                   61



Appendix VIII          Comments from the Department of Health and Human Services                   64



Appendix IX            GAO Contact and Staff Acknowledgments                                       66



Related GAO Products                                                                               67



Tables
                       Table 1: Disproportionate Share Hospital (DSH) Audit
                                Requirements Established by 2008 Final Rule                        13
                       Table 2: Summary of the 2010 Disproportionate Share Hospital
                                (DSH) Audit Findings for 49 States, by DSH Audit
                                Requirement                                                        17
                       Table 3: Information That States Are Required to Provide to the
                                Centers for Medicare & Medicaid Services on Medicaid
                                Disproportionate Share Hospital (DSH) and Non-DSH
                                Supplemental Payments Made to Hospitals, by Source of
                                Information                                                        22
                       Table 4: Extent of Compliance with Federal DSH Audit
                                Requirements, by State, Audit Requirement, and Number
                                of Hospitals as Reported in 2010 Disproportionate Share
                                Hospital (DSH) Audits (part 1)                                     40
                       Table 5: Extent of Compliance with Federal DSH Audit
                                Requirements, by State, Audit Requirement, and Number
                                of Hospitals as Reported in 2010 Disproportionate Share
                                Hospital (DSH) Audits (part 2)                                     43
                       Table 6: Data Elements on Disproportionate Share Hospital (DSH)
                                Reports                                                            46
                       Table 7: Number of Hospitals, Percentage of Disproportionate
                                Share Hospital (DSH) Payments, and Percentage of
                                Uncompensated Care for the 10 Percent of DSH Hospitals
                                Receiving the Largest DSH Payments and the 90 Percent
                                Receiving the Smallest DSH Payments, by State                      49



                       Page ii                    GAO-13-48 Oversight of Medicaid Supplemental Payments
          Table 8: Number of Hospitals, Percentage of Non-Disproportionate
                   Share Hospital (DSH) Supplemental Payments, and
                   Percentage of Medicaid Uncompensated Care Costs for
                   the 10 Percent of DSH Hospitals Receiving the Largest
                   Non-DSH Payments and the 90 Percent of DSH Hospitals
                   Receiving the Smallest Non-DSH Supplemental Payments,
                   by State                                                           52
          Table 9: Medicaid and Uninsured Patient Payments and Costs for
                   Disproportionate Share Hospital (DSH) Hospitals That
                   Had No Uncompensated Care Costs and Received a DSH
                   Payment, by State                                                  57
          Table 10: Medicaid and Uninsured Patient Payments and Costs for
                   Disproportionate Share Hospital (DSH) Hospitals That
                   Had Uncompensated Care Costs and Received a DSH
                   Payment in Excess of These Costs, by State                         60
          Table 11: Number and Percentage of Disproportionate Share
                   Hospital (DSH) Hospitals That Received Non-DSH
                   Supplemental and Regular Medicaid Payments in Excess
                   of Medicaid Costs and Amount by Which Payments
                   Exceeded Costs, by State                                           62


Figures
          Figure 1: Overview of How States Make Non-Disproportionate
                   Share Hospital (DSH) Supplemental Payments in Addition
                   to Regular Medicaid Payments under Medicaid’s Upper
                   Payment Limit (UPL)                                                  9
          Figure 2: Share of Disproportionate Share Hospital (DSH)
                   Payments Received and Share of Uncompensated Care
                   Provided by the 10 Percent of DSH Hospitals Receiving
                   the Largest DSH Payments in 2007, Ranked by Difference
                   between Share of DSH Payments and Share of
                   Uncompensated Care                                                 20
          Figure 3: Number and Percentage of Disproportionate Share
                   Hospital (DSH) Hospitals That Received Regular Medicaid
                   and Non-DSH Supplemental Payments in Excess of
                   Medicaid Costs, and Amounts by Which Payments
                   Exceeded Costs, by State                                           28
          Figure 4: Medicaid and Uninsured Patient Payments and Costs for
                   Disproportionate Share Hospital (DSH) Hospitals That
                   Did Not Have Uncompensated Care Costs                              56




          Page iii                   GAO-13-48 Oversight of Medicaid Supplemental Payments
Figure 5: Medicaid and Uninsured Patient Payments and Costs for
         Disproportionate Share Hospital (DSH) Hospitals That
         Had Uncompensated Care Costs                                                     59




Abbreviations

CMS               Centers for Medicare & Medicaid Services
CPA               Certified Public Accountant
DSH               Disproportionate Share Hospital
FMAP              federal medical assistance percentage
HHS               Department of Health and Human Services
MACPAC            Medicaid and CHIP Payment and Access Commission
OIG               Office of Inspector General
PPACA             Patient Protection and Affordable Care Act
UPL               Upper Payment Limit



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Page iv                           GAO-13-48 Oversight of Medicaid Supplemental Payments
United States Government Accountability Office
Washington, DC 20548




                                   November 26, 2012

                                   The Honorable Max Baucus
                                   Chairman
                                   The Honorable Orrin Hatch
                                   Ranking Member
                                   Committee on Finance
                                   United States Senate

                                   In 2011, Medicaid—the joint federal-state program that finances health
                                   care for certain low-income individuals—cost an estimated $410 billion. 1
                                   States pay qualified health care providers for covered services provided
                                   to Medicaid beneficiaries and obtain federal matching funds for the
                                   federal share of these payments. 2 In addition to these regular payments,
                                   which are generally based on claims submitted by the providers for
                                   services rendered, states also make and obtain federal matching funds
                                   for supplemental payments to certain providers—particularly hospitals—to
                                   help offset remaining costs of care for Medicaid patients, 3 as well as, in
                                   some cases, the costs they incur to treat uninsured patients. Unlike
                                   regular Medicaid payments, supplemental payments typically are not
                                   made on the basis of claims submitted for services rendered. Rather, they
                                   generally consist of large lump sum payments made on a monthly,
                                   quarterly, or yearly basis. Supplemental payments are a significant and
                                   growing component of Medicaid spending. Some states have made
                                   relatively large supplemental payments to relatively small numbers of
                                   providers, and the total amount of supplemental payments has


                                   1
                                    Medicaid provided health coverage for an estimated 55 million low-income individuals,
                                   including children, families, and aged or disabled individuals in 2011.

                                   The 2011 cost figure represents combined federal and state Medicaid expenditures for
                                   provider services in fiscal year 2011 and does not include expenditures for administration.
                                   Centers for Medicare & Medicaid Services’ Office of the Actuary, 2011 Actuarial Report on
                                   the Financing Outlook for Medicaid (Washington, D.C.: March 2012).
                                   2
                                    The federal government matches state Medicaid expenditures for services according to a
                                   state’s federal medical assistance percentage (FMAP). The FMAP is based on a statutory
                                   formula under which the federal share of a state’s Medicaid expenditures for services may
                                   range from 50 to 83 percent. States with lower per capita income receive a higher FMAP.
                                   42 U.S.C. §§ 1396b(a)(1), 1396d(b).
                                   3
                                    States’ regular Medicaid payments are not required to fully cover the costs of providing
                                   Medicaid services.




                                   Page 1                            GAO-13-48 Oversight of Medicaid Supplemental Payments
increased. 4 In fiscal year 2011, states reported spending at least
$43 billion on supplemental payments, up from $32 billion in fiscal year
2010 and at least $23 billion in fiscal year 2006. 5 These amounts were
likely understated, because reporting of supplemental payments was
incomplete. We and others have raised concerns about the need for
improved transparency regarding the size of the payments and who
receives them, as well as the need for improved accountability regarding
how the funds are related to Medicaid services. 6 Since 2003, we have
designated Medicaid a high-risk program due to concern about its size,
growth, and fiscal oversight, including federal oversight of supplemental
payments. 7

The Centers for Medicare & Medicaid Services (CMS), an agency within
the Department of Health and Human Services (HHS), is responsible for
overseeing state Medicaid programs at the federal level. These
responsibilities include reviewing and approving state Medicaid plans,
which include states’ methodologies for determining provider payments.
CMS responsibilities also include ensuring that state Medicaid payments
are consistent with federal requirements, including the requirements that
payments to providers must be consistent with efficiency, economy, and
quality of care and must be sufficient to enlist enough providers that care
and services are available at least to the extent that they are available to
the general population in the area. 8 To fulfill these responsibilities, CMS




4
 GAO, Medicaid: CMS Needs More Information on the Billions of Dollars Spent on
Supplemental Payments, GAO-08-614 (Washington, D.C.: May 2008).
5
 GAO, Medicaid: States Reported Billions More in Supplemental Payments in Recent
Years, GAO-12-694 (Washington, D.C.: July 2012).
6
 A list of related GAO products can be found at the end of this report. Also see, for
example, HHS, Office of the Inspector General, Audit of Oregon’s Medicaid Upper
Payment Limits for Non-State Government Nursing Facilities for State Fiscal Years 2002
and 2003, A-09-03-00055 (Washington, D.C.: 2005); HHS, Office of the Inspector
General, Adequacy of Tennessee’s Medicaid Payments to Nashville Metropolitan
Bordeaux Hospital, Long-Term-Care Unit, A-04-03-03023 (Washington, D.C.: 2005); and
HHS, Office of the Inspector General, Adequacy of Washington State’s Medicaid
Payments to Newport Community Hospital, Long-Term-Care Unit, A-10-04-00001
(Washington, D.C.: 2005).
7
GAO, High-Risk Series: An Update, GAO-11-278 (Washington, D.C.: February 2011).
8
42 U.S.C § 1396a(a)(30)(A).




Page 2                           GAO-13-48 Oversight of Medicaid Supplemental Payments
needs to have relevant, reliable, and timely information available for
management decision making and external reporting purposes. 9

A large component of Medicaid supplemental payments is
disproportionate share hospital (DSH) payments. Under federal Medicaid
law, states are required to make DSH payments to certain hospitals.
These payments are designed to help offset these hospitals’
uncompensated care costs for serving Medicaid and uninsured low-
income individuals. 10 Congress and CMS have taken several actions over
the past two decades—including setting limits, or caps, on DSH spending
at the state level—to help ensure the transparency and accountability of
these payments and enable more-informed oversight. In addition to
establishing annual state DSH allotments, which limit the amount of
federal matching funds each state is permitted to receive for DSH
payments, federal law also limits the amount of DSH payments states
may make to an individual hospital to an amount equal to or less than the
hospital’s annual uncompensated care costs. 11 In 2003, Congress
mandated improved accountability for DSH payments under the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003, by
providing that the Secretary of Health and Human Services require states
to submit annual independent certified audits and annual reports on their
DSH payments. 12 In 2008, CMS issued a final rule to implement the 2003




9
 Standards for Internal Control in the Federal Government states that agencies are
responsible for determining through monitoring that relevant, reliable, and timely
information is available for management decision making and external reporting purposes.
In addition, agencies are responsible for continually examining and improving internal
controls to provide reasonable assurance that the objectives of the agency, such as
compliance with applicable laws and regulations, are being achieved. GAO, Standards for
Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.:
November 1999).
10
  See 42 U.S.C. §§ 1396a(13)(A), 1396r-4. Uncompensated care costs are the costs
incurred in providing services during the year to Medicaid and uninsured patients minus
any payments made to the hospital for Medicaid and uninsured patients for those
services. Congress established DSH payments to hospitals in 1981, when changes were
made to the methods states could use to determine Medicaid hospital payment rates, in
response to concerns about the effects those changes could have on hospitals serving
larger numbers of Medicaid and uninsured low-income individuals.
11
    42 U.S.C. § 1396r-4(g)(1).
12
  Pub. L. No. 108-173, § 1001(d), 117 Stat. 2066, 2430-2431 (2003) (adding section
1923(j) to the Social Security Act) (codified, as amended, at 42 U.S.C. § 1395r-4(j)).




Page 3                            GAO-13-48 Oversight of Medicaid Supplemental Payments
DSH audit and report requirement. 13 The 2008 final rule laid out key audit
and reporting requirements, including the requirement that states include
in their annual DSH reports facility-specific information on the costs of
serving Medicaid and uninsured patients and payments received from or
on behalf of these patients. The first sets of DSH audits and reports,
covering payments made in 2005 through 2007, were submitted to CMS
in December 2010.

In addition to DSH payments, many states also make another type of
Medicaid supplemental payment—referred to here as non-DSH
supplemental payments—to providers. Unlike DSH payments, states are
not required under federal law to make non-DSH payments, 14 and non-
DSH payments do not have a specified statutory or regulatory purpose. 15
Non-DSH payments are made not only to hospitals but also to other
providers, such as nursing homes and physician groups that, for example,
serve high-cost Medicaid beneficiaries. Since the 1980s, some states
have made non-DSH payments to certain hospitals and providers if the
state’s regular Medicaid payments did not reach the upper payment limit
(UPL) for federal matching. 16 The UPL is based on what Medicare—the
federal health program that covers individuals aged 65 and over,
individuals with end-stage renal disease, and certain disabled
individuals—would pay for comparable services. 17 The UPL is the upper


13
  Medicaid Program; Disproportionate Share Hospital Payments, 73 Fed. Reg. 77904
(Dec. 19, 2008) (codified at 42 C.F.R. Parts 447 and 455); Medicaid Program;
Disproportionate Share Hospital Payments; Correcting Amendment, 74 Fed. Reg. 18656
(Apr. 24, 2009). CMS subsequently issued a notice of proposed rulemaking to revise
certain provisions of this rule. Medicaid Program; Disproportionate Share Hospital
Payments—Uninsured Definition, 77 Fed. Reg. 2500 (Jan. 18, 2012).
14
  In this report, we use the terms non-DSH payments and non-DSH supplemental
payments interchangeably.
15
  We found in our 2008 study of five states that some states indicated that one purpose
may be similar to that for DSH payments in that non-DSH payments are made to hospitals
serving a large number of Medicaid patients. See GAO-08-614.
16
  Sometimes non-DSH payments are referred to as UPL payments.
17
   The UPL is not a facility-specific limit, but is instead applied on an aggregate basis to
three categories of providers: local (nonstate) government-owned or local (nonstate)
government-operated facilities, state-government-owned or state-government-operated
facilities, and privately owned and operated facilities. Separate UPLs exist for inpatient
services provided by hospitals, nursing facilities, and intermediate care facilities for
individuals with intellectual disabilities, and outpatient services provided by hospitals and
clinics. See 42 C.F.R. §§ 447.272, 447.321 (2011).




Page 4                             GAO-13-48 Oversight of Medicaid Supplemental Payments
bound on what the federal government will pay as its share of the
Medicaid payments for different classes of covered services, and it often
exceeds regular Medicaid payments for services. On the basis of the gap
between the UPL and regular Medicaid payments, states can make non-
DSH supplemental payments to selected providers for different classes of
services. 18 These non-DSH payments, which are in addition to regular
Medicaid payments made to providers, but within the UPL, are not subject
to the same type of overall state spending limits or facility-specific limits
that DSH payments are. In particular, non-DSH supplemental payments
are not limited to an individual provider’s cost of providing Medicaid
services.

In recent years, states have reported increasing amounts of non-DSH
payments. 19 In 2012, CMS’s Office of the Actuary reported that recent
increases in Medicaid spending for hospital services were due in part to
large non-DSH payments to hospitals in 2010. 20 In contrast to recent
years, when DSH payments exceeded non-DSH payments, in fiscal year
2011 non-DSH payments exceeded DSH payments, with non-DSH
payments totaling nearly $26 billion, compared to over $17 billion for DSH
payments.

You asked for information about federal oversight of supplemental
payments, including whether recent audits of DSH payments are
facilitating oversight of these payments. For this report, we determined
(1) how the information collected from DSH audits and reports can
facilitate CMS’s oversight of DSH payments and (2) the extent to which
similar information exists to facilitate CMS’s oversight of non-DSH
supplemental payments.


18
  DSH payments are not included in calculating the gap between the UPL and regular
Medicaid payments.
19
  At the same time, we have reported that many states have reduced regular Medicaid
payment rates in response to budgetary pressures. GAO, Increased Medicaid Funds
Aided Enrollment Growth, and Most States Reported Taking Steps to Sustain Their
Programs, GAO-11-58 (Washington, D.C.: Oct. 8, 2010).
20
  Researchers with CMS’s Office of the Actuary compared health care spending growth
for calendar years 2009 and 2010. They found that overall Medicaid spending growth
slowed from 8.9 percent in 2009 to 7.2 percent in 2010, whereas Medicaid spending
increases for hospital services grew from 10.4 percent in 2009 to 11.2 percent in 2010.
Anne B. Martin et al., “Growth in U.S. Health Spending Remained Slow in 2010; Health
Share of Gross Domestic Product Was Unchanged from 2009,” Health Affairs, vol. 31,
no. 1 (2012).




Page 5                           GAO-13-48 Oversight of Medicaid Supplemental Payments
To determine how the information collected from DSH audits and reports
can facilitate CMS’s oversight of DSH payments, we reviewed relevant
federal laws, regulations, and guidance and analyzed states’ 2010 DSH
audits and reports for payments made in 2007, the most recent year
available at the time of our review. 21 A total of 49 states submitted DSH
audits and reports covering about 3,000 DSH hospitals. 22 We analyzed
auditors’ assessments of states’ compliance with key audit requirements
and analyzed hospitals’ DSH payments and uncompensated care costs
from the DSH reports to examine the extent to which state DSH payments
are aligned with hospitals’ uncompensated care costs. Our analysis of the
DSH audits did not evaluate the quality of the audits or the process that
the independent auditors followed to produce the DSH audits. To ensure
that the data submitted by the states were sufficiently reliable for our
analyses, we reviewed auditors’ findings in each state’s DSH audit,
reviewed DSH reports for incomplete and erroneous entries, and
discussed these findings with CMS officials. We determined that the DSH
audits and reports were sufficiently reliable for the purposes of this report,
and we accounted for any limitations in these data during our analyses.
We also conducted interviews with CMS officials.

