United States General Accounting Office Washington, D.C. 20548 Health, Education and Human Services Division B-276914 July 16, 1997 11 The Honorable John Breaux Ranking Minority Member Special Committee on Aging United States Senate Subject: Medicaid: Disproportionate Share Hospital Payments to Institutions for Mental Diseases Dear Senator Breaux: Between 1993 and 1995, Medicaid disproportionate share hospital (DSH) payments to institutions for mental diseases (IMDs)' increased by about $1 billion. Concerned about this increase, you asked us to obtain information on DSH programs that provide funds to IMDs in selected states. On July 10, 1997, we briefed your office on the progress of our work. As a result of this briefing, we were asked to provide you with a series of charts summarizing some of the preliminary data we have obtained without a full discussion of the reasons for the changes in these payments. This correspondence responds to that request; this fall, we will provide you with a report that further develops the information you requested. To address your concerns, we visited or contacted seven states: California, Kansas, Maryland, Michigan, New Hampshire, North Carolina, and Texas. We chose these states on the basis of our analysis of the 1993-95 DSH expenditure data. We picked Michigan and Texas because those states reported high growth in mental health DSH expenditures during the period. We selected Maryland, New Hampshire, and North Carolina because their mental health DSH expenditures represented a high proportion of their total DSH expenditures. In addition, we contacted California because that state reported 'DSH payments are payments, in addition to other Medicaid reimbursements, to hospitals that serve large numbers of low-income patients. Generally speaking, an IMD is any hospital of more than 16 beds that specializes in psychiatric care. An IMD may be public or private, profit or nonprofit, but the payments in question primarily involve state-operated psychiatric facilities. GAO/HEHS-97-181R Mental Health Disproportionate Share Expenditures o06ql5/l 898 B-276914 no mental health DSH expenditures and Kansas because it had reported a large decline in mental health I)SH expenditures. In each of these states, we discussed the DSH program with knowledgeable officials and obtained information on the changes in the payments occurring in recent years. In summary, our work to date indicates that the 1993-95 growth in mental health DSH payments pre-dates full implementation of the hospital-specific caps mandated by the Omnibus Budget Reconciliation Act (OBRA) of 1993.2 In 1996, both total and mental DSH expenditures declined significantly as the full impact of the hospital-specific caps took effect. In addition, the growth in mental health DSH expenditures that occurred before 1996 appears, at least in some cases, to be a shifting of DSH payments from one type of public hospital to another as OBRA '93 DSH requirements became effective. In Michigan, for example, about $571 million, or over 92 percent, of the almost $618 million in DSH adjustments paid to hospitals in 1994 went to the University of Michigan Hospital. In 1995, however, OBRA '93 limited payments to this hospital to about $53 million-a $518 million decrease. Meanwhile, DSH payments to state- operated psychiatric hospitals increased by about $303 million. Finally, although mental health DSH payments declined in 1996, they continued to represent a significant portion of states' total DSH expenditures. Moreover, as table 5 in the enclosure shows, in the states we contacted where hospitals received mental health DSH payments, those hospitals on average received substantially higher DSH payments than other hospitals participating in the DSH program. The enclosure presents the following data on DSH expenditures for the seven states we contacted: - changes in total DSH payments for fiscal years 1994 to 1996, 2OBRA '93 placed limits on the amount of DSH payments states could make to individual hospitals. This limit, known as the hospital-specific cap, restricted DSH adjustments to no more than the costs of providing inpatient and outpatient services to Medicaid and uninsured patients, less payments received from Medicaid and uninsured patients. To allow states a transition period, the effective date for payments to public hospitals was generally July 1, 1994, and 1 year later for private hospitals. In addition, the law allowed states to make payments to certain "high disproportionate share" public hospitals during a 1- year transition period of up to 200 percent of their hospital-specific cap. 2 GAO/HEHS-97-181R. Mental Health Disproportionate Share Expenditures B-276914 percent of state DSH allotment s spent before and after full implementation of OBRA '93, - changes in mental health DSH payments for fiscal years 1994 to 1996, mental