oversight

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)

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.




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8                    GAO/HEHS-97-181R Mental Health Disproportionate Share Expenditures