To determine the extent to which information similar to that which exists
for DSH payments also exists to facilitate CMS’s oversight of non-DSH
supplemental payments, we reviewed relevant federal laws, regulations,
and guidance; analyzed data on non-DSH supplemental payments and
Medicaid payments and costs that were reported for DSH hospitals in




21
 In this report, we use the term state to refer to the 50 states and the District of Columbia.
We do not include Puerto Rico or four U.S. territories—American Samoa, Guam, the
Northern Mariana Islands, and the U.S. Virgin Islands.
22
  Massachusetts and Tennessee did not make DSH payments in 2007 and did not submit
DSH audits or reports. Some states operate HHS-approved Section 1115 Medicaid
demonstrations under which the state does not make DSH payments directly to hospitals.
For example, Tennessee incorporated DSH funding into payments to managed care
organizations, and all of Massachusetts’s DSH funds were used to support a special fund
for safety-net health care providers.

For the purpose of this report, we refer to hospitals that receive DSH payments as DSH
hospitals.




Page 6                             GAO-13-48 Oversight of Medicaid Supplemental Payments
             states’ 2010 DSH reports; and conducted interviews with CMS officials. 23
             More details on our methodology can be found in appendix I.

             We conducted this performance audit from December 2011 through
             November 2012 in accordance with generally accepted government
             auditing standards. Those standards require that we plan and perform the
             audit to obtain sufficient, appropriate evidence to provide a reasonable
             basis for our findings and conclusions based on our audit objectives. We
             believe that the evidence obtained provides a reasonable basis for our
             findings and conclusions based on our audit objectives.


             The two types of supplemental payments—DSH and non-DSH—had very
Background   different origins and have different requirements. Federal law requires
             states to make DSH payments to certain eligible hospitals. 24 States are
             required to report these payments separately from their regular Medicaid
             payments in their quarterly expenditure reports, which they submit to
             CMS to obtain federal matching funds. The separate reporting for DSH
             payments has allowed CMS to monitor these payments. In the early
             1990s, following a period of rapid growth in DSH payments and reports of
             states establishing complex financing arrangements involving these
             payments that, in effect, resulted in the diversion and use of federal funds
             for non-Medicaid purposes, Congress set the limits, or caps, on DSH
             spending at the state and facility levels. In contrast to DSH payments, the
             amount of non-DSH payments a state may make has no firm dollar limit.
             Instead, the UPL, under which non-DSH payments are made, fluctuates
             because it is based on the amount of Medicaid services provided, a
             state’s regular Medicaid payment rate for the services, and the rates that
             Medicare would pay for comparable services, 25 factors that may fluctuate



             23
               DSH hospitals include any hospital that has a Medicaid inpatient utilization rate of at
             least 1 percent, and, with the exception of children’s hospitals and certain hospitals that do
             not offer nonemergency obstetric services, at least two obstetricians who have staff
             privileges at the hospital and have agreed to provide obstetric services. 42 U.S.C.
             §§ 1396r-4(d).
             24
               Federal law requires states to make DSH payments to eligible hospitals that have a
             Medicaid inpatient utilization rate of at least one standard deviation above the mean rate
             for hospitals receiving Medicaid payments in the state and to eligible hospitals that have a
             low-income utilization rate that exceeds 25 percent. 42 U.S.C. § 1396r-4(b).
             25
               See 42 C.F.R. §§ 447.272, 447.321 (2011). Medicare payment rates are typically higher
             than state Medicaid payment rates.




             Page 7                             GAO-13-48 Oversight of Medicaid Supplemental Payments
over time. In this way, the UPL does not operate as a firm dollar limit on
non-DSH supplemental payments in the same way state DSH allotments
serve to cap DSH payments. States began making non-DSH payments to
target additional payments to certain providers. Under federal Medicaid
regulations, states may make such payments, with approval from CMS
through the state plan approval process, as long as regular and non-DSH
supplemental payments to a class of providers do not exceed the
respective UPL. 26 The UPL is not applied to individual providers; instead it
is applied to all providers within specified ownership classes. As a result,
states have discretion in how they distribute non-DSH supplemental
payments to individual providers. We and the HHS Office of Inspector
General (OIG) have reported that some states concentrated these
payments to a small number of providers and there was no assurance
that they were used for Medicaid purposes. 27 (See fig. 1 for a description
of how states make non-DSH supplemental payments in addition to
regular Medicaid payments under the Medicaid UPL provisions.)




26
  Separate UPLs exist for inpatient services provided by hospitals, nursing facilities, and
intermediate care facilities for individuals with intellectual disabilities, and outpatient
services provided by hospitals and clinics. These UPLs are applied on an aggregate basis
to three categories of providers: local (nonstate) government-owned or local (nonstate)
government-operated facilities, state-government-owned or state-government-operated
facilities, and privately owned and operated facilities. See 42 C.F.R. §§ 447.272, 447.321
(2011). Although there are several UPLs, in this report we use the term UPL to
encompass all UPLs.
27
  GAO, Medicaid: Improved Federal Oversight of State Financing Schemes Is Needed,
GAO-04-228 (Washington, D.C.: Feb. 2004), and HHS, Office of the Inspector General,
A-09-03-00055, A-04-03-03023, and A-10-04-00001.




Page 8                            GAO-13-48 Oversight of Medicaid Supplemental Payments
Figure 1: Overview of How States Make Non-Disproportionate Share Hospital (DSH)
Supplemental Payments in Addition to Regular Medicaid Payments under
Medicaid’s Upper Payment Limit (UPL)




Notes: The UPL applies to regular Medicaid payments and non-DSH supplemental payments and
does not include DSH payments. DSH payments are made for services provided to Medicaid and
uninsured patients and have separate payment limits.

We have previously reported concerns about a lack of reliable information
regarding DSH payments and concerns about the accuracy of states’
calculations of these payments. In May 2008, we reported that CMS was
not collecting the facility-specific information needed to oversee the
integrity of the DSH payments. 28 We recommended that CMS expedite
issuance of a final rule implementing the 2003 statute requiring states to
complete annual independent audits of DSH payments and annual state
reports on DSH payments made to individual hospitals. As mentioned
above, CMS issued this rule in December 2008. In our November 2009
report, we found DSH payments that were not based on accurate



28
  GAO-08-614.




Page 9                             GAO-13-48 Oversight of Medicaid Supplemental Payments
estimates of individual hospitals’ DSH payment limits. 29 In particular, two
of the four states we reviewed did not adhere to the federal requirement
that states include all Medicaid payments, including non-DSH
supplemental payments, when estimating hospitals’ DSH payment
limits. 30 In these cases, payments were being made to reimburse
hospitals for uncompensated care costs without considering other
Medicaid payments the providers had received, resulting in
overpayments. At that time, CMS indicated that its 2008 final rule would
better ensure that states account for all Medicaid payments. The 2008
final rule included instructions for states to use to ensure that their
methodology for calculating DSH payments was consistent with federal
law. As mentioned earlier, the first sets of DSH audits and reports,
covering payments made in 2005 through 2007, were submitted to CMS
in December 2010. CMS gave states a transition period during which the
agency would not take action against states on the basis of findings of
noncompliance with federal DSH requirements identified in the audits and
reports. Beginning in 2014, after the transition period has ended, 31 CMS
may use audit findings to recover federal funds for payments that did not
comply with federal DSH audit requirements; however, states will have
the option to seek approval from CMS to redistribute the federal funding
in question to other hospitals that are qualified to receive DSH payments.

Over the past decade, we have also raised concerns related to the
oversight of non-DSH payments. In 2004, we reported a need for more-
complete CMS review of non-DSH supplemental payment arrangements
to ensure that payments were for Medicaid purposes. 32 Although CMS
increased the scrutiny of states’ requests for approval of non-DSH
supplemental payments through the state plan amendment approval
process, in 2008 we reported that not all supplemental payments had




29
 GAO, Medicaid: Ongoing Federal Oversight of Payments to Offset Uncompensated
Hospital Care Costs Is Warranted, GAO-10-69 (Washington, D.C.: Nov. 20, 2009).
30
  All Medicaid payments, including non-DSH supplemental payments, count against a
hospital’s DSH cap, reducing the total DSH payments a hospital may receive. See
42 U.S.C. § 1396r-4(g).
31
  Audits for payments made in 2011 will be completed and submitted by December 31,
2014. The delay in the submission of audits and reports allows for any lag in the
availability of actual hospital cost and payment data.
32
 GAO-04-228.




Page 10                         GAO-13-48 Oversight of Medicaid Supplemental Payments
been reviewed through this process. 33 We also have reported on a need
for guidance to states regarding appropriately estimating the UPL, and a
need for improved transparency for non-DSH payments, which are often
large and made to small numbers of providers, through facility-specific
reporting of these payments. For example, we reported in February 2004
and May 2008 that CMS lacked comprehensive information on how states
were allocating non-DSH payments to providers. 34 We also found in 2004
that CMS did not issue guidance to states on the methods used to
calculate the amounts of their non-DSH payments. In a sample of six
states, we found widely varying and potentially inaccurate methods for
calculating the UPL, which is the basis for the amount of non-DSH
supplemental payments states may make. Inaccurate methods could
result in overestimates of the UPL and excessive claims for federal
matching funds. To address these concerns, we recommended that CMS
require facility-specific reporting of non-DSH payments and establish
uniform guidance on the acceptable methods for calculating the amount
of non-DSH payments. As of November 2012, facility-specific reporting
requirements had not been established, and uniform guidance had not
been issued. 35




33
  GAO-08-614.
34
  GAO-04-228 and GAO-08-614.
35
  In conjunction with a final rule CMS issued in 2007 that created facility-specific limits on
non-DSH payments for governmental providers, the agency established methods and data
sources for states to use to calculate these payment limits; however, a federal district
court vacated the rule in 2008, and CMS formally rescinded the rule in 2010. See
Alameda County Medical Center, et al. v. Leavitt, et al., no. 1:08-00422 (D.D.C. filed
Mar. 11, 2008).




Page 11                            GAO-13-48 Oversight of Medicaid Supplemental Payments
                           The DSH audits can help improve oversight of states’ DSH payments by
DSH Audits and             providing CMS with information on state compliance with federal DSH
Reports Provide            requirements, and information from recent audits shows that most states
                           may need to take corrective actions by 2014. The 2010 DSH reports
Information That Can       provide CMS with information that can be used, for example, to better
Improve Federal            align DSH payments with hospitals’ uncompensated care costs as
Oversight by               required by recent federal law.

Illuminating Needed
Changes to DSH
Payments
Audits Provide CMS with    The annual independent audits of state DSH payments provide
Enhanced Information for   information that CMS can use to improve its oversight of the extent of
Overseeing States’         states’ compliance with six key DSH requirements (see table 1 for a
                           summary of the six DSH audit requirements). According to CMS officials,
Compliance with Key DSH    DSH audits provide more transparency about state DSH payments than
Requirements and Show      previously existed, which can help the agency to better oversee these
That Most States May       payments. CMS officials said that in the past the agency relied on states’
Need to Take Corrective    assurances and HHS OIG investigations to ensure that DSH payments
Actions                    were being made appropriately. CMS officials told us that the 2003 DSH
                           audit mandate provides the first strong statutory requirement for states
                           reporting information about their DSH payments. Additionally, a provision
                           in the statute authorizes CMS to withhold federal matching funds for DSH
                           payments for states that do not submit their DSH audits and reports on
                           time. CMS withheld four states’ federal matching funds for DSH payments
                           in 2011, totaling about $92 million, because the states did not submit
                           audits and reports as required. After the states submitted DSH audits and
                           reports, CMS provided the states with the withheld federal matching
                           funds.




                           Page 12                     GAO-13-48 Oversight of Medicaid Supplemental Payments
Table 1: Disproportionate Share Hospital (DSH) Audit Requirements Established by 2008 Final Rule

DSH audit requirement                            Description
DSH payments do not exceed hospitals’            DSH payments made to each hospital are limited to the uncompensated care costs
uncompensated care costs                         calculated by the auditors using acceptable data sources and methods established by
                                                                                                                           a
                                                 the Centers for Medicare & Medicaid Services (CMS) in the 2008 final rule.
Hospital uncompensated care costs are            Only the cost of inpatient and outpatient services provided to Medicaid and uninsured
accurately calculated                            patients can be included in the calculation of hospitals’ uncompensated care costs. The
                                                 inclusion of ineligible costs, such as physician costs, would inflate a hospital’s
                                                                                                                           b
                                                 uncompensated care costs, which could result in a DSH overpayment.
Any Medicaid payment surpluses are               States’ procedures for calculating hospitals’ uncompensated care costs must ensure that
applied against the uncompensated care           all Medicaid surpluses, that is, payments that are in excess of Medicaid costs for
costs of uninsured patients when                 providing hospital services to Medicaid patients, are used to offset the uncompensated
                                                                                   c
calculating hospitals’ total uncompensated       care costs of uninsured patients. If hospitals did not account for all Medicaid payment
care costs                                       surpluses, the amount of their uncompensated care costs would be inflated, which could
                                                 result in a DSH overpayment.
Qualified hospitals are allowed to retain        Hospitals must meet certain federal qualifications to be eligible to receive DSH
their DSH payments                               payments, and payments must be retained by the hospital and be available to offset
                                                                              d
                                                 uncompensated care costs. In addition, auditors must ensure that DSH payments made
                                                 to each hospital are not returned to the state and used for other purposes.
State has records of all payments and            States must document and retain all information and records of payments and
expenditures related to Medicaid and             expenditures related to hospital services provided to Medicaid and uninsured patients.
uninsured patients
State has documented its methodologies           States must have documentation describing their methods for calculating hospital-
for determining hospitals’ uncompensated         specific uncompensated care costs, including the state’s definition of incurred costs for
care costs                                       Medicaid and uninsured patients.
                                             Source: GAO summary of regulations.

                                             Notes: Regulatory information is from Disproportionate Share Hospital Payments, Final Rule 73 Fed.
                                             Reg. 77904 (Dec. 19, 2008) (codified at 42 C.F.R. Parts 447 and 455).
                                             a
                                              The 2008 final rule prescribed specific methodologies by which states are to calculate costs for the
                                             purpose of determining hospital-specific DSH limits. In some cases, these methodologies may differ
                                             from actual state practices for calculating hospital-specific DSH limits and payments in 2007, and
                                             could account for certain hospitals receiving DSH payments in excess of the limits calculated using
                                             the 2008 final rule methodologies.
                                             b
                                              The 2008 final rule specifically excludes physician costs from the definition of “hospital services” that
                                             is used to determine hospital-specific DSH limits; however, some states have historically included the
                                             cost of physician services in such calculations. Additionally, in January 2012 CMS issued a proposed
                                             rule to revise the definition of eligible uninsured costs used to calculate uncompensated care costs
                                             and reiterated CMS’s past position that costs associated with bad debt, including unpaid coinsurance
                                             and deductibles, as well as cost of services provided to individuals who are inmates in a public
                                             institution or are otherwise involuntarily held in secure custody as result of criminal charges, cannot
                                             be included in the calculation of hospital uncompensated care costs. Under the proposed rule, the
                                             costs of services provided to individuals whose health insurance coverage has been exhausted or did
                                             not cover the specific service provided would be considered uninsured costs when calculating
                                             uncompensated care costs. The rule also proposes that the costs of services provided to American
                                             Indians / Alaska Natives who have Indian Health Service and tribal health program coverage would
                                             be considered uninsured if the Indian Health Service or tribal health program coverage did not
                                             provide the services or authorize coverage for the services. Under the 2008 final rule, the costs of
                                             services provided to American Indians / Alaska Natives who had Indian Health Service or tribal health
                                             program coverage and to individuals whose health insurance coverage had been exhausted or did
                                             not cover the specific service provided were not considered eligible uninsured costs. The new
                                             definition of uninsured costs will be effective for DSH audits and reports that cover DSH payments
                                             made in 2011, which states will submit to CMS in 2014. The proposed rule also states that the




                                             Page 13                                 GAO-13-48 Oversight of Medicaid Supplemental Payments
definition of uninsured costs may affect the calculation of uncompensated care costs for some
hospitals, depending upon the method utilized by the hospital or state in calculating uncompensated
care costs prior to the effective date of a final rule. Hospitals affected by this change should have
higher uncompensated care costs, according to the proposed rule. As of November 2012, this rule
had not been finalized. See 77 Fed. Reg. 2500 (Jan. 18, 2012).
c
 In our November 2009 report, we identified a state that omitted Medicaid surpluses when calculating
the uncompensated care costs for some of its hospitals, resulting in DSH payments in excess of the
hospitals’ actual uncompensated care costs. The state terminated this practice during the course of
that review. See GAO-10-69. According to a CMS official, this requirement is intended to address
such practices by ensuring that states do not omit Medicaid surpluses when calculating the
uncompensated care costs. However, the official added that the requirement is not an authorization
for states to make regular or non-DSH supplemental Medicaid payments for uninsured individuals or
other non-Medicaid purposes.
d
 In order for a hospital to qualify as a DSH hospital, it must have at least two obstetricians who have
staff privileges at the hospital and who have agreed to provide obstetric services to individuals who
are entitled to medical assistance for such services under the state plan. Children’s hospitals and
certain hospitals that do not offer nonemergency obstetric services are exempt from this requirement.
In addition, the hospital must have a Medicaid inpatient utilization rate of at least 1 percent. 42 U.S.C.
§ 1396r-4(d).


Our analysis of findings from the 2010 DSH audits illustrates the types of
changes that states may need to make to their DSH payments by 2014 to
avoid potential loss of federal funds or having to redistribute payments in
the future. 36 For example, we found that 44 of 49 states making DSH
payments in 2007, and hence submitting audits in 2010, made payments
to at least one hospital that did not comply with one or more of the six
DSH audit requirements. Specifically, in 21 of these 44 states, DSH
payments to at least 30 percent of the hospitals did not comply with one
or more of the requirements. States were directed to use findings from
audits completed during the transition period to make any necessary
changes, beginning with payments made in 2011. 37 Action in response to
noncompliance begins with audits of the 2011 DSH payments, which
must be submitted to CMS in 2014. At that time, states found to be
noncompliant with DSH audit requirements may be subject to loss of
federal funds or may be required to redistribute any excess DSH
payments to other DSH hospitals. As a result, these states may need to


36
   Under the 2008 final rule, the independent auditors may be the state audit agency or
any other Certified Public Accountant (CPA) firm that operates independently from either
the Medicaid agency or the hospitals being audited. States may not use non-CPA firms,
fiscal intermediaries, or independent certification programs currently in place to audit
uncompensated care costs, nor expand audits of hospital financial statements to obtain
audit certification of the hospital-specific DSH limits. Of the 49 2010 DSH audits,
36 were performed by two national CPA firms, and the remaining 13 audits were
performed by state audit agencies and other CPA firms.
37
   The transition period applies to 2010 through 2013 DSH audits, which provide auditors’
findings on DSH payments made from 2005 through 2010.