health DSH payments compared with total DSH payments for fiscal year 1996, and - payments to mental health and other hospitals participating in the DSH program for fiscal year 1996. We discussed a draft of this correspondence with HCFA program-level officials, who agreed with our characterization of information on DSH payments, and we incorporated their technical suggestions where appropriate. We will make copies of this correspondence available to others on request. Please call me at (202) 512-7114 or Paul Alcocer at (312) 220-7709 if you or your staff have any questions. Other contributors to this report include Leslie G. Aronovitz, Robert T. Ferschl, and Paul T. Wagner, Jr. Sincerely yours, William J. Scanlon Director, Health Financing and Systems Issues Enclosure 3 The state DSH allotment for a federal fiscal year is the maximum amount of DSH payments in which the federal government will financially participate during that year. To the extent a state reports expenditures that exceed the allotment, the Health Care Financing Administration (HCFA) adjusts the federal share of expenditures. 3 GAO/HEHS-97-181R Mental Health Disproportionate Share Expenditures ENCLOSURE ENCLOSURE Table 1: Changes in Total DSH Payments for Selected States. FYs 1994-96 Dollars in millions State 1994 1995 1996 Percentage Percentage change, 1994-96 change, 1995-96 California $2,191.5 $2,191.4 $2,091.5 (4.6) (4.6) Kansas 165.1 88..3 55.2 (66.6) (37.5) Maryland 129.5 143.1 152.6 17.8 6.6 Michigan 617.7 438.0 347.4 (43.8) (20.7) New Hampshire 395.0 186..4 144.1 (63.5) (22.7) North Carolina 389.3 431.3 362.8 (6.8) (15.9) Texas 1,513.0 1,513..0 1,513.0 0 0 Source: HCFA Central Office and State Medicaid Agencies. 4 GAO/HEHS-97-181R Mental Health Disproportionate Share Expenditures ENCLOSURE ENCLOSURE Table 2: Percentage of State DSH Allotment Spent Before and After Full Implementation of OBRA '93 Dollars in millions State FY 1994 Allotment FY 1996 Allotment allotment spent allotment spent (before OBRA (percent) (after OBRA (percent) '93 limits) '93 limits) California $2,191.5 100.0 $2,191.5 95.4 Kansas 188.9 87.4 188.9 29.2 Maryland 129.5 100.0 151.0 101.0 Michigan 617.7 100.0 686.5 50.6 New Hampshire 392.0 101.0 392.0 36.8 North Carolina 389.3 100.0 459.0 79.0 Texas 1,513.0 100.0 1,513.0 100.0 Source: GAO analysis of state allotment and expenditure data. 5 GAO/HEHS-97-181R Mental Health Disproportionate Share Expenditures ENCLOSURE ENCLOSURE T'able 3: Changes in Mental Health DSH Payments for Selected States, FYs 1994-96 Dollars in millions State 1994 1995 1996 Percentage Percentage change, 1994-96 change, 1995-96 California 0 0 0 Not applicable Not applicable Kansas $156.3 $76.7 $49.3 (68.4) (35.7) Maryland 111.9 120.9 114.4 2.2 (5.4) Michigan 2.0 304.8 241.0 11,950.0 (20.9) New Hampshire 169.2 95.0 46.1 (72.8) (51.5) North Carolina 373.9 238.1 198.2 (47.0) (16.8) Texas 250.8 283.7 319.0 27.2 12.4 Source: HCFA Central Office and State Medicaid Agencies. 6 GAO/HEHS-97-181R Mental Health Disproportionate Share Expenditures ENCLOSURE ENCLOSURE Table 4: Mental Health DSH Payments Compared With Total DSH Payments. FY 1996 Dollars in millions State Mental health DSH Total DSH Percent payments payments California 0 $2,091.5 0 Kansas $49.3 55.2 89.3 Maryland 114.4 152.6 75.0 Michigan 241.0 347.4 69.4 New Hampshire 46.1 144.1 32.0 North Carolina 198.2 362.8 54.6 Texas 319.0 1,513.0 21.1 Source: HCFA Central Office and State Medicaid Agencies. 7 GAO/HEHS-97-181R Mental Health Disproportionate Share Expenditures ENCLOSURE ENCLOSURE Table 5: Payments to Mental Health and Other Hospitals Participating in the DSH Program, FY 1996 Dollars in millions State Number of Mental Number of Other DSH mental health health other payments hospitals DSH hospitals payments California 0 0 123 $2,091.5 Kansas 4 $49.3 27 5.9 Maryland 8 114.4 15 36.6 Michigan 8 241.0 81 106.4a New Hampshire 1 46.1 28 98.0 North Carolina 5b 198.2 87 164.6 Texas 13c 319.0 177 1,194.0 d Notes: 'About one-half of this amount went to two public hospitals: the University of Michigan Hospital and Hurley Hospital. bIncludes the University of North Carolina Hospital, which received approximately $17 million of the total reported mental health payments. These payments, however, were not necessarily related to mental health services. 'Includes two private psychiatric hospitals, which received about $1 million of the total mental health payments. dAbout $286 million of this total was paid to five other state-operated hospitals. Source: HCFA Central Office and State Medicaid Agencies. (101560) 8 GAO/HEHS-97-181R Mental Health Disproportionate Share Expenditures
Medicaid: Disproportionate Share Hospital Payments to Institutions for Mental Diseases
Published by the Government Accountability Office on 1997-07-15.
Below is a raw (and likely hideous) rendition of the original report. (PDF)