Page 14                                 GAO-13-48 Oversight of Medicaid Supplemental Payments
take corrective actions by 2014, when the transition period ends, to
resolve any ongoing noncompliance.

Our analysis of the 2010 audits of the 2007 DSH payments showed the
following:

•    Forty-one states made DSH payments to 717 hospitals in 2007 that
     exceeded the hospitals’ uncompensated care costs, as calculated by
     independent auditors using data sources and methods that CMS
     established in the 2008 final rule. The number of hospitals that
     received excess payments ranged from 1 each in Arkansas, the
     District of Columbia, Hawaii, Oregon, and Vermont to 114 in Missouri.

•    Nine states did not accurately calculate uncompensated care costs for
     206 hospitals because they included ineligible costs. Examples of
     ineligible costs, as described by the 2008 final rule, included those for
     nonhospital services that are not allowed, such as physician services,
     and those for services provided to patients whose third-party
     insurance had either been exhausted or did not cover the specific
     service. 38




38
  In January 2012, CMS issued a proposed rule to revise the definition of eligible
uninsured costs used to calculate uncompensated care costs, and reiterated CMS’s past
position that costs associated with bad debt, including unpaid coinsurance and
deductibles, as well as cost of services provided to individuals who are inmates in a public
institution or are otherwise involuntarily held in secure custody as result of criminal
charges, cannot be included in the calculation of hospital uncompensated care costs.
Under the proposed rule, the costs of services provided to individuals whose health
insurance coverage has been exhausted or did not cover the specific service provided
would be considered uninsured costs when calculating uncompensated care costs. The
rule also proposes that the costs of services provided to American Indians / Alaska
Natives who have Indian Health Service and tribal health program coverage would be
considered uninsured if the Indian Health Service or tribal health program coverage did
not provide the services or authorize coverage for the services. Under the 2008 final rule,
the costs of services provided to American Indians / Alaska Natives who had Indian Health
Service or tribal health program coverage and to individuals whose health insurance
coverage had been exhausted or did not cover the specific service provided were not
considered eligible uninsured costs. The new definition of uninsured costs will be effective
for DSH audits and reports that cover DSH payments made in 2011, which states will
submit to CMS in 2014. The proposed rule also states that the definition of uninsured
costs may affect the calculation of uncompensated care costs for some hospitals,
depending upon the method utilized by the hospital or state in calculating uncompensated
care costs prior to the effective date of a final rule. Hospitals affected by this change
should have higher uncompensated care costs, according to the proposed rule. As of
November 2012, this rule had not been finalized.




Page 15                           GAO-13-48 Oversight of Medicaid Supplemental Payments
•   Fifteen states made DSH payments to a total of 58 hospitals that
    either did not retain their DSH payments or were not qualified to
    receive them. Auditors found that 18 of these hospitals did not retain
    their DSH payments, while the remaining 40 hospitals were not
    qualified because these hospitals did not meet the federal
    requirements to receive DSH payments. For example, some of these
    hospitals did not meet the requirement of having a Medicaid inpatient
    volume of at least 1 percent of their total workload.

Table 2 summarizes the number of hospitals for which states’ DSH
payments complied or did not comply with audit requirements, and
appendix II provides similar information by state. In addition, the table
includes information on the extent to which auditors could not determine
compliance with DSH audit requirements because of data reliability or
documentation issues.




Page 16                     GAO-13-48 Oversight of Medicaid Supplemental Payments
Table 2: Summary of the 2010 Disproportionate Share Hospital (DSH) Audit Findings for 49 States, by DSH Audit Requirement

                                                                              Noncompliance with                         Compliance with requirement
                            Compliance with requirement                          requirement                               could not be determined
DSH audit                   Number of    As percentage of                Number of As percentage of                      Number of As percentage of
                                                         a                                         a                                               a
requirements                 hospitals    total hospitals                 hospitals total hospitals                       hospitals total hospitals
DSH payments do not
exceed hospital
uncompensated care costs        2,008                   68.0%                       717                      24.3%             228             7.7%
Uncompensated care
costs are accurately
                                                                                        b
calculated                      1,752                     59.3                    206                              7.0         995              33.7
Any Medicaid surplus is
applied against uninsured
                                     c
uncompensated care costs        1,851                     62.7                       18                            0.6        1,084             36.7
Qualified hospitals are
allowed to retain their
                                                                                        d
DSH payments                    2,638                     89.3                      58                             2.0         257               8.7
State has records of all
payments and expenditures
related to Medicaid and
uninsured patients              2,470                     83.6                      106                            3.6         377              12.8
State documented its
method for calculating
uncompensated costs             2,679                     90.7                      261                            8.8          13               0.4
                                          Source: GAO analysis of Centers for Medicare & Medicaid Services data.

                                          Notes: Data are from 2010 DSH audits of 2007 DSH payments. Percentages of hospitals in each
                                          compliance category may not add to 100 percent due to rounding.
                                          a
                                           Percentages are based on GAO analysis of 2010 DSH audits of 2007 DSH payments to 2,953 DSH
                                          hospitals. We analyzed independent auditor findings on states’ compliance with each of the six
                                          requirements and identified the number of hospitals for which there was a determination of
                                          compliance or noncompliance, or compliance could not be determined. A total of 3,104 hospitals were
                                          included in the 2011 DSH audits. We excluded 151 hospitals from our analysis, including those that
                                          were closed, did not receive a DSH payment, or were duplicates.
                                          b
                                           For 83 of these 206 hospitals, auditors found noncompliance on the basis of reviewing only a limited
                                          number of hospitals in five states. Thus compliance with respect to the remaining hospitals that were
                                          not reviewed by the auditors could not be determined for these states.
                                          c
                                           For hospitals that did not have a Medicaid surplus, we categorized the DSH payments as being in
                                          compliance.
                                          d
                                           DSH payments to 18 of these hospitals were categorized as noncompliant because the hospitals did
                                          not retain their DSH payments, while the DSH payments to the remaining 40 hospitals were
                                          categorized as noncompliant because the hospitals were not qualified to receive DSH payments.




                                          Page 17                                           GAO-13-48 Oversight of Medicaid Supplemental Payments
DSH Reports Provide         The annual DSH reports provide information CMS can use to better align
Information That Can Help   the states’ federal DSH allotments with their levels of uncompensated
CMS Align States’ DSH       care, as required by the Patient Protection and Affordable Care Act
                            (PPACA). This act reduces national DSH funding beginning in fiscal year
Allotments with             2014 and requires that CMS implement a method for making
Uncompensated Care          corresponding reductions in state DSH allotments on the basis of how
Costs                       states have distributed their DSH payments. 39 Although states have broad
                            flexibility in determining which hospitals receive DSH payments and the
                            amount that each hospital receives, PPACA directs CMS to make the
                            largest reductions in DSH allotments for states that do not target their
                            DSH payments to (1) hospitals with high volumes of Medicaid inpatients
                            and (2) hospitals that have high levels of uncompensated care. 40 CMS
                            has identified the annual DSH reports as a key source of information for
                            analyzing the relationship between DSH payments and uncompensated
                            care and assessing potential new methods for establishing state DSH
                            allotments. States are required to provide 17 pieces of information for
                            each DSH hospital on their annual DSH reports, such as Medicaid and
                            low-income inpatient utilization rates, total Medicaid and uninsured
                            inpatient and outpatient payments and costs, and DSH payments made to
                            each hospital. (See app. III for a description of all 17 data elements states
                            are required to include in DSH reports.)

                            CMS can use the information from the DSH reports to identify the extent
                            to which states are targeting their DSH payments to hospitals with high
                            levels of uncompensated care. For example, our analysis of the 2010
                            DSH reports showed that in 30 of 42 states, 41 the hospitals that received


                            39
                              Under PPACA, total national DSH funding will be reduced by a total of about $18 billion
                            from fiscal years 2014 to 2020. Pub. L. No. 111-148, §§ 2551, 10201(e), 124 Stat. 119,
                            312, 920 (Mar. 23, 2010), as amended by the Health Care and Education Reconciliation
                            Act of 2010, Pub. L. No. 111-152, § 1203, 124 Stat. 1029, 1053 (Mar. 30, 2010)
                            (amending section 1923(f) of the Social Security Act, as codified at 42 U.S.C. § 1396r-
                            4(f)).
                            40
                              Although states are required to make DSH payments to hospitals treating large numbers
                            of Medicaid or low-income patients, states may also make DSH payments to other
                            hospitals as long as at least 1 percent of their patients are Medicaid patients and, with
                            certain exceptions, the hospitals have at least two obstetricians who have staff privileges
                            and have agreed to provide obstetric services to individuals who are entitled to medical
                            assistance for such services under the state plan. 42 U.S.C. § 1396r-4(d).
                            41
                              Massachusetts and Tennessee did not make DSH payments in 2007 and did not submit
                            DSH reports. The DSH reports in seven additional states (Arkansas, Delaware, Iowa,
                            Mississippi, Pennsylvania, South Dakota, and Wisconsin) did not include the necessary
                            data to analyze DSH payments and uncompensated care.




                            Page 18                           GAO-13-48 Oversight of Medicaid Supplemental Payments
the largest share of the state’s DSH payments did not provide the largest
share of the state’s total uncompensated care. 42 (See fig. 2, which shows
the share of DSH payments received and the share of uncompensated
care provided by the 10 percent of total DSH hospitals in each state that
received the largest DSH payments.) In 11 states the 10 percent of the
hospitals receiving the largest DSH payments provided a larger share of
the state’s total uncompensated care and received a smaller share of the
state’s total DSH payments. 43 (See app. IV for additional information
about the share of DSH payments and uncompensated care for the
10 percent of DSH hospitals that received the largest DSH payments in
the state and the 90 percent of DSH hospitals that received the smallest
DSH payments in each state.)




42
  For the purposes of this report, we consider the hospitals receiving the largest DSH
payments in each state to be the 10 percent of total DSH hospitals in the state that
received the largest DSH payments. When calculating the number of DSH hospitals
representing 10 percent, we rounded up to the nearest whole number.
43
  In the remaining state, Maine, the share of DSH payments and uncompensated care
cost were equal for the 10 percent of the hospitals receiving the largest DSH payments.




Page 19                           GAO-13-48 Oversight of Medicaid Supplemental Payments
Figure 2: Share of Disproportionate Share Hospital (DSH) Payments Received and Share of Uncompensated Care Provided by
the 10 Percent of DSH Hospitals Receiving the Largest DSH Payments in 2007, Ranked by Difference between Share of DSH
Payments and Share of Uncompensated Care




                                       Page 20                       GAO-13-48 Oversight of Medicaid Supplemental Payments
                            Notes: For the purpose of this report, we consider the hospitals receiving the largest DSH payments
                            in each state to be the 10 percent of total DSH hospitals in the state that received the largest DSH
                            payments. When calculating the number of DSH hospitals representing 10 percent, we rounded up to
                            the nearest whole number. Massachusetts and Tennessee did not make DSH payments in 2007 and
                            did not submit DSH reports. Some states operate HHS-approved Section 1115 Medicaid
                            demonstrations under which the state does not make DSH payments directly to hospitals. For
                            example, Tennessee incorporated DSH funding into payments to managed care organizations, and
                            all of Massachusetts’s DSH funds are used to support a special fund for safety-net health care
                            providers. The DSH reports for Arkansas, Delaware, Iowa, Mississippi, Pennsylvania, South Dakota,
                            and Wisconsin did not include the necessary data to analyze DSH payments and uncompensated
                            care. In analyzing uncompensated care in California, we did not adjust for public hospitals authorized
                            by law to receive DSH payments of up to 175 percent of their uncompensated care.
                            a
                             In the District of Columbia and Florida, the 10 percent of total DSH hospitals in the state that
                            received the largest DSH payments did not in the aggregate have uncompensated care costs.
                            Rather, in these states the hospitals receiving the largest DSH payments in the aggregate had a
                            surplus—that is, total regular and non-DSH payments exceeded total costs for Medicaid and
                            uninsured patients. The surplus results in the hospitals’ share of total state uncompensated care
                            being a negative percentage. For example, in Florida, a $13 million surplus (a positive number)
                            divided by the state’s total uncompensated care of $506 million (a negative number) results in
                            negative 2.6 percent. However, we do not show negative percentages on this figure, but instead
                            report the hospital’s share of the state’s total uncompensated care as 0 percent.
                            b
                            In New Mexico, the 90 percent of total DSH hospitals in the state that together received the smallest
                            DSH payments did not have uncompensated care costs.


                            Information similar to that required for DSH supplemental payments, such
Information on Non-         as information on facility-specific payments and on state compliance with
DSH Payments Does           federal requirements, does not exist to the same extent for non-DSH
                            supplemental payments. However, the limited information that is available
Not Exist to the Same       on non-DSH payments to DSH hospitals demonstrates the potential need
Extent as for DSH           for similar reports and audits of non-DSH payments to enhance CMS’s
Payments, and               ability to oversee non-DSH payments.

Available Reports
Suggest That Such
Information Could
Enhance Oversight
Facility-Specific Payment   Information specific to individual facilities is not available for non-DSH
Information and             payments to the same extent that it is for DSH payments, since non-DSH
Independent Audits Do       payments are not subject to the same reporting and audit requirements.
                            While some limited information about non-DSH payments made to DSH
Not Exist to the Same       hospitals can be found in the annual DSH reports that states must submit,
Extent for Non-DSH          information about non-DSH payments made to hospitals that are not
Payments That They Do       eligible to receive DSH payments—or other health care facilities, such as
for DSH Payments            nursing homes—does not exist at the facility level. In addition, some
                            information on non-DSH payments is available in the quarterly
                            expenditure reports that states submit to CMS to obtain the federal



                            Page 21                               GAO-13-48 Oversight of Medicaid Supplemental Payments
                                        matching funds for Medicaid payments made. These reports include the
                                        state’s non-DSH payments aggregated by the facility’s ownership type—
                                        local-government-owned or local-government-operated, state-
                                        government-owned or state-government-operated, or privately owned or
                                        operated—and by some categories of service, such as inpatient and
                                        outpatient hospital services, 44 but do not include facility-specific
                                        payments. 45 (See table 3 for information states are required to provide to
                                        CMS for DSH payments, in comparison with that required for non-DSH
                                        payments.)

Table 3: Information That States Are Required to Provide to the Centers for Medicare & Medicaid Services on Medicaid
Disproportionate Share Hospital (DSH) and Non-DSH Supplemental Payments Made to Hospitals, by Source of Information

                                                                                                  Required for          Required for non-
Source                  Information                                                               DSH payments          DSH payments
                                                                                                                               a
Annual DSH reports      Supplemental Medicaid payments made, by facility                          Yes                   Partial
                                                                                                                               b
Quarterly state         Payments made, by category of service                                     Yes                   Partial
expenditure reports
Quarterly state         Payments made, by provider ownership type                                 No                    Yes
expenditure reports
Annual DSH audits       Independent audits of compliance with federal requirements                Yes                   No
                                        Source: GAO.
                                        a
                                         Only available for hospitals that receive DSH payments and are included in states’ annual DSH
                                        reports.
                                        b
                                         Only available for some categories of service, such as inpatient and outpatient hospital services, but
                                        not others, such as mental health services or clinic services.


                                        Without information on allocations of non-DSH payments to individual
                                        providers, CMS and others are unable to identify or assess total Medicaid
                                        funding received by individual providers and how Medicaid payments
                                        relate to providers’ Medicaid costs. The targeting of non-DSH
                                        supplemental payments to certain providers may be necessary and



                                        44
                                          Starting with the first quarter of fiscal year 2010, CMS began requiring states to report
                                        non-DSH payments for six categories of service: inpatient hospital services, outpatient
                                        hospital services, nursing facility services, physician and surgical services, other
                                        practitioners’ services, and intermediate care facility services.
                                        45
                                          We recently reported—using available information in quarterly expenditure reports—that
                                        facilities receiving non-DSH payments, other than DSH hospitals, received at least
                                        $1.6 billion in non-DSH supplemental payments in fiscal year 2010. The exact amount of
                                        non-DSH supplemental payments for these other facilities was unknown because state
                                        reporting was incomplete. See GAO-12-694.




                                        Page 22                                GAO-13-48 Oversight of Medicaid Supplemental Payments
appropriate to ensure, for example, that those providers serving larger
numbers of Medicaid beneficiaries are appropriately compensated for
their costs of serving those beneficiaries. However, without information on
the providers to which payments are targeted, assessments of whether
those payments are affecting beneficiary access to care and are not
excessive in view of providers’ costs are not possible. For example, the
Medicaid and CHIP Payment and Access Commission (MACPAC), the
commission created by Congress to study Medicaid payment and access,
reported in March 2012 on the data limitations at the federal level
regarding non-DSH payments, which it refers to as “UPL payments.”
MACPAC noted that these payments can be an important source of
revenue for certain providers. However, because these payments are not
necessarily associated with specific services or enrollees and are not
reported at the provider level, it is difficult for state and federal
policymakers to compare total Medicaid payments across providers and
enrollment groups and to evaluate the effect of these lump-sum payments
on payment methods and delivery models. 46

Oversight of non-DSH payments is also constrained by the lack of audited
information on non-DSH payments. Unlike DSH payments, states’ non-
DSH payments are not subject to annual independent audits or standard
requirements regarding the methods and data sources for calculating
payment amounts. CMS and others have limited information regarding
the reliability of the methods and data used to calculate payments, and
the consistency of the payments with Medicaid payment principles. We
and others have reported on aspects of selected states’ non-DSH
payments and raised varied concerns regarding whether some states’
payments were used for Medicaid purposes and were consistent with
economy and efficiency—key Medicaid principles. For example, our prior
work in selected states has found that some states were making non-
DSH payments that were vastly higher than the payments the facilities



46
  MACPAC noted that without provider-specific information, it is not possible to identify
how much Medicaid actually spends on specific services and populations or to make
meaningful intra- or cross-state comparisons of payment amounts or methods; determine
the ultimate disposition of federal funds that are provided to states for their Medicaid
programs (i.e., which providers receive supplemental payments and in what amounts); or
assess fully the extent to which payment policies affect efficiency, quality, and access to
appropriate services. Furthermore, the effect of policies intended to promote certain
outcomes through payment rates (e.g., pay for performance) may be muted by providers’
ability to access supplemental payments. See Medicaid and CHIP Payment and Access
Commission, Report to the Congress on Medicaid and CHIP (Washington, D.C.: 2012).




Page 23                           GAO-13-48 Oversight of Medicaid Supplemental Payments
would have received under regular Medicaid payment rates and were not
retained by the providers for Medicaid purposes. 47 We have also reported
that non-DSH payments were made for similar purposes as DSH
payments, and that selected states had used widely varying and
inaccurate methods for calculating their non-DSH payment amounts. 48
Similarly, the HHS OIG has reported for selected states that large non-
DSH supplemental payments were made to certain providers that were
returned to the state, not accurately calculated, and did not improve the
quality of care provided to Medicaid beneficiaries. 49 These reports have
generally been focused on a small number of states—five or fewer—and
have covered a limited time frame. Although CMS established an
oversight initiative in 2003 to closely review state payment arrangements
before approving them, not all existing payment arrangements had been
reviewed.

In 2004, we made recommendations to improve the oversight of these
payments, including recommending that CMS establish uniform guidance
for states that would set acceptable methods for calculating the amount of
non-DSH supplemental payments and adopt requirements for facility-
specific reporting of non-DSH payments. At the time, CMS generally
agreed with our recommendations, stating that it would issue guidance on
the characteristics and principles underlying acceptable methods, and
that it would also consider improvements in reporting requirements for
non-DSH payments. 50 However, as of November 2012, requirements
implementing these recommendations had not been established. CMS
officials said that they do not have plans to make changes to the
oversight of non-DSH payments that would institute requirements similar
to those for DSH payments, such as requiring annual facility-specific
reporting of non-DSH payment information, clarifying permissible
methods for calculating non-DSH payment amounts, and requiring annual
independent audits of state non-DSH payment calculations. Officials
stated that they were able to implement the DSH payment
requirements—which encountered objections from states, hospitals, and



47
 GAO-04-228.
48
 GAO-08-614 and GAO-04-228.
49
  For example, see HHS, Office of the Inspector General, A-09-03-00055, A-04-03-03023,
and A-10-04-00001.
50
 GAO-04-228.




Page 24                         GAO-13-48 Oversight of Medicaid Supplemental Payments
                            others—because they were required by law to do so, and that legislation
                            would be needed for CMS to establish similar requirements for non-DSH
                            payments.


Available Information       The hospital-specific information on non-DSH payments that is available
Suggests That Reports and   from DSH reports illustrates the potential utility of having such information
Audits for Non-DSH          for enhancing oversight. Using this information, CMS can determine the
                            extent to which non-DSH payments are targeted to a small number of
Supplemental Payments       providers, are related to those providers’ Medicaid workload, and resulted
Could Improve CMS’s         in total Medicaid payments (regular Medicaid and non-DSH supplemental
Ability to Oversee These    payments) that exceeded an individual provider’s costs of providing
Payments                    Medicaid services. This type of analysis can point to circumstances where
                            a state’s payments to individual hospitals may warrant further scrutiny, to
                            ensure the payments were made for Medicaid purposes and were
                            consistent with Medicaid payment principles.

                            In reviewing states’ 2010 DSH reports, we found that a small proportion of
                            DSH hospitals in each state received a large proportion of total non-DSH
                            supplemental payments made to DSH hospitals and that payments were
                            not always aligned with hospitals’ uncompensated Medicaid costs. 51
                            Across the 43 states that reported making non-DSH payments in their
                            DSH reports, 52 over $5.1 billion of the $7.6 billion in total non-DSH
                            payments made to DSH hospitals went to the 10 percent of DSH



                            51
                              For our analysis, uncompensated Medicaid costs are the expenses incurred in providing
                            Medicaid-covered services to Medicaid beneficiaries minus regular Medicaid payments
                            the hospitals received. In conjunction with CMS’s 2008 final rule on DSH audits and
                            reports, CMS also issued a DSH audit and reporting protocol to provide guidance and
                            direction on how the audits were to be conducted, including methodology and data
                            sources to be used in calculating hospitals’ payments and costs. The protocol requires
                            that information in the DSH reports about DSH hospitals’ Medicaid payments and costs
                            come from existing cost-reporting tools and documents, such as the Medicaid
                            Management Information System, the approved state Medicaid plan, the Medicare 2552-
                            96 hospital cost report, and audited hospital financial statements or other auditable
                            hospital accounting records.
                            52
                               Eight states were excluded from our analysis of non-DSH supplemental payments. Of
                            these eight states, two states (Massachusetts and Tennessee) did not make DSH
                            payments in 2007 and did not submit DSH reports. Five states (Delaware, Maine, North
                            Dakota, Vermont, and Wisconsin) did not report non-DSH supplemental payments in their
                            DSH reports or did not make non-DSH supplemental payments in 2007. One state, South
                            Dakota, was excluded from our analysis because we could not determine the reliability of
                            its data.




                            Page 25                          GAO-13-48 Oversight of Medicaid Supplemental Payments
hospitals in each state that received the largest non-DSH payments. 53
The proportion of non-DSH payments made to a small number of DSH
hospitals was not always aligned with the hospitals’ uncompensated
Medicaid costs, that is, total costs of Medicaid services provided to
Medicaid beneficiaries minus total regular Medicaid payments received by
the hospitals. For example, in 6 of 13 states, the 10 percent of DSH
hospitals with the largest non-DSH payments received 90 percent or
more of the non-DSH payments made to DSH hospitals, while their
shares of total uncompensated Medicaid costs in the state were less than
35 percent. The allocation of non-DSH payments to hospitals in this way
raises questions about how the payments relate to the provision of
Medicaid services and the purposes for which these payments are made.
(See app. V for more information about the percentage and dollar amount
of non-DSH payments made to, and the percentage of uncompensated
Medicaid costs for, DSH hospitals in each state.)

The 2010 DSH reports also demonstrate how having more-detailed
information on states’ non-DSH payments can improve CMS’s oversight
for these payments, which have no facility-specific payment limits and for
which states have flexibility in how they are distributed to providers. The
2010 DSH reports suggest that states’ total regular Medicaid and non-
DSH payments in some cases significantly exceeded the Medicaid costs
experienced by the providers receiving those payments. 54 Of the 43
states that reported making non-DSH payments in their DSH reports, we
found that in 39 states at least one hospital received total regular
Medicaid and non-DSH supplemental payments in excess of Medicaid




53
  When calculating the number of DSH hospitals representing the 10 percent that
received the largest share of non-DSH payments, we rounded up hospitals’ non-DSH
payments to the nearest whole number.
54
  In their annual DSH reports, states are required to report three categories of Medicaid
payments that hospitals may have received: fee-for-service payments, managed care
organization payments, and non-DSH supplemental payments. For the purpose of our
report, we combined the fee-for-service payment and managed care organization payment
amounts and refer to them as total regular Medicaid payments. States are also required to
report the total Medicaid payments for each hospital, that is, the sum of the three
categories of Medicaid payments hospitals may have received. For the 2010 reports,
however, in some states this total also included other payments, such as payments a
hospital received from another state Medicaid program and payments received from
Medicare for Medicaid individuals who were eligible for both Medicaid and Medicare.




Page 26                          GAO-13-48 Oversight of Medicaid Supplemental Payments
costs. 55 On the basis of the hospital-specific information in these
39 states’ 2010 DSH reports, a total of 505 DSH hospitals received total
regular Medicaid and non-DSH payments in excess of Medicaid costs. 56
These hospitals’ payments exceeded costs by a total of about $2.7 billion.
For these hospitals, non-DSH payments were a significant factor in
Medicaid payments exceeding Medicaid costs.

•    Of the 505 hospitals, 310 received a non-DSH payment that, when
     added to the regular Medicaid payments the hospital received,
     resulted in total Medicaid payments exceeding Medicaid costs by
     about $1.9 billion. For example, one hospital received almost
     $320 million in non-DSH payments, which when combined with
     $331 million in regular Medicaid payments exceeded the $410 million
     in costs experienced by the hospital in providing Medicaid services by
     about $241 million.

•    The remaining 195 hospitals received regular Medicaid payments that
     exceeded Medicaid costs before they received a non-DSH payment,
     and total payments exceeded costs by about $900 million. For
     example, one hospital received almost $62 million in non-DSH
     payments even though regular Medicaid payments made to the
     hospital exceeded its costs of providing Medicaid services by over
     $52 million.

(See fig. 3 and app. VII for the number and percentage of DSH hospitals
in each state that received a non-DSH payment and for which their
regular Medicaid and non-DSH payments exceeded Medicaid costs and
the amounts by which payments exceeded costs.)




55
  The remaining four states (Connecticut, the District of Columbia, Hawaii, and Nebraska)
did not have any hospitals that received total regular Medicaid and non-DSH payments in
excess of Medicaid costs.
56
  For purposes of this report, the term Medicaid costs refers to expenses incurred in
providing Medicaid-covered services to Medicaid beneficiaries.

Another 200 hospitals did not receive a non-DSH payment, but their regular Medicaid
payments exceeded Medicaid costs. For these hospitals, as well as the 505 hospitals that
received total regular Medicaid and non-DSH payments in excess of Medicaid costs, we
also analyzed their DSH payments and uncompensated care costs. (See app. VI for the
results of this analysis.)




Page 27                           GAO-13-48 Oversight of Medicaid Supplemental Payments
 Interactive graphic Figure 3: Number and Percentage of Disproportionate Share Hospital (DSH) Hospitals That
                                      Received Regular Medicaid and Non-DSH Supplemental Payments in Excess of Medicaid Costs,
                                      and Amounts by Which Payments Exceeded Costs, by State

  Hospitals       Percentages          Dollars

Move mouse over the above categories to view the number of hospitals with Medicaid payments exceeding Medicaid costs, the percentage of
hospitals with Medicaid payments exceeding Medicaid costs, or the dollar amounts by which Medicaid payments exceeded Medicaid costs.




   Number of DSH                                                                      Wash.
                                                                                                          Mont.                                                                         Maine
                                                                                                                      N.Dak.      Minn.
   Hospitals That Received                                                         Ore.
                                                                                                 Idaho                                     Wisc.
                                                                                                                                                                                  Vt.       N.H.
                                                                                                                                                                                              Mass.
                                                                                                                      S.Dak.                                                   N.Y.
   Medicaid Payments in                                                                                     Wyo.
                                                                                                                                    Iowa
                                                                                                                                                         Mich.
                                                                                                                                                                         Pa.
                                                                                                                                                                                             R.I.
                                                                                                                                                                                          Conn.

   Excess of Medicaid
                                                                                          Nev.                        Nebr.                                     Ohio                   N.J.
                                                                                                                                                 Ill.   Ind.                          Del.
                                                                                                   Utah                                                            W.VA.
                                                                                 Calif.                       Colo.                                                                   Md.

   Costs, by State
                                                                                                                        Kans.         Mo.                              Va.
                                                                                                                                                           Ky.                        DC
                                                                                                                                                                         N.C.
                                                                                                                                                        Tenn.
                                                                                                  Ariz.
   Totals reflect number of DSH hospitals.                                                                  N.Mex.
                                                                                                                          Okla.       Ark.                             S.C.
                                                                                                                                                Miss.
                                                                                                                                                                 Ga.
                                                                                                                                                        Ala.
                                                                                                                       Tex.
                                                                                                                                          La.
                                                                                                                                                                       Fla.
                                                                                           Alaska
              No data availablea                  6 to 20 DSH hospitals

              No DSH hospitals                    21 or more DSH hospitals
                                                                                                                         Hawaii
              1 to 5 DSH hospitals



                                                         Source: GAO analysis of Centers for Medicare & Medicaid Services data.

                                                         Notes: Data are from 2010 DSH reports of 2007 DSH payments. Total Medicaid payments are regular
                                                         Medicaid and non-DSH supplemental payments. Total Medicaid costs are the expenses incurred in
                                                         providing Medicaid-covered services to Medicaid beneficiaries.
                                                         a
                                                          Massachusetts and Tennessee did not make DSH payments in 2007 and did not submit DSH
                                                         reports. Delaware, Maine, North Dakota, South Dakota, Vermont, and Wisconsin did not report the
                                                         necessary information to analyze Medicaid payments and costs.




      Print instructions             To print expanded information, see appendix VII.



                                                        Page 28                                           GAO-13-48 Oversight of Medicaid Supplemental Payments
Regular and non-DSH Medicaid payments are not limited to providers’
costs of delivering Medicaid services; however, as Medicaid payments,
they are intended to pay for Medicaid-covered services provided to
Medicaid beneficiaries. As a result, Medicaid payments that greatly
exceed Medicaid costs raise questions about the purpose of the
payments, including how they relate to Medicaid services, whether they
are consistent with economy and efficiency, and whether they contribute
to beneficiaries’ access to quality care. For example, recent research
suggests that Medicaid supplemental payments were a key factor that
resulted in overall profits for government-owned and government-
operated hospitals reviewed. 57 Hospital-specific information can be
helpful to CMS and others for understanding, at the provider level, the
relationship of supplemental payments to both regular Medicaid payments
and Medicaid costs, which currently cannot be assessed given available
information. According to CMS officials, since 2003, CMS typically has
assessed the appropriateness of supplemental payment arrangements
when a state proposes implementing a new payment arrangement or
makes changes to established programs. In reviewing proposals, CMS
reviews how the payments are calculated and the purposes for which
they are made. We have found, however, that some states have reported
broad purposes for their non-DSH supplemental payments and that CMS
has not reviewed all payment arrangements. 58 States’ payment methods
and payment arrangements can be complex and challenging to assess,
and doing so can require significant time and resources.




57
  Researchers examined the financial performance of 150 hospitals that they identified as
providing a large share of care to low-income, uninsured, and Medicaid populations. The
study examined hospitals’ finances during 2003 to 2007 and compared the financial
performance of government-owned and government-operated hospitals, nonprofit
hospitals, and private for-profit hospitals. Researchers found that government-owned and
government-operated hospitals had positive operating margins (profits) in part because of
supplemental Medicaid payments. In contrast, nonprofit and private for-profit hospitals had
negative operating margins. Nancy M. Kane et al., “Strained Local and State Government
Finances among Current Realities That Threaten Public Hospitals’ Profitability,” Health
Affairs, vol. 31, no. 8 (2012).
58
 See GAO-08-614.




Page 29                           GAO-13-48 Oversight of Medicaid Supplemental Payments
              Medicaid is a large and growing program and is vital to tens of millions of
Conclusions   vulnerable individuals, who rely on it for their health care. To understand
              the complex program and make decisions on how best to oversee it,
              decision makers at the federal level need reliable and accurate
              information on how program resources are allocated and spent.
              Supplemental payments are a significant and growing component of
              Medicaid spending, and non-DSH supplemental payments appear to be a
              contributor to this growth.

              For more than two decades, concerns have been raised about the lack of
              transparency and accountability in CMS’s oversight of both DSH and non-
              DSH supplemental payments. For example, information has been lacking
              on the distribution of supplemental payments, the relationship of
              supplemental payments to regular Medicaid payments and to the level of
              services provided, and the purposes for which supplemental payments
              are made. The annual DSH reports that states are now submitting to
              CMS, and the annual independent audits of states’ compliance with key
              federal DSH audit requirements, including calculations of DSH payment
              limits, are important steps toward improving transparency and
              accountability for Medicaid DSH payments. They should help improve the
              allocation of these payments to qualified hospitals in future years. Similar
              information is lacking, however, for non-DSH payments. Moreover, the
              limited information available on non-DSH payments shows that a large
              share of these payments are paid to a small number of hospitals, and that
              when these payments are combined with regular Medicaid payments,
              hundreds of hospitals may be receiving Medicaid payments well in excess
              of their actual costs of providing Medicaid services. Such excessive
              payments raise concerns, including whether such payments are
              consistent with the requirement that provider payments be economical
              and efficient. These concerns highlight the need for clear guidelines
              regarding the calculation of non-DSH payment amounts.

              We believe our longstanding concerns regarding the need for improved
              transparency and accountability for supplemental payments are still valid.
              In 2004, to better ensure the fiscal integrity of Medicaid, we made
              recommendations to CMS to address concerns about transparency for
              large non-DSH payments and about widely varying and inaccurate state
              calculations of non-DSH payment amounts. However, as of November
              2012, CMS had not established facility-specific reporting requirements or
              clarified permissible methods for calculating non-DSH payment amounts.
              In addition, states’ non-DSH payments are not subject to annual
              independent audits. Given the size and growth of non-DSH payments,
              which now exceed DSH payments in total amounts, there is an urgent


              Page 30                     GAO-13-48 Oversight of Medicaid Supplemental Payments
                  need for improvements in the transparency of and accountability for non-
                  DSH supplemental payments. Accordingly, we are raising these issues to
                  the Congress as a new matter for its consideration.


                  To improve transparency of and accountability for Medicaid non-DSH
Matter for        supplemental payments, we suggest that Congress consider requiring the
Congressional     Administrator of CMS to (1) improve state reporting of non-DSH
                  supplemental payments, including requiring annual reporting of payments
Consideration     made to individual facilities and other information that the agency
                  determines is necessary to oversee non-DSH supplemental payments;
                  (2) clarify permissible methods for calculating non-DSH supplemental
                  payments; and (3) require states to submit an annual independent
                  certified audit verifying state compliance with permissible methods for
                  calculating non-DSH supplemental payments.


                  We provided a draft of this report to HHS for comment. In its written
Agency Comments   comments, HHS agreed that improved reporting and oversight of non-
                  DSH supplemental payments was needed. HHS noted that some efforts
                  were under way to do so, including a comprehensive review of state
                  supplemental payment methodologies to ensure that payments are
                  compliant with Medicaid statute and federal regulation. HHS also noted
                  that work was under way to evaluate and improve the implementation of
                  Medicaid DSH certified audits and reports. HHS’s letter is reprinted in
                  appendix VIII.


                  As agreed with your offices, unless you publicly announce the contents of
                  this report earlier, we plan no further distribution until 30 days from the
                  report date. At that time, we will send copies to the Secretary of Health
                  and Human Services, the Administrator of the Centers for Medicare &
                  Medicaid Services, and other interested parties. In addition, the report will
                  be available at no charge on the GAO website at http://www.gao.gov.




                  Page 31                      GAO-13-48 Oversight of Medicaid Supplemental Payments
If you or your staff have any questions about this report, please contact
me at (202) 512-7114 or iritanik@gao.gov. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this report. Major contributors to this report are listed in
appendix IX.




Katherine M. Iritani
Director, Health Care




Page 32                     GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix I: Scope and Methodology
             Appendix I: Scope and Methodology




             This appendix describes in detail our work to determine how the
             information collected from disproportionate share hospital (DSH) audits
             and reports facilitates the Centers for Medicare & Medicaid Services’
             (CMS) oversight of DSH supplemental payments and the extent to which
             similar information exists for overseeing non-DSH supplemental
             payments. We obtained from CMS information from 49 states’ 2010 DSH
             audits and reports for payments made in 2007, the most-recent year
             available at the time of our review. 1 We did not evaluate the quality of the
             DSH audits or the audit processes the independent auditors used. We
             also did not independently verify the accuracy of the DSH report data. We
             checked the audit and report data for obvious errors and omissions and
             interviewed CMS officials to resolve any identified discrepancies. In
             reviewing the audit data, we also removed from our analysis hospitals
             that were closed, were out-of-state (not located in the state for which the
             audit was conducted), and had no reported DSH payments (either $0 was
             reported or no information was provided), as well as hospitals that
             appeared twice, which was the case in only one state’s audit. In reviewing
             the DSH report data, we removed hospitals with incomplete information or
             for which independent auditors had raised questions about data reliability
             or the hospital’s qualifications for receiving a DSH payment. The number
             of hospitals removed for each type of analysis differed because each
             analysis was based on a review of different information in the DSH
             reports. We did not remove hospitals for which auditors had noted that
             information provided by states and hospitals could not be confirmed. On
             the basis of this review, we determined that the DSH audits and reports
             were sufficiently reliable for the purposes of this report, and we accounted
             for any limitations in these data during our analyses. We also reviewed
             applicable laws and regulations.




             1
              In this report, we use the term state to refer to the 50 states and the District of Columbia.
             Massachusetts and Tennessee did not make DSH payments in 2007 and did not submit
             DSH audits or reports. Some states operate HHS-approved Section 1115 Medicaid
             demonstrations under which the state does not make DSH payments directly to hospitals.
             For example, Tennessee incorporated DSH funding into payments to managed care
             organizations, and all of Massachusetts’s DSH funds were used to support a special fund
             for safety-net health care providers.




             Page 33                            GAO-13-48 Oversight of Medicaid Supplemental Payments
                       Appendix I: Scope and Methodology




                       To determine how the information collected from DSH audits facilitates
Analysis of DSH        CMS’s oversight of DSH payments, we analyzed the DSH audits for the
Audits and Reports     49 states that submitted them to determine the extent of states’
                       compliance with the six audit requirements established by the 2008 final
for Oversight of DSH   rule: (1) DSH payments do not exceed hospitals’ uncompensated care
Payments               costs; (2) hospital uncompensated care costs are accurately calculated;
                       (3) any Medicaid payment surpluses are applied against the
                       uncompensated care costs of uninsured patients; (4) qualifying hospitals
                       are allowed to retain the DSH payments that they receive; (5) the state
                       has records of all payments and expenditures related to Medicaid and
                       uninsured patients; and (6) the state has documented its methods for
                       calculating uncompensated care costs. Each audit documented
                       independent auditors’ findings regarding the extent to which states’ DSH
                       payments complied with these six requirements. We analyzed the audit
                       findings, and for each state we determined the extent of compliance with
                       the audit requirements by identifying the number of hospitals (1) whose
                       DSH payments complied with the audit requirement; (2) whose DSH
                       payments did not comply with the audit requirement; and (3) for which
                       compliance of their DSH payments with the audit requirement could not
                       be determined. Specifically, we determined the number of hospitals
                       whose DSH payments complied with the audit requirements on the basis
                       of the number of hospitals cited by auditors as compliant, or calculated
                       the number on the basis of the number of hospitals auditors identified as
                       noncompliant or whose compliance could not be determined. We
                       determined the number of hospitals whose DSH payments did not comply
                       with audit requirements on the basis of the number of hospitals cited by
                       auditors as noncompliant, or calculated the number on the basis of the
                       number of hospitals auditors identified as compliant or whose compliance
                       could not be determined. The number of hospitals for which compliance
                       of their DSH payments could not be determined was based on findings
                       that explicitly identified hospitals whose compliance with the audit
                       requirements could not be determined by auditors because, for example,
                       documentation was not provided or the documentation provided was not
                       sufficient for auditors to determine the level of compliance. We also
                       calculated the number of hospitals for which compliance of their DSH
                       payments could not be determined on the basis of the number of
                       hospitals that auditors did not identify as being compliant or
                       noncompliant. For this analysis, we removed 151 hospitals of the 3,104
                       hospitals included in the 2010 DSH audits. As a result, our analysis
                       reflects findings from the remaining 2,953 hospitals.




                       Page 34                         GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix I: Scope and Methodology




To determine how the information collected from DSH reports facilitates
CMS’s oversight of DSH payments, we analyzed hospital-specific
information from the 2010 DSH reports for 49 states to determine the
extent to which DSH payments were targeted to hospitals with high levels
of uncompensated care. 2 Of these states, 7 states did not report the
necessary data to analyze DSH payments and uncompensated care. 3 We
removed all 351 hospitals in these states. In addition, in the remaining
42 states, we removed 876 hospitals for which data were missing or were
deemed by us to be unreliable, so our analysis is based on 1,877
hospitals in 42 states. The hospital-specific information in the reports
includes payments received for Medicaid and uninsured patients, non-
DSH supplemental payments, and the costs of care for Medicaid and
uninsured patients. 4 In conducting our analysis, we reviewed DSH
payments made to DSH hospitals and the uncompensated care they
provided to Medicaid and uninsured patients as a proxy for the amount of
uncompensated care each hospital provided. We calculated the
percentage of DSH payments made to, and uncompensated care
provided by, the 10 percent of DSH hospitals that received the largest
DSH payments in the state and the remaining 90 percent of DSH
hospitals in each state.




2
 Massachusetts and Tennessee did not make DSH payments in 2007 and did not submit
DSH audits and reports. Some states operate HHS-approved Section 1115 Medicaid
demonstrations under which the state does not make DSH payments directly to hospitals.
For example, Tennessee incorporated DSH funding into payments to managed care
organizations, and all of Massachusetts’s DSH funds were used to support a special fund
for safety-net health care providers.
3
 The 7 states that did not report the necessary data to analyze DSH payments and
uncompensated care were Arkansas, Delaware, Iowa, Mississippi, Pennsylvania, South
Dakota, and Wisconsin.
4
 According to CMS’s general DSH audit and reporting protocol, information in DSH
reports about payments and costs comes from existing cost-reporting tools and
documents, such as the Medicaid Management Information System, approved state
Medicaid plans, the Medicare 2552-96 hospital cost report, and audited hospital financial
statements or other auditable hospital accounting records.




Page 35                           GAO-13-48 Oversight of Medicaid Supplemental Payments
                        Appendix I: Scope and Methodology




                        To determine the extent to which similar information exists to facilitate
Analysis of DSH         CMS’s oversight of non-DSH supplemental payments, we analyzed the
Reports for Oversight   information states submitted in their 2010 DSH reports for DSH payments
                        made in 2007, which includes hospital-specific information on non-DSH
of Non-DSH              payments made to DSH hospitals. Of the 49 states that submitted a 2010
Supplemental            DSH report, 6 states were excluded from our analysis of non-DSH
Payments                supplemental payments because they did not report non-DSH
                        supplemental payments in their DSH reports, or did not make non-DSH
                        supplemental payments in 2007, or the reliability of their data could not be
                        determined. 5 We removed all 105 hospitals in these states. In addition, in
                        the remaining 43 states, we removed 330 hospitals for which data were
                        missing or payments were not made, so our analysis is based on 2,669
                        hospitals in 43 states. Using the information from these states’ DSH
                        reports, we did the following:

                        •   Analyzed non-DSH payment information and Medicaid
                            uncompensated care costs to identify the extent to which non-DSH
                            payments were aligned with hospitals’ uncompensated Medicaid costs
                            in each state. Specifically, we reviewed the non-DSH payments and
                            Medicaid uncompensated care costs for these hospitals and
                            calculated the percentage of non-DSH payments and Medicaid
                            uncompensated care costs for the 10 percent of DSH hospitals that
                            received the largest non-DSH payments in each state and for the
                            remaining 90 percent of DSH hospitals in each state.

                        •   Analyzed the total regular Medicaid and non-DSH supplemental
                            payments and total Medicaid costs to identify the number and
                            percentage of DSH hospitals with combined regular Medicaid and
                            non-DSH supplemental payments in excess of Medicaid costs, as well
                            as the dollar amount by which Medicaid payments exceeded Medicaid
                            costs, for DSH hospitals that received a non-DSH supplemental




                        5
                         The 5 states that did not report non-DSH supplemental payments in their DSH reports or
                        did not make non-DSH supplemental payments in 2007 were Delaware, Maine, North
                        Dakota, Vermont, and Wisconsin. One state, South Dakota, was excluded from our
                        analysis because we could not determine the reliability of its data.




                        Page 36                          GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix I: Scope and Methodology




    payment. 6 Specifically, we reviewed regular Medicaid and non-DSH
    payments made to these hospitals and the costs associated with
    treating Medicaid beneficiaries. We calculated the number and
    percentage of DSH hospitals in each state that both received
    combined regular Medicaid and non-DSH payments in excess of
    Medicaid costs and received a non-DSH payment. For these
    hospitals, we also calculated the amounts by which combined regular
    Medicaid and non-DSH payments exceeded Medicaid costs and
    determined whether regular Medicaid payments alone exceeded
    Medicaid costs or whether regular Medicaid payments, when
    combined with non-DSH payments, exceeded Medicaid costs.

We conducted this performance audit from December 2011 through
November 2012 in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the
audit to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives. We
believe that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.




6
 In their annual DSH reports, states are required to report three categories of Medicaid
payments that hospitals may have received: fee-for-service payments, managed care
organization payments, and non-DSH supplemental payments. For the purpose of our
report, we combined the fee-for-service payment and managed care organization payment
amounts and refer to them as total regular Medicaid payments. States are also required to
report the total Medicaid payments for each hospital, that is, the sum of the three
categories of Medicaid payments hospitals may have received. For the 2010 reports,
however, in some states this total also included other payments, such as payments a
hospital received from another state Medicaid program and payments received from
Medicare for Medicaid individuals who were eligible for both Medicaid and Medicare.




Page 37                          GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix II: Extent of Compliance with DSH
              Appendix II: Extent of Compliance with DSH
              Audit Requirements in 2010 DSH Audits



Audit Requirements in 2010 DSH Audits

              In 2003, Congress mandated improved accountability for disproportionate
              share hospital (DSH) payments under the Medicare Prescription Drug,
              Improvement, and Modernization Act of 2003, by providing that the
              Secretary of Health and Human Services require states to submit annual
              independent certified audits and annual reports on their DSH payments. 1
              In 2008, the Centers for Medicare & Medicaid Services (CMS) issued a
              final rule to implement the 2003 DSH audit and report requirement. 2 The
              2008 final rule laid out key audit and reporting requirements. The first sets
              of DSH audits and reports, covering payments made in 2005 through
              2007, were submitted to CMS in December 2010. Action in response to
              noncompliance begins with audits of the 2011 DSH payments, which
              must be submitted to CMS in 2014. At that time, states found to be
              noncompliant with DSH audit requirements may be subject to loss of
              federal funds or may be required to redistribute any excess DSH
              payments to other DSH hospitals. As a result, these states may need to
              take corrective actions by 2014, when the transition period ends, to
              resolve any ongoing noncompliance.

              Tables 4 and 5 present more-detailed information on the results of our
              analysis of the 2010 DSH audits of the 2007 DSH payments on the extent
              of states’ compliance with each of the six DSH audit requirements. These
              requirements include

              •   DSH payments do not exceed hospitals’ uncompensated care costs,

              •   hospital uncompensated care costs are accurately calculated,

              •   any Medicaid payment surpluses are applied against the
                  uncompensated care costs of uninsured patients,

              •   qualified hospitals are allowed to retain the DSH payments that they
                  receive,



              1
               Pub. L. No. 108-173, § 1001(d), 117 Stat. 2066, 2430-2431 (2003) (adding section
              1923(j) to the Social Security Act) (codified, as amended, at 42 U.S.C. § 1395r-4(j)).
              2
               Medicaid Program; Disproportionate Share Hospital Payments, 73 Fed. Reg. 77904
              (Dec. 19, 2008) (codified at 42 C.F.R. Parts 447 and 455; Medicaid Program;
              Disproportionate Share Hospital Payments; Correcting Amendment, 74 Fed. Reg. 18656
              (Apr. 24, 2009). CMS subsequently issued a notice of proposed rulemaking to revise
              certain provisions of this rule. Medicaid Program; Disproportionate Share Hospital
              Payments—Uninsured Definition, 77 Fed. Reg. 2500 (Jan. 18, 2012).




              Page 38                            GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix II: Extent of Compliance with DSH
Audit Requirements in 2010 DSH Audits




•   the state has records of all payments and expenditures related to
    Medicaid and uninsured patients, and

•   the state has documented its methods for calculating uncompensated
    care costs.




Page 39                           GAO-13-48 Oversight of Medicaid Supplemental Payments
                                          Appendix II: Extent of Compliance with DSH
                                          Audit Requirements in 2010 DSH Audits




Table 4: Extent of Compliance with Federal DSH Audit Requirements, by State, Audit Requirement, and Number of Hospitals
as Reported in 2010 Disproportionate Share Hospital (DSH) Audits (part 1)

                                 DSH payments do not exceed         Hospital uncompensated             Any Medicaid surplus is
                                 hospital uncompensated care        care costs are accurately         applied against uninsured
                                             costs                         calculated                 uncompensated care costs



                 Total number                          Could not                         Could not                      Could not
State             of hospitals    Met    Not met      be verified    Met Not met        be verified     Met Not met    be verified
                                                                                    a                                                 b
Alabama                    98       49       49                0      15        6               77        0        0          98
Alaska                      4        4        0                0       3         0               1        4        0              0
Arizona                    40       40        0                0      40         0               0       40        0              0
                                                                                                                                      b
Arkansas                    4        3        1                0       4         0               0        0        0              4
California                141      124       17                0       1         0             140        0        0          141
Colorado                   47        0        0               47       0         0              47        0        0           47
Connecticut                35        0        0               35       0         0              35        0        0           35
Delaware                    1        1        0                0       1         0               0        1        0              0
District of Columbia       10        5        1                4       6         0               4        6        0              4
Florida                    63       44       19                0      63         0               0       63        0              0
Georgia                   109       83       26                0     109         0               0      109        0              0
Hawaii                     15       14        1                0      15         0               0       15        0              0
Idaho                      35       30        5                0      35         0               0       35        0              0
Illinois                   42        9       32                1      41         0               1       41        0              1
Indiana                    66       51       15                0      66         0               0       66        0              0
Iowa                       12        9        3                0       0         0              12        0        0           12
Kansas                     45       23       22                0      42         0               3       45        0              0
Kentucky                  108       82       26                0     105         0               3      108        0              0
Louisiana                 118       55       63                0     116         0               2      118        0              0
Maine                       2        2        0                0       2         0               0        2        0              0
Maryland                   20       14        6                0      20         0               0       20        0              0
                                                                                    a                                                 b
Michigan                  130      102       28                0      18       27               85        0        0         130
Minnesota                 106       39        0               67       0         0             106       38        0           68
                                                                                    a                                                 b
Mississippi                58       29       29                0       0       12               46        0        0          58
Missouri                  144       30      114                0     144         0               0      144        0              0
Montana                    50       25       25                0      41         0               9       28        0           22
Nebraska                   28       24        4                0      26         0               2       28        0              0
                                                  c
Nevada                     12        9        3                0      11         0               1       12        0              0
                                                  c
New Hampshire              29       11       15                3      29         0               0       29        0              0
New Jersey                 88       72       16                0      88         0               0       88        0              0




                                          Page 40                           GAO-13-48 Oversight of Medicaid Supplemental Payments
                                          Appendix II: Extent of Compliance with DSH
                                          Audit Requirements in 2010 DSH Audits




                                 DSH payments do not exceed                   Hospital uncompensated                      Any Medicaid surplus is
                                 hospital uncompensated care                  care costs are accurately                  applied against uninsured
                                             costs                                   calculated                          uncompensated care costs



                 Total number                           Could not                                       Could not                          Could not
State             of hospitals    Met    Not met       be verified              Met Not met            be verified         Met Not met    be verified
New Mexico                 23        9         14                    0            23              0                  0      23        0              0
New York                  222      167         32                  23           171             28                 23      222        0              0
North Carolina            110      103          7                    0          110               0                  0     110        0              0
North Dakota                7        4          3                    0              4             0                  3       7        0              0
Ohio                      176      168          8                    0          176               0                  0     176        0              0
Oklahoma                   65       50          6                    9              0           65                   0      49        3           13
Oregon                      9        8          1                    0              9             0                  0       9        0              0
Pennsylvania              176      164         12                    0              0           10                166        0        1          175
Rhode Island               14       10          4                    0            14              0                  0      14        0              0
                                                   c
South Carolina             61       40        19                     2            58              0                  3      58        0              3
                                                   c
South Dakota               20       16         4                     0              0           20                   0       0        0           20
                                                   c                                               a                                                 b
Texas                     181      125        39                   17               0          22                 159        0        0         181
Utah                       34       21         13                    0            34              0                  0      34        0              0
                                                   d
Vermont                    14        0         1                   13               0             0                14        0       14              0
Virginia                   21       19          2                    0            21              0                  0      21        0              0
                                                   c                                               a                                                 b
Washington                 72       52        13                     7              3          16                  53        0        0          72
West Virginia              57       40         17                    0            57              0                  0      57        0              0
Wisconsin                  26       26          0                    0            26              0                  0      26        0              0
Wyoming                     5        3          2                    0              5             0                  0       5        0              0
                             d
Total                   2,953    2,008        717                 228        1,752            206                 995    1,851       18        1,084
                                          Source: GAO analysis of Centers for Medicare & Medicaid Services (CMS) data.

                                          Notes: Data are from 2010 DSH audits of the 2007 DSH payments. Massachusetts and Tennessee
                                          did not make DSH payments in 2007 and did not submit DSH audits. We analyzed the audit findings,
                                          and for each state we determined the extent of compliance with the audit requirements by identifying
                                          the number of hospitals (1) whose DSH payments complied with the audit requirement—categorized
                                          as “Met”; (2) whose DSH payments did not comply with the audit requirement—categorized as “Not
                                          met”; and (3) for which compliance of their DSH payments with the audit requirement could not be
                                          determined—categorized as “Could not be verified.” DSH payments made between 2005 and 2010
                                          are subject to a transition period during which CMS would not take action against states based on
                                          findings of noncompliance with federal DSH requirements identified in the audits.
                                          a
                                           In these states, the number of hospitals with payments found noncompliant was based on auditors’
                                          review of a case study of hospitals.
                                          b
                                           The DSH audit findings of these states’ compliance with this requirement noted that because the
                                          Medicaid State Plans of these states were silent about the inclusion of all Medicaid payments (i.e.,
                                          out-of-state, dual eligible, and supplemental payments) in the calculation of hospitals’ uncompensated
                                          care costs, not all Medicaid payment surpluses were applied against the uninsured uncompensated
                                          care costs. As a result, we could not determine the specific number of hospitals whose DSH
                                          payments were compliant or noncompliant with this requirement.




                                          Page 41                                         GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix II: Extent of Compliance with DSH
Audit Requirements in 2010 DSH Audits




c
 Of the number of hospitals in each of these states whose DSH payments exceeded the hospitals’
uncompensated care costs, the following numbers of hospitals in each state were not qualified to
receive DSH payments and thus exceeded their uncompensated care costs by default: one in
Nevada, two in New Hampshire, one in South Carolina, four in South Dakota, three in Texas, one in
Vermont, and one in Washington.
d
 The total number of hospitals represents the number of hospitals whose DSH payments we
reviewed. This number is less than the total number of hospitals included in submitted DSH audits
because we removed from our analysis hospitals that were closed prior to 2007, were out-of-state
(not located in the state for which the audit was conducted), had no reported DSH payments (either
$0 was reported or no information was provided), and appeared twice in a DSH audit.




Page 42                               GAO-13-48 Oversight of Medicaid Supplemental Payments
                                         Appendix II: Extent of Compliance with DSH
                                         Audit Requirements in 2010 DSH Audits




Table 5: Extent of Compliance with Federal DSH Audit Requirements, by State, Audit Requirement, and Number of Hospitals
as Reported in 2010 Disproportionate Share Hospital (DSH) Audits (part 2)

                                                                    State has records of all
                                  Qualified hospitals are         payments and expenditures          State documented its
                                  allowed to retain their           related to Medicaid and          method for calculating
                                      DSH payments                     uninsured patients            uncompensated costs
                  Total number                   Could not                         Could not                       Could not
State              of hospitals   Met   Not met be verified         Met   Not met be verified       Met   Not met be verified
                                                  a
Alabama                     98     66         3             29       64         34            0      98          0            0
Alaska                       4      4         0             0         4          0            0       4          0            0
Arizona                     40     40         0             0        40          0            0      40          0            0
Arkansas                     4      4         0             0         4          0            0       4          0            0
California                 141    141         0             0       141          0            0     141          0            0
                                                  a
Colorado                    47      0       11              36        0          0          47       47          0            0
Connecticut                 35      0         0             35        0          0          35       35          0            0
Delaware                     1      1         0             0         1          0            0       1          0            0
District of Columbia        10      6         0             4        10          0            0      10          0            0
Florida                     63     63         0             0        63          0            0      63          0            0
Georgia                    109    109         0             0       109          0            0     109          0            0
Hawaii                      15     15         0             0        15          0            0      15          0            0
Idaho                       35     32         0             3        35          0            0      35          0            0
Illinois                    42     42         0             0        41          0            1      41          0            1
Indiana                     66     66         0             0        66          0            0      66          0            0
Iowa                        12      0         0             12        0          0          12        0          0            12
Kansas                      45     45         0             0        45          0            0      45          0            0
Kentucky                   108    108         0             0       108          0            0     108          0            0
Louisiana                  118    118         0             0       118          0            0     118          0            0
Maine                        2      2         0             0         0          2            0       2          0            0
Maryland                    20     20         0             0        20          0            0      20          0            0
                                                  a
Michigan                   130    126         2             2       130          0            0     130          0            0
Minnesota                  106     38         0             68        0         45          61      101          5            0
Mississippi                 58     58         0             0        56          2            0      58          0            0
Missouri                   144    144         0             0       144          0            0     144          0            0
Montana                     50     39         0             11       50          0            0      50          0            0
Nebraska                    28     28         0             0        28          0            0      28          0            0
                                                  a
Nevada                      12     11         1             0        12          0            0      12          0            0
                                                  a
New Hampshire               29     24         2             3        29          0            0      29          0            0
New Jersey                  88     70        18             0        88          0            0      88          0            0
New Mexico                  23     23         0             0        23          0            0      23          0            0




                                         Page 43                           GAO-13-48 Oversight of Medicaid Supplemental Payments
                                          Appendix II: Extent of Compliance with DSH
                                          Audit Requirements in 2010 DSH Audits




                                                                               State has records of all
                                   Qualified hospitals are                   payments and expenditures                         State documented its
                                   allowed to retain their                     related to Medicaid and                         method for calculating
                                       DSH payments                               uninsured patients                           uncompensated costs
                 Total number                     Could not                                       Could not                                   Could not
State             of hospitals    Met    Not met be verified                    Met      Not met be verified                  Met    Not met be verified
                                                     a
New York                  222     194            5                 23           100               23                 99         0        222            0
North Carolina            110     110             0                  0          110                 0                    0    110          0            0
North Dakota                7       5             0                  2              7               0                    0      7          0            0
Ohio                      176     176             0                  0          176                 0                    0    176          0            0
                                                     a
Oklahoma                   65      52            4                   9              0               0                65        65          0            0
                                                     a
Oregon                      9       7            1                   1              9               0                    0      9          0            0
Pennsylvania              176     176             0                  0          176                 0                    0    176          0            0
Rhode Island               14      14             0                  0            14                0                    0     14          0            0
                                                     a
South Carolina             61      58            1                   2            61                0                    0     61          0            0
                                                     a
South Dakota               20      14            4                   2              0               0                20         0         20            0
                                                     a
Texas                     181     170            3                   8          164                 0                17       181          0            0
Utah                       34      34             0                  0            34                0                    0     34          0            0
                                                     a
Vermont                    14      13            1                   0              0               0                14         0         14            0
                                                     a
Virginia                   21      20            1                   0            21                0                    0     21          0            0
                                                     a
Washington                 72      64            1                   7            66                0                    6     72          0            0
West Virginia              57      57             0                  0            57                0                    0     57          0            0
Wisconsin                  26      26             0                  0            26                0                    0     26          0            0
Wyoming                     5       5             0                  0              5               0                    0      5          0            0
                             b                       c
Total                   2,953    2,638         58                 257        2,470              106                377       2,679       261            13
                                          Source: GAO analysis of Centers for Medicare & Medicaid Services (CMS) data.

                                          Notes: Data are from 2010 DSH audits of the 2007 DSH payments. Massachusetts and Tennessee
                                          did not make DSH payments in 2007 and did not submit DSH audits. We analyzed the audit findings,
                                          and for each state we determined the extent of compliance with the audit requirements by identifying
                                          the number of hospitals (1) whose DSH payments complied with the audit requirement—categorized
                                          as “Met”; (2) whose DSH payments did not comply with the audit requirement—categorized as “Not
                                          met”; and (3) for which compliance of their DSH payments with the audit requirement could not be
                                          determined—categorized as “Could not be verified.” DSH payments made between 2005 and 2010
                                          are subject to a transition period during which CMS would not take action against states based on
                                          findings of noncompliance with federal DSH requirements identified in the audits.
                                          a
                                           DSH payments to these hospitals were categorized as noncompliant because the hospitals were not
                                          qualified to receive DSH payments.
                                          b
                                           The total number of hospitals represents the number of hospitals whose DSH payments we
                                          reviewed. This number is less than the total number of hospitals included in submitted DSH audits
                                          because we removed from our analysis hospitals that were closed prior to 2007, were out-of-state
                                          (not located in the state for which the audit was conducted), had no reported DSH payments (either
                                          $0 was reported or no information was provided), and appeared twice in a DSH audit.
                                          c
                                           DSH payments to 18 of these hospitals were categorized as noncompliant because the hospitals did
                                          not retain their DSH payments, while DSH payments to the remaining 40 hospitals were categorized
                                          as noncompliant because the hospitals were not qualified to receive DSH payments.




                                          Page 44                                         GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix III: Overview of the 17 Data
              Appendix III: Overview of the 17 Data Elements
              on DSH Reports



Elements on DSH Reports

              The Medicare Prescription Drug, Improvement, and Modernization Act of
              2003 directed the Secretary of Health and Human Services to require
              states to submit annual independent certified audits and annual reports
              on their disproportionate share hospital (DSH) payments. 1 Congress
              stipulated that the annual DSH reports identify each hospital that received
              a DSH payment in the prior fiscal year, the amount of the DSH payment,
              and such other information that the Secretary determines is necessary to
              ensure the appropriateness of state DSH payments. In 2008, the final rule
              implementing the 2003 DSH audit and report requirements identified the
              following 17 pieces of information in table 6 that states are required to
              include on their annual DSH reports for each DSH hospital. 2




              1
               Pub. L. No. 108-173, § 1001(d), 117 Stat. 2066, 2430-2431 (2003) (adding section
              1923(j) to the Social Security Act) (codified, as amended, at 42 U.S.C. § 1395r-4(j)).
              2
               Medicaid Program; Disproportionate Share Hospital Payments, 73 Fed. Reg. 77904
              (Dec. 19, 2008) (codified at 42 C.F.R. § 447.299(c)); Medicaid Program; Disproportionate
              Share Hospital Payments; Correcting Amendment, 74 Fed. Reg. 18656 (Apr. 24, 2009).




              Page 45                            GAO-13-48 Oversight of Medicaid Supplemental Payments
                                                Appendix III: Overview of the 17 Data Elements
                                                on DSH Reports




Table 6: Data Elements on Disproportionate Share Hospital (DSH) Reports

Data element                                                 Description
1.   Hospital name                                           The name of the hospitals that received DSH payments from the state,
                                                             identifying facilities that are institutes for mental disease and facilities that
                                                             are located out of state.
2.   State-estimated hospital-specific DSH limit             The estimate of eligible uncompensated care for the hospital receiving a
                                                             DSH payment for the year under audit based on the state’s methodology for
                                                             determining such limit.
3.   Medicaid inpatient utilization rate                     The hospital’s Medicaid inpatient utilization rate as defined by federal law,
                                                             unless the state uses alternative qualification criteria described in element
                                                             (5) of this table.
4.   Low-income utilization rate                             The hospital’s low-income utilization rate as defined by federal law, unless
                                                             the state uses alternative qualification criteria described in element (5) of
                                                             this table.
5.   State-defined DSH qualification criteria                If the state uses an alternate broader DSH qualification methodology as
                                                             authorized by federal law, it must provide the value of the statistic and the
                                                             methodology used to determine that statistic.
6.   Inpatient and outpatient Medicaid fee-for-service       The total annual amount of Medicaid fee-for-service payments made to the
     rate payments                                           hospital for inpatient and outpatient services furnished to Medicaid-eligible
                                                             individuals, but excluding DSH payments or non-DSH supplemental
                                                             payments.
7.   Inpatient and outpatient Medicaid managed care          The total annual amount paid to the hospital by Medicaid managed care
     organization payments                                   organizations for inpatient hospital and outpatient hospital services furnished
                                                             to Medicaid-eligible individuals.
8.   Non-DSH supplemental inpatient and outpatient           The total annual amount of non-DSH supplemental Medicaid payments
     Medicaid payments                                       made to the hospital under the state plan. These amounts do not include
                                                             DSH payments, regular Medicaid fee-for-service rate payments, and
                                                             Medicaid managed care organization payments.
9.   Total Medicaid inpatient and outpatient payments        Sum of inpatient and outpatient Medicaid fee-for-service, managed care
                                                             organization, and non-DSH supplemental payments (sum of elements (6),
                                                             (7), and (8) in this table).
10. Total cost of care—Medicaid inpatient and                The total annual costs incurred by each hospital for providing inpatient and
    outpatient services                                      outpatient hospital services to Medicaid-eligible individuals.
11. Total Medicaid uncompensated care cost                   The total amount of uncompensated care for providing Medicaid inpatient
                                                             and outpatient services. That is, total cost of inpatient and outpatient
                                                             Medicaid services minus total Medicaid inpatient and outpatient payments
                                                             (element (10) minus element (9) in this table). The uncompensated care
                                                             costs of providing Medicaid physician services cannot be included in this
                                                             amount.
12. Uninsured inpatient and outpatient payments              Total annual payments received by the hospital by or on behalf of individuals
                                                             with no source of third-party coverage for inpatient and outpatient hospital
                                                             services they receive. This amount does not include payments made by a
                                                             state or units of local government for services furnished to indigent patients.
                                                a
13. Total applicable Section 1011 payments                   Federal Section 1011 payments for uncompensated inpatient and outpatient
                                                             hospital services provided to Section 1011-eligible aliens with no source of
                                                             third-party coverage for the inpatient and outpatient hospital services they
                                                             receive.




                                                Page 46                             GAO-13-48 Oversight of Medicaid Supplemental Payments
                                               Appendix III: Overview of the 17 Data Elements
                                               on DSH Reports




Data element                                                     Description
14. Total inpatient and outpatient uninsured cost of             The total costs incurred for furnishing inpatient and outpatient hospital
    care                                                         services to individuals with no source of third-party coverage for the hospital
                                                                 services they receive.
15. Total inpatient and outpatient uninsured                     Total annual amount of uncompensated inpatient and outpatient care for
    uncompensated cost of care                                   furnishing inpatient hospital and outpatient hospital services to individuals
                                                                 with no source of third-party coverage for the hospital services they receive.
                                                                 The amount should be the result of the total inpatient and outpatient cost of
                                                                 providing hospital services to these individuals minus total payments
                                                                 received by or on behalf of these individuals (element (14) minus the sum of
                                                                 elements (12) and (13) in this table). The uncompensated care costs of
                                                                 providing physician services cannot be included. The uninsured
                                                                 uncompensated amount also cannot include unpaid copays or deductibles
                                                                 for individuals with third-party coverage for the hospital services they receive
                                                                 or any other unreimbursed costs associated with hospital services provided
                                                                 to individuals with those services in their third-party coverage benefit
                                                                 package. Moreover, the uncompensated care costs also cannot include bad
                                                                 debt or payer discounts related to services furnished to individuals who have
                                                                 health insurance or other third-party payer.
16. Total annual uncompensated care cost                         The total annual uncompensated care cost equals the total cost of care for
                                                                 furnishing inpatient hospital and outpatient hospital services to Medicaid-
                                                                 eligible individuals and to individuals with no source of third-party coverage
                                                                 for the hospital services they receive less the sum of regular Medicaid fee-
                                                                 for-service rate payments, Medicaid managed care organization payments,
                                                                 non-DSH supplemental payments, uninsured payments, and Section 1011
                                                                 payments for inpatient and outpatient hospital services (the sum of elements
                                                                 (9), (12), and (13) subtracted from the sum of elements (10) and (14) in this
                                                                 table).
17. Total DSH payments received                                  The total amount of DSH payments made to the hospital during the
                                                                 Medicaid plan year.
                                               Source: GAO summary of regulations.

                                               Notes: The source regulations are Medicaid Program; Disproportionate Share Hospital Payments,
                                               73 Fed. Reg. 77904 (Dec. 19, 2008) (codified at 42 C.F.R. § 447.299(c)); Medicaid Program;
                                               Disproportionate Share Hospital Payments; Correcting Amendment, 74 Fed. Reg. 18656
                                               (Apr. 24, 2009).
                                               a
                                                Section 1011 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003
                                               provided $250 million per year for fiscal years 2005 to 2008 for payments to eligible providers for
                                               emergency health services provided to undocumented aliens and other specified aliens. Pub. L.
                                               No. 108-173, § 1011, 117 Stat. 2066, 2432-2435 (2003).




                                               Page 47                                GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix IV: Percentage of DSH Payments
             Appendix IV: Percentage of DSH Payments and
             Uncompensated Care for DSH Hospitals in
             2010 DSH Reports


and Uncompensated Care for DSH Hospitals
in 2010 DSH Reports
             Table 7 presents the number of hospitals and the proportion of
             disproportionate share hospital (DSH) payments and uncompensated
             care attributable to the 10 percent of DSH hospitals that received the
             largest DSH payments in the state and to the 90 percent of DSH hospitals
             that received the smallest DSH payments in each state, based on states’
             2010 DSH reports of 2007 payments.




             Page 48                         GAO-13-48 Oversight of Medicaid Supplemental Payments
                                       Appendix IV: Percentage of DSH Payments and
                                       Uncompensated Care for DSH Hospitals in
                                       2010 DSH Reports




Table 7: Number of Hospitals, Percentage of Disproportionate Share Hospital (DSH) Payments, and Percentage of
Uncompensated Care for the 10 Percent of DSH Hospitals Receiving the Largest DSH Payments and the 90 Percent Receiving
the Smallest DSH Payments, by State

                       The 10 percent of DSH hospitals with largest           The 90 percent of DSH hospitals with smallest
                                     DSH payments                                            DSH payments
                                                          Percentage of                                         Percentage of
                       Number of     Percentage of      uncompensated         Number of      Percentage of    uncompensated
                                                                      a                                                     a
State                   hospitals   DSH payments                  care         hospitals    DSH payments                care
Alabama                        6             72.5%               81.7%                48             27.5%              18.3%
Alaska                         1                 81.2                 71.6             1               18.8               28.4
Arizona                        4                 87.1                 27.1            33               12.9               72.9
           b
California                     9                 44.0                 34.1            77               56.0               65.9
Colorado                       2                 82.6                 64.8            10               17.4               35.2
Connecticut                    4                 46.5                 49.8            31               53.5               50.2
                                                                         c                                                      c
District of Columbia           1                 44.8             (2.5)                4               55.2             102.5
                                                                         c                                                      c
Florida                        6                 77.4             (2.6)               48               22.6             102.6
Georgia                       10                 58.0                 49.8            88               42.0               50.2
Hawaii                         1                 61.7                 54.3             8               38.3               45.7
Idaho                          3                 51.7                 61.9            27               48.3               38.1
Illinois                       1                 30.4                 11.6             5               69.6               88.4
Indiana                        6                 66.8                 46.3            50               33.2               53.7
Kansas                         3                 65.0                 46.4            25               35.0               53.6
Kentucky                       7                 70.1                 39.7            57               29.9               60.3
Louisiana                      9                 60.3                 49.6            77               39.7               50.4
Maine                          1                 57.1                 57.1             1               42.9               42.9
Maryland                       2                 29.2                 36.9            16               70.8               63.1
Michigan                       1                 90.9                 39.5             1                9.1               60.5
Minnesota                      5                 70.6                 34.5            40               29.4               65.5
Missouri                      10                 53.1                 92.5            90               46.9                7.5
Montana                        3                 42.5                 79.5            20               57.5               20.5
Nebraska                       2                 62.3                 27.1            18               37.7               72.9
Nevada                         1                 88.1                 75.8             9               11.9               24.2
New Hampshire                  3                 44.8                 32.0            22               55.2               68.0
New Jersey                     5                 45.7                 33.0            45               54.3               67.0
                                                                         d                                                    d
New Mexico                     1                 94.1            128.5                 8                5.9            (28.5)
New York                      19                 67.3                 53.1           168               32.7               46.9
North Carolina                10                 74.7                 37.9            87               25.3               62.1
North Dakota                   1                 69.9                 78.3             2               30.1               21.7
Ohio                          18                 47.2                 40.8           157               52.8               59.2




                                       Page 49                            GAO-13-48 Oversight of Medicaid Supplemental Payments
                                 Appendix IV: Percentage of DSH Payments and
                                 Uncompensated Care for DSH Hospitals in
                                 2010 DSH Reports




                 The 10 percent of DSH hospitals with largest                           The 90 percent of DSH hospitals with smallest
                               DSH payments                                                            DSH payments
                                                           Percentage of                                                         Percentage of
                 Number of     Percentage of             uncompensated                  Number of              Percentage of   uncompensated
                                                                       a                                                                     a
State             hospitals   DSH payments                         care                  hospitals            DSH payments               care
Oklahoma                 5                   76.8                          40.3                      43                 23.2              59.7
Oregon                   1                   97.0                          45.6                           5              3.0              54.4
Rhode Island             2                   46.7                          63.0                      10                 53.3              37.0
South Carolina           6                   40.7                          41.6                      52                 59.3              58.4
Texas                   15                   66.9                          33.0                    130                  33.1              67.0
Utah                     4                   86.4                          39.4                      27                 13.6              60.6
Vermont                  2                   55.8                          49.3                      12                 44.2              50.7
Virginia                 2                   77.7                          43.6                      12                 22.3              56.4
Washington               7                   78.2                          42.0                      56                 21.8              58.0
West Virginia            6                   61.0                          42.2                      49                 39.0              57.8
Wyoming                  1                   47.8                          54.7                           2             52.2              45.3
                                 Source: GAO analysis of Centers for Medicare & Medicaid Services data.

                                 Notes: Data are from 2010 DSH reports of 2007 DSH payments. For the purpose of this report, we
                                 consider the hospitals receiving the largest DSH payments in each state to be the 10 percent of total
                                 DSH hospitals in the state that received the largest DSH payments. When calculating the number of
                                 DSH hospitals representing 10 percent, we rounded up to the nearest whole number. Massachusetts
                                 and Tennessee did not make DSH payments in 2007 and did not submit DSH reports. Arkansas,
                                 Delaware, Iowa, Mississippi, Pennsylvania, South Dakota, and Wisconsin did not report the
                                 necessary data to analyze DSH payments and uncompensated care.
                                 a
                                     Figures in parentheses represent a negative number.
                                 b
                                  In analyzing uncompensated care costs in California, we did not adjust for public hospitals
                                 authorized to receive DSH payments of up to 175 percent of their uncompensated care.
                                 c
                                  In the District of Columbia and Florida, the 10 percent of total DSH hospitals in the state that
                                 received the largest DSH payments did not in the aggregate have uncompensated care costs.
                                 Rather, 1 hospital in the District of Columbia and 6 hospitals in Florida in the aggregate had surpluses
                                 because payments exceeded uncompensated care costs. Their surpluses reduced the overall
                                 uncompensated care costs for DSH hospitals in their states and therefore contributed a negative
                                 amount to overall uncompensated care costs. For example, in Florida the 6 hospitals had a
                                 $13 million surplus, which reduced the overall uncompensated care costs for DSH hospitals in the
                                 state from $519 million to $506 million. These hospitals contributed negative 2.6 percent to overall
                                 uncompensated care costs for DSH hospitals in the state. In contrast, the 90 percent of total DSH
                                 hospitals (48 hospitals) in the state that received the smallest DSH payments provided $519 million in
                                 uncompensated care costs, or 102.6 percent of the $506 million in total uncompensated care costs in
                                 the state.
                                 d
                                  In New Mexico, the 90 percent of total DSH hospitals in the state that received the smallest DSH
                                 payments did not in the aggregate have uncompensated care costs. Rather, these eight hospitals in
                                 the aggregate had a surplus because payments exceeded uncompensated care costs. Their surplus
                                 reduced the overall uncompensated care costs for DSH hospitals in the state and therefore
                                 contributed a negative amount to overall uncompensated care costs. The hospital with the largest
                                 DSH payment in New Mexico had a greater amount of uncompensated care costs than all hospitals’
                                 combined uncompensated care costs and therefore contributed more than 100 percent of overall
                                 uncompensated care costs.




                                 Page 50                                         GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix V: DSH Hospitals’ Non-DSH
             Appendix V: DSH Hospitals’ Non-DSH
             Payments and Medicaid Uncompensated Care
             Costs in 2010 DSH Reports


Payments and Medicaid Uncompensated
Care Costs in 2010 DSH Reports
             Table 8 presents information about the number of hospitals and the
             percentage of non-disproportionate share hospital (DSH) supplemental
             payments and Medicaid uncompensated care costs attributable to the
             10 percent of DSH hospitals that received the largest non-DSH payments
             in the state and the 90 percent of DSH hospitals that received the
             smallest non-DSH payments in each state, based on states’ 2010 DSH
             reports of 2007 DSH payments.




             Page 51                        GAO-13-48 Oversight of Medicaid Supplemental Payments
                                       Appendix V: DSH Hospitals’ Non-DSH
                                       Payments and Medicaid Uncompensated Care
                                       Costs in 2010 DSH Reports




Table 8: Number of Hospitals, Percentage of Non-Disproportionate Share Hospital (DSH) Supplemental Payments, and
Percentage of Medicaid Uncompensated Care Costs for the 10 Percent of DSH Hospitals Receiving the Largest Non-DSH
Payments and the 90 Percent of DSH Hospitals Receiving the Smallest Non-DSH Supplemental Payments, by State

                       The 10 percent of DSH hospitals with largest            The 90 percent of DSH hospitals with smallest
                                   non-DSH payments                                        non-DSH payments
                                    Percentage of      Percentage of                        Percentage of       Percentage of
                                         non-DSH           Medicaid                              non-DSH            Medicaid
                       Number of        payments     uncompensated             Number of        payments      uncompensated
                                                a                  a                                    a                   a
State                   hospitals       received              costs             hospitals       received               costs
Alabama                        7            78.8%              46.1%                   57            21.2%               53.9%
Alaska                         1            100.0                 9.2                   3               0.0                90.8
Arizona                        5              72.5               35.3                  38             27.5                 64.7
Arkansas                       1              93.9               74.1                   3               6.1                25.9
California                    15              52.0               39.2                 128             48.0                 60.8
Colorado                       4              68.9               33.6                  28             31.1                 66.4
Connecticut                    4              90.0                8.4                  31             10.0                 91.6
                                                 b                                                        b
District of Columbia           1           (22.3)                 0.4                   7           122.3                 99.6
Florida                        7              76.4               35.8                  54             23.6                 64.2
Georgia                       11              60.5               48.8                  98             39.5                 51.2
Hawaii                         1              64.6               55.1                   8             35.4                 44.9
Idaho                          4              62.1                9.0                  27             37.9                 91.0
Illinois                       4              34.1               25.1                  35             65.9                 74.9
Indiana                        7              57.5               41.5                  59             42.5                 58.5
Iowa                           1              78.4               62.7                   9             21.6                 37.3
Kansas                         5              80.9               63.9                  40             19.1                 36.1
Kentucky                      11              99.8               56.4                  97               0.2                43.6
Louisiana                     12            100.0                15.3                 106               0.0                84.7
                                                                       c                                                         c
Maryland                       2              71.3            (250.0)                  18             28.7               350.0
Michigan                      13              62.7               46.5                 113             37.3                 53.5
Minnesota                      5              80.1               43.9                  40             19.9                 56.1
Mississippi                    6              50.0               22.7                  50             50.0                 77.3
Missouri                      15              67.4               65.7                 128             32.6                 34.3
Montana                        4              55.6               65.2                  35             44.4                 34.8
Nebraska                       3            100.0                36.6                  24               0.0                63.4
Nevada                         2              97.9               73.7                   9               2.1                26.3
                                                 d                                                        d
New Hampshire                  3            135.1                16.4                  26           (35.1)                 83.6
New Jersey                     9              63.0               33.9                  81             37.0                 66.1
                                                                      e                                                        e
New Mexico                     3              77.1             192.1                   20             22.9              (92.1)
New York                      19              72.6               29.3                 170             27.4                 70.7




                                       Page 52                             GAO-13-48 Oversight of Medicaid Supplemental Payments
                                 Appendix V: DSH Hospitals’ Non-DSH
                                 Payments and Medicaid Uncompensated Care
                                 Costs in 2010 DSH Reports




                 The 10 percent of DSH hospitals with largest                           The 90 percent of DSH hospitals with smallest
                             non-DSH payments                                                       non-DSH payments
                              Percentage of              Percentage of                                        Percentage of         Percentage of
                                   non-DSH                   Medicaid                                              non-DSH              Medicaid
                 Number of        payments             uncompensated                    Number of                 payments        uncompensated
                                          a                          a                                                    a                     a
State             hospitals       received                      costs                    hospitals                received                 costs
North Carolina          11                 59.6                           51.6                       99                40.4                  48.4
Ohio                    18                 98.8                           34.2                     158                  1.2                  65.8
Oklahoma                 6                 83.3                           45.2                       46                16.7                  54.8
                                                d                                                                         d
Oregon                   1              104.1                             61.8                            8           (4.1)                  38.2
Pennsylvania            19                 82.7                           34.2                     169                 17.3                  65.8
                                                d                                                                             d
Rhode Island             2              322.9                               9.1                      11             (222.9)                  90.9
South Carolina           6                 46.5                           41.8                       54                53.5                  58.2
Texas                   17                 85.3                           53.5                     144                 14.7                  46.5
                                                                               e                                                                e
Utah                     4                 98.4                        446.6                         29                 1.6               (346.6)
Virginia                 2                 81.3                           35.3                       13                18.7                  64.7
                                                d                                                                         d
Washington               7              121.3                             41.8                       56              (21.3)                  58.2
West Virginia            6                 72.2                           62.1                       51                27.8                  37.9
Wyoming                  1                 85.5                           72.1                            4            14.5                  27.9
                                 Source: GAO analysis of Centers for Medicare & Medicaid Services data.

                                 Notes: Data are from 2010 DSH reports of 2007 DSH payments. For the purpose of this report, we
                                 consider the hospitals receiving the largest non-DSH supplemental payments in each state to be the
                                 10 percent of total DSH hospitals in the state that received the largest non-DSH supplemental
                                 payments. When calculating the number of DSH hospitals representing 10 percent, we rounded up to
                                 the nearest whole number. Massachusetts and Tennessee did not make DSH payments in 2007 and
                                 did not submit DSH reports. Delaware, Maine, North Dakota, Vermont, and Wisconsin did not report
                                 non-DSH supplemental payments or did not make non-DSH supplemental payments in 2007. One
                                 state, South Dakota, was excluded from our analysis because we could not determine the reliability of
                                 its data. For our analysis, uncompensated Medicaid costs are the expenses incurred in providing
                                 Medicaid-covered services to Medicaid beneficiaries minus regular Medicaid payments the hospitals
                                 received.
                                 a
                                 Figures in parentheses represent a negative number.
                                 b
                                  Because of adjustments for non-DSH payments made, there were no aggregate non-DSH
                                 supplemental payments for the District of Columbia in 2007.
                                 c
                                   Maryland did not have uncompensated Medicaid costs for all hospitals. For all hospitals in the state,
                                 payments exceeded costs by about $7.8 million, while for two hospitals in the top 10 percent costs
                                 exceeded payments by about $19.5 million. When calculating the two hospitals’ share of the state’s
                                 uncompensated Medicaid costs, the statewide surplus is treated as a negative uncompensated
                                 Medicaid cost. As a result, the two hospitals’ share appears as a negative number.
                                 d
                                  In New Hampshire, Oregon, Rhode Island, and Washington, the 90 percent of total DSH hospitals
                                 that received the smallest non-DSH supplemental payments include hospitals with payment
                                 adjustments that reduced non-DSH payments already made. This resulted in an overall reduction in
                                 non-DSH supplemental payments for this group of hospitals.
                                 e
                                  In New Mexico and Utah, the aggregate uncompensated Medicaid costs of the top 10 percent of
                                 hospitals in each state were greater than the state’s overall uncompensated Medicaid costs, resulting
                                 in these hospitals having more than 100 percent of the state’s uncompensated Medicaid costs. The
                                 statewide uncompensated Medicaid costs are lower than those of the top 10 percent of hospitals,
                                 because some hospitals in the state had a Medicaid surplus, which reduces the uncompensated
                                 Medicaid costs of other hospitals when calculating the statewide total.




                                 Page 53                                           GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix VI: DSH Payments and
             Appendix VI: DSH Payments and
             Uncompensated Care Costs for Selected DSH
             Hospitals in 2010 DSH Reports


Uncompensated Care Costs for Selected DSH
Hospitals in 2010 DSH Reports
             This appendix provides the results of our analysis of total regular
             Medicaid, disproportionate share hospital (DSH), and non-DSH
             supplemental payments in states’ 2010 DSH reports compared to
             hospitals’ total cost of care for Medicaid and uninsured patients for certain
             hospitals. We conducted this analysis to illustrate the extent to which
             DSH reports can provide the Centers for Medicare & Medicaid Services
             (CMS) with information about how supplemental payments, in particular
             non-DSH supplemental payments, relate to regular Medicaid payments,
             DSH payments, and the costs of providing care to Medicaid and
             uninsured patients. Our analysis is based on the 2010 DSH reports of
             2007 DSH payments, which were subject to a transition period, during
             which CMS would not take action against states based on findings of
             noncompliance with federal DSH requirements. During the transition
             period, states are directed to use findings from DSH audits and reports to
             make any necessary changes in their DSH payments. Actions in
             response to noncompliance begin with payments made in 2011, which
             must be submitted to CMS in 2014. We identified 705 DSH hospitals that
             received total regular Medicaid and non-DSH supplemental payments in
             excess of Medicaid costs. 1 For these hospitals, we compared DSH
             payments to uncompensated care costs—the costs incurred in providing


             1
              Of these 705 DSH hospitals, 505 received both regular Medicaid and non-DSH
             payments, and 200 received only regular Medicaid payments.
             These findings are based on CMS’s definition of eligible uninsured costs under the 2008
             final rule that was in place for the 2010 audits. In January 2012, however, CMS published
             a proposed regulation to clarify which individuals are considered uninsured for the
             purposes of calculating hospitals’ uncompensated care costs. The rule proposes that the
             costs of services provided to individuals whose health insurance coverage has been
             exhausted or did not cover the specific service provided would be considered uninsured
             costs when calculating uncompensated care costs. Under the 2008 final rule, these costs
             were not considered eligible uninsured costs. The new definition of eligible uninsured
             costs may affect the calculation of hospitals’ uncompensated care costs and
             determinations of whether DSH payments exceed hospitals’ uncompensated care costs.
             See 77 Fed. Reg. 2500 (Jan. 18, 2012).

             In their annual DSH reports, states are required to report three categories of Medicaid
             payments that hospitals may have received: fee-for-service payments, managed care
             organization payments, and non-DSH supplemental payments. For the purpose of our
             report, we combined the fee-for-service payment and managed care organization payment
             amounts and refer to them as total regular Medicaid payments. States are also required to
             report the total Medicaid payments for each hospital, that is, the sum of the three
             categories of Medicaid payments hospitals may have received. For the 2010 reports,
             however, in some states this total also included other payments, such as payments a
             hospital received from another state Medicaid program and payments received from
             Medicare for Medicaid individuals who were eligible for both Medicaid and Medicare.




             Page 54                           GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix VI: DSH Payments and
Uncompensated Care Costs for Selected DSH
Hospitals in 2010 DSH Reports




services during the year to Medicaid and uninsured patients minus any
regular Medicaid, non-DSH supplemental, and uninsured patient
payments made to the hospital for those services. When we compared
DSH payments to uncompensated care costs for these hospitals, we
found that 255 of the hospitals received DSH payments in excess of
uncompensated care costs. 2 Of the 255 hospitals, 118 did not have
uncompensated care costs—that is, total regular Medicaid, non-DSH
payments, and uninsured patient payments exceeded total costs for
Medicaid and uninsured patients—and should not have received a DSH
payment, while the remaining 137 hospitals had uncompensated care
costs but received DSH payments in excess of these costs.

For the 118 hospitals that did not have uncompensated care costs and,
therefore, did not warrant receiving a DSH payment, total payments
exceeded total costs of care by about $1 billion. We found that total
payments were about $5.1 billion, 3 while these hospitals’ Medicaid and
uninsured care costs were about $4.1 billion. (See fig. 4 and table 9 for
these payments and costs.)




2
 Of the remaining 450 hospitals, 212 did not have DSH payments in excess of
uncompensated care costs, and 238 did not report the data necessary to analyze DSH
payments and uncompensated care costs.
3
 The payments consisted of the following: over $3.4 billion of regular Medicaid payments,
nearly $1.2 billion of non-DSH supplemental payments, and about $439 million of DSH
payments. Total payments also include about $107 million in payments made by or on
behalf of uninsured patients.




Page 55                           GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix VI: DSH Payments and
Uncompensated Care Costs for Selected DSH
Hospitals in 2010 DSH Reports




Figure 4: Medicaid and Uninsured Patient Payments and Costs for Disproportionate
Share Hospital (DSH) Hospitals That Did Not Have Uncompensated Care Costs




Note: Totals for 118 hospitals that had no uncompensated care costs and for which regular Medicaid
and non-DSH supplemental payments exceeded Medicaid costs.




Page 56                              GAO-13-48 Oversight of Medicaid Supplemental Payments
                                                 Appendix VI: DSH Payments and
                                                 Uncompensated Care Costs for Selected DSH
                                                 Hospitals in 2010 DSH Reports




Table 9: Medicaid and Uninsured Patient Payments and Costs for Disproportionate Share Hospital (DSH) Hospitals That Had No
Uncompensated Care Costs and Received a DSH Payment, by State

                           Costs (dollars in thousands)                                     Payments (dollars in thousands)
                                                                                       Total                                                         Amount by
                             Total      Total                                Total non-DSH                         Total                                 which
               Number     Medicaid uninsured                               regular   supple-                  uninsured Total DSH                     payments
                of DSH     costs of  costs of                             Medicaid    mental                     patient payments              Total    exceed
                                                                                           a
State         hospitals       care       care Total costs                payments payments                    payments received            payments      costs
Alabama             12    $206,133     $47,304      $253,437              $323,626             $80,361              $6,284       $41,293   $451,564    $198,126
           b
California           7     287,490      54,063        341,553               323,669              80,029             12,570           <1     416,268      74,715
District of
Columbia             1     144,590       4,649        149,239               150,428                      0               609      24,583    175,620      26,381
Florida              6     479,144     193,057        672,201               394,642            349,704              29,334        98,697    872,376     200,175
Idaho                1         194         50               244                   174                  91                   2        17         284         40
Indiana              1       2,522         26            2,548                  2,865                    0                  1       298       3,163        614
Kentucky             3       6,242        674            6,916                  7,227                105                 326        434       8,092       1,176
Maryland             4     177,370      24,404        201,774               204,468                3,203              1,044       13,803    222,517      20,743
Minnesota            1       1,378        566            1,944                  1,768                  33                694         48       2,543        599
Missouri            31    1,408,130    175,489     1,583,619             1,123,949             563,885              25,454       163,612   1,876,900    293,281
Montana              6       8,241       2,076         10,317                   8,356              1,901                 815       1,432     12,503       2,186
New
Hampshire            1       6,204         60            6,264                  6,468                  68                   1      2,284      8,821       2,557
New
Mexico               6      28,735      14,557         43,292                 40,460             15,746               3,225         702      60,133      16,842
New York             5     125,661      13,526        139,187               156,817                1,191              1,515       19,220    178,743      39,557
North
Carolina             2       5,116        389            5,505                  6,283                303                 138          1       6,725       1,220
Ohio                 4       4,954        713            5,667                  6,509                    0               125       1,522      8,156       2,489
                                                                                                                                                   c
Oklahoma             1      16,511        547          17,058                 19,456                   45             1,575         309      21,430       4,372
Rhode
Island               1       1,535        596            2,131                  2,134              (302)              2,239        2,648      6,718       4,587
South
Carolina             2      31,058       7,272         38,330                 32,662               4,447              2,922        5,458     45,489       7,159
                                                                                                                                                   c
Texas               10     517,775      44,310        562,085               526,283              50,221             12,579        61,060    655,554      93,468
                                                                                                                                                   c
Utah                 7      35,464       9,922         45,386                 47,060                     0            3,117         313      50,392       5,006
                                                                                                                                                   c
Washington           2       3,376        132            3,508                  4,197                (59)                 28        231       4,403        894
West
Virginia             3      22,044       3,424         25,468                 25,446                 382              2,044        1,413     29,284       3,816
Wyoming              1       1,653        769            2,422                  1,292                812                 339         14       2,456         34
Total              118 $3,521,520     $598,574   $4,120,094             $3,416,236 $1,152,163                    $106,980       $439,388 $5,120,134 $1,000,040
                                                 Source: GAO analysis of Centers for Medicare & Medicaid Services (CMS) data.




                                                 Page 57                                         GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix VI: DSH Payments and
Uncompensated Care Costs for Selected DSH
Hospitals in 2010 DSH Reports




Notes: Data are from 2010 DSH reports of 2007 DSH payments. Payment and cost amounts may not
sum to totals because of rounding.
a
    Figures in parentheses represent a negative number.
b
 California also had two public hospitals that did not have uncompensated care costs and received a
DSH payment. Since these hospitals were eligible to receive DSH payments up to 175 percent of
their uncompensated care costs, we removed them from our analysis.
c
 In Oklahoma, Texas, Utah, and Washington state, total payments do not equal the sum of total
regular Medicaid payments, non-DSH supplemental payments, uninsured patient payments, and DSH
payments because in these states the total payments column includes other payments that were not
separately reported in these states’ DSH reports. Specifically, in Oklahoma and Texas, CMS officials
said that these other payments were Medicare payments for Medicaid individuals that are eligible for
both Medicaid and Medicare. In Utah, these payments were adjustments made to Medicaid payments
received. In Washington state, these other payments were payments received from another state
Medicaid program.


For the 137 hospitals that had uncompensated care costs but received a
DSH payment in excess of those costs, total payments exceeded total
costs of care by about $664 million. We found that total payments were
about $6.3 billion, 1 while Medicaid and uninsured care costs were about
$5.7 billion. (See fig. 5 and table 10 for these payments and costs.)




1
 The payments consisted of the following: nearly $3.1 billion of regular Medicaid
payments, over $1.2 billion of non-DSH supplemental payments, and almost $1.8 billion of
DSH payments. Total payments also include about $205 million in payments made by or
on behalf of uninsured patients.




Page 58                                 GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix VI: DSH Payments and
Uncompensated Care Costs for Selected DSH
Hospitals in 2010 DSH Reports




Figure 5: Medicaid and Uninsured Patient Payments and Costs for Disproportionate
Share Hospital (DSH) Hospitals That Had Uncompensated Care Costs




Note: Totals for 137 hospitals that had uncompensated care costs and for which regular Medicaid
and non-DSH supplemental payments exceeded Medicaid costs.




Page 59                              GAO-13-48 Oversight of Medicaid Supplemental Payments
                                              Appendix VI: DSH Payments and Uncompensated
                                              Care Costs for Selected DSH Hospitals in 2010 DSH
                                              Reports




Table 10: Medicaid and Uninsured Patient Payments and Costs for Disproportionate Share Hospital (DSH) Hospitals That Had
Uncompensated Care Costs and Received a DSH Payment in Excess of These Costs, by State

                             Costs (dollars in thousands)                                    Payments (dollars in thousands)
                                                                                        Total                                                           Amount
                               Total         Total                             Total non-DSH       Total                                               by which
                 Number     Medicaid    uninsured                            regular  supple- uninsured                           Total DSH           payments
                       of    costs of     costs of          Total           Medicaid   mental    patient                          payments      Total    exceed
State           hospitals       care          care          costs          payments payments payments                              received payments      costs
Alabama                9    $249,062      $99,163      $348,225              $231,517            $41,319            $5,918         $140,781   $419,534        $71,309
Colorado               2      74,102       42,146        116,248                50,978             41,341                    0       47,871    140,190         23,942
Florida                6     145,745      136,327        282,072               139,277             97,289           36,865           23,320    296,751         14,679
Georgia                9      58,443       15,475          73,918               59,630              1,797             3,288          13,047     77,763          3,845
Illinois               2         136        7,938           8,074                    181                   0                 66      19,259     19,506         11,432
Indiana                5     130,736      131,393        262,129                90,903             44,682             5,210         144,354    285,148         23,019
Kansas                 2       6,533        1,101           7,634                 6,344                286               234          1,374      8,238           604
Kentucky               1       5,836        1,138           6,974                 6,797                    0                 0         329       7,126           153
Louisiana              7     212,447      118,919        331,366               215,095              5,062             3,632         158,226    382,015         50,649
Missouri              39     656,970      349,330     1,006,300                531,967           199,098            35,527          390,702   1,157,293       150,993
Montana                4       1,139          968           2,107                 1,138                392               398           395       2,323           215
                                                                                                                                                      a
Nevada                 1         369          455              824                   345               255                   32        418       1,058           234
New Jersey             3     130,844       87,550        218,394               118,602             34,665             1,938          86,398    241,603         23,208
New York              12     398,218       42,942        441,160               418,510                 957            5,005          37,657    462,129         20,969
North Carolina         1      27,297        4,944          32,241               24,904              3,632                631          4,635     33,802          1,560
Ohio                   2      44,564        5,708          50,272               47,397                     0             312          4,650     52,359          2,087
Rhode Island           1      38,198        3,408          41,606               37,033              1,726                140          7,848     46,746          5,140
South Carolina         8     140,998       49,455        190,453              119,627             25,790              4,520          57,983    207,920        17,466
                                                                                                                                                         a
Texas                 14    1,138,527     817,206     1,955,733                746,220           691,512            91,620          612,229 2,181,744         226,011
Utah                   1       1,236          334           1,570                 1,329                    0             206           372       1,907           337
                                                                                                                                                      a
Virginia               1     110,779       49,312        160,091                97,968             31,565             6,504          21,749   161,887           1,795
                                                                                                                                                      a
Washington             3     112,464       14,392        126,856               108,406              5,670             3,045          19,605   138,963          12,106
West Virginia          4       6,665        2,347           9,012                 7,076                235               222          3,628     11,161          2,149
Total                137 $3,691,309 $1,981,950 $5,673,259                 $3,061,242 $1,227,270                  $205,309 $1,796,832 $6,337,164              $663,905
                                              Source: GAO analysis of Centers for Medicare & Medicaid Services (CMS) data.

                                              Notes: Data are from 2010 DSH reports of 2007 DSH payments. Payment and cost amounts may not
                                              sum to totals because of rounding.
                                              a
                                               In Nevada, Texas, Virginia, and Washington state, total payments do not equal the sum of total
                                              regular Medicaid payments, non-DSH supplemental payments, uninsured patient payments, and DSH
                                              payments because in these states the total payments column includes other payments that were not
                                              separately reported in these states’ DSH reports. Specifically, for Texas, CMS officials said that these
                                              other payments were Medicare payments for Medicaid individuals that are eligible for both Medicaid
                                              and Medicare. In Nevada, Virginia, and Washington state, these other payments were payments received
                                              from another state Medicaid program.




                                              Page 60                                         GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix VII: DSH Hospitals with Medicaid
              Appendix VII: DSH Hospitals with Medicaid
              Payments in Excess of Medicaid Costs in 2010
              DSH Reports


Payments in Excess of Medicaid Costs in
2010 DSH Reports
              Regular and non-disproportionate share hospital (DSH) Medicaid
              payments are not limited to providers’ costs of delivering Medicaid
              services; however, as Medicaid payments they are intended to pay for
              Medicaid-covered services provided to Medicaid beneficiaries and must
              be consistent with efficiency, economy, and quality of care. Table 11
              presents information from interactive figure 3 on the number and
              percentage of DSH hospitals in each state that received total regular
              Medicaid and non-DSH supplemental payments in excess of Medicaid
              costs and the amounts by which payments exceeded costs for DSH
              hospitals that received non-DSH supplemental payments.




              Page 61                          GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix VII: DSH Hospitals with Medicaid
Payments in Excess of Medicaid Costs in 2010
DSH Reports




Table 11: Number and Percentage of Disproportionate Share Hospital (DSH)
Hospitals That Received Non-DSH Supplemental and Regular Medicaid Payments in
Excess of Medicaid Costs and Amount by Which Payments Exceeded Costs, by
State

                                                               Dollar amount by which
                                                                 regular Medicaid and
                                                               non-DSH supplemental
                       Number of DSH           Percentage of       payments exceeded
State                      hospitals           DSH hospitals           Medicaid costs
Alabama                              22                 34%              $204,012,498
Alaska                                 1                 25                  182,708
Arizona                                1                  2                  134,246
Arkansas                               1                 25                 2,917,316
California                           23                  16               148,499,802
Colorado                               2                  6                18,216,205
Connecticut                            0                  0                         0
District of Columbia                   0                  0                         0
Florida                              37                  61               625,694,383
Georgia                              17                  16                 1,693,135
Hawaii                                 0                  0                         0
Idaho                                10                  32                  561,101
Illinois                             29                  74               262,185,810
Indiana                                9                 14                 5,994,186
Iowa                                   4                 40                 3,412,828
Kansas                                 7                 16                 4,291,691
Kentucky                               5                  5                18,314,308
Louisiana                              2                  2                 4,372,258
Maryland                               6                 30                53,652,164
Michigan                             25                  20                34,774,182
Minnesota                              9                 20                15,700,509
Mississippi                          30                  54                53,338,361
Missouri                            101                  71               424,467,105
Montana                              23                  59                 5,598,006
Nebraska                               0                  0                         0
Nevada                                 1                  9                  239,852
New Hampshire                          1                  3                  331,755
New Jersey                             9                 10                37,682,503
New Mexico                           15                  65               119,893,213
New York                             11                   6                45,332,681




Page 62                          GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix VII: DSH Hospitals with Medicaid
Payments in Excess of Medicaid Costs in 2010
DSH Reports




                                                                                 Dollar amount by which
                                                                                   regular Medicaid and
                                                                                 non-DSH supplemental
                                  Number of DSH                  Percentage of       payments exceeded
 State                                hospitals                  DSH hospitals           Medicaid costs
 North Carolina                                         8                   7                 3,387,059
 Ohio                                                   2                   1                16,128,593
 Oklahoma                                             11                   21                27,891,507
 Oregon                                                 1                  11                    25,926
 Pennsylvania                                           6                   3                 9,375,010
 Rhode Island                                           1                   8                  560,581
 South Carolina                                       13                   22                11,905,483
 Texas                                                35                   22               496,527,209
 Utah                                                   6                  18                45,025,319
 Virginia                                               2                  13                34,006,273
 Washington                                             9                  14                 6,182,632
 West Virginia                                          8                  14                 5,081,405
 Wyoming                                                2                  40                  539,407
 Total                                               505                  19%            $2,748,129,210
Source: GAO analysis of Centers for Medicare & Medicaid Services data.

Notes: Data are from 2010 DSH reports of 2007 DSH payments. Massachusetts and Tennessee did
not make DSH payments in 2007 and did not submit DSH reports. Delaware, Maine, North Dakota,
South Dakota, Vermont, and Wisconsin did not report the necessary information to analyze Medicaid
payments and costs.




Page 63                                         GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix VIII: Comments from the
             Appendix VIII: Comments from the Department
             of Health and Human Services



Department of Health and Human Services




             Page 64                         GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix VIII: Comments from the Department
of Health and Human Services




Page 65                         GAO-13-48 Oversight of Medicaid Supplemental Payments
Appendix IX: GAO Contact and Staff
                  Appendix IX: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Katherine Iritani, (202) 512-7114 or iritanik@gao.gov
GAO Contact
                  In addition to the contact named above, Tim Bushfield, Assistant Director;
Staff             Helen Desaulniers; Carolyn Fitzgerald; Sandra George; Peter Mangano;
Acknowledgments   Roseanne Price; and Said Sariolghalam made key contributions to this
                  report.




                  Page 66                          GAO-13-48 Oversight of Medicaid Supplemental Payments
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             Page 67                     GAO-13-48 Oversight of Medicaid Supplemental Payments
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(291002)
           Page 68                    GAO-13-48 Oversight of Medicaid Supplemental Payments
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