John BertaSenior Director, Policy AnalysisTexas Hospital Association

June 19, 2014

Medicaid DSH

THA – Who We Are

The Texas Hospital Association is a nonprofit trade association representing Texas hospitals and health systems. In addition to providing a unified voice for health care, THA serves its 500+ members with timely information, data analysis, education on essential operational requirements, networking and leadership opportunities.

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Serving Texas Hospitals/Health Systems

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Medicaid DSH - Outline

I. FY2011

II. FY2012-13 – Waiver DY1 & DY2

III. FY2014-15 – DY3 & DY4

IV. FY2016 and Beyond4

FY2011 DSH (and Before)

DSH & UPL – Pre-Waiver

Programs Related to each other

Public Hospitals have incentive to Fund DSH

Fully Funded for Every Year

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DSH Funding Incentive

UPL at Maximum – No Other Funds Available IGT ~$0.40

Paid $1.00

DSH IGT ~$0.40

Paid ~$0.55

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Medicaid DSH - Outline

I. FY2011

II. FY2012-13 – Waiver DY1 & DY2

III. FY2014-15 – DY3 & DY4

IV. FY2016 and Beyond7

FY2012 Financing Transformation

Transformation Waiver – Shifting Landscape

– DSH & UC - Closer Connection

– Additional PCP Costs Allowed for UC

– Result = Alternate Funding Opportunities for Public Hospitals

DSH Audit– Dollars Recouped beginning in Program Year

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FY2012 - Shifting Landscape

FY2011 UPL $2.8B

FY2012 UC & DSRIP $4.2B

DSH & UC Closely Aligned

Medicaid Shortfall Growing Larger9

Medicaid Disproportionate Share FY2012

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Public Hospitals Agree to Fund $502M of $569 Potential

DSH Dollars Unspent

THA Forms Task Force on DSH

THA Task Force Concepts 2012-2013

Medicaid Disproportionate Share Hospital Task Force – 6/1/2012–the money follows the work

–shared responsibility for funding the Medicaid DSH program

–protection for the most vulnerable classes of hospitals

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UC and DSRIP Funding= $29B

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UC/UPL Transition- $466M

Medicaid DSH FY2013 - Issues

FY 2013 Payments – 100% Amounts - $138M GR $323M IGT

New DSH Rule– Lubbock and Odessa drop out of 8 hospital coalition leaving big 6

– DSH is Regionalized

– Pass 3 Rural Funding Mechanism Developed

– GR and IGT are separated

– Texas Children’s Lawsuit

Max TPL payment = Cost

DSH paid @ 90% (10% Expected)13

Medicaid DSH - Outline

I. FY2011

II. FY2012-13 – Waiver DY1 & DY2

III. FY2014-15 – DY3 & DY4

IV. FY2016 and Beyond14

Medicaid Disproportionate Share FY2014

New Rider 86 covers DSH & UC $300M GR authorized for FY2014 & FY2015

– 2014 = $160M

– 2015 = $140M

No General Revenue Funds appropriated after FY2015

Other Budget Riders not written in this manner

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Medicaid DSH Rider 86

Proportional allocation of supplemental hospital payments among large public, small public, and non-public providers

Mechanisms though which Medicaid payments are made through managed care organizations

Recommended statutory changes and any other legislative direction needed to fully implement the plan 16

Medicaid DSH Rider 86 (cont’d)

Assess the extent to which supplemental payments are needed to cover Medicaid and uninsured/uncompensated care costs

Transition plan from supplemental payments to rates that recognize improvements in quality of patient care, the most appropriate use of care, and patient outcomes

No General Revenue Funds appropriated after FY2015

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Medicaid DSH Rider 86 (cont’d)

FY 2014 request must show a measurable progress in developing the plan

FY 2015 request should include the final plan

No GR funds may be expended for FY 15 until plan is finalized

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Medicaid DSH FY2014

2011-Before Transformation Waiver Non-State Hospital DSH Pool = $1.2B UPL Payments = $2.8B Total = $4.0B

2014-After Transformation Waiver FY2014 UC & DSRIP = $6.2B FY2014 DSH Non State = $1.3B Total = $7.5B

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2014 DSH – Attributes - 1

State-owned hospitals – No change

2013 – Regional Approach (RHP) 2014 – Hospitals in statewide pools

2013 – Funds for Low Income and Medicaid 2014 – Days added together

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2014 DSH – Attributes - 2

2013 - GR funded non RHP areas 2014 – Hospitals share in GR and related FF 2014 – 3 Pools = all GR and FF in Pools 1&2 shared

by all (e.g. net DSH proceeds) 2014 - Pool 3 = IGT back to IGT hospitals

2013 – Pass 3 Methodology in place 2014 – No change

2013 – 6 Large public hospitals transfer for their region 2014 – Fed Funds on IGT by 6 shared by all 21

2014 DSH – Attributes - 3

2013 – no provision 2014 – Most other public hospitals IGT ½ of their

DSH (Lubbock & Ector IGT for themselves) 2014 – Non-8 public hospitals have their days

weighted such that net DSH is equal 2014 – Big 6 = $377 total = $396

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2014 UC Attributes - 1

UC funds are divided into seven pools– state-owned hospitals

– COTH members (6 large public)

– other public hospitals

– private hospitals

– physician group practices

– governmental ambulance

– publicly owned dental providers

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2014 UC Attributes - 2

Pool amounts are Allocated pro-rata

Allocation basis:– Hospitals - Post DSH Payment unpaid HSL

– Other groups – UC Cost

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2014 UC Attributes - 3

6 Large transferring hospitals receive “bump” on allocation basis (pre-allocation basis)

UC pre-allocation “bump” equals amount of DSH IGT made for other hospitals

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$284M added to 6 UC Pool

Net DSH proceeds = $1.344B - $395M IGT = $949M

Big 6 = 23% of $949M net proceeds Total IGT = $395M * 23% = $93M $377M – $93M = $284M $284M = UC bump for big 6

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2014 UC Attributes - 4

Special Provision for smaller (Rider 38) hospitals:

–The reduction in future years is limited to decreases in UC Pool

–E.g. $3.9 billion to 3.1 billion

–Reduction is still significant but no greater than this amount

–Applies to county < 60k, RRC,SCH,CAH

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2014-17 Key Dates

Fall 2014 - FY 2014 DSH paid (1/2 paid) Jan 2015 – 84th TX Leg in session Spring 2015 – last half of 2014 DSH Paid June 2015 TX Leg leaves FY2015 DSH – needs final plan FY2016 – last year of 5 year waiver 2017 DSH cuts begin

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Medicaid DSH - Outline

I. FY2011

II. FY2012-13 – Waiver DY1 & DY2

III. FY2014-15 – DY3 & DY4

IV. FY2016 and Beyond29

Medicaid DSH – Future Years

Composition of 84th LegislatureFederal DSH AllotmentDSH Audit OutcomesWaiver

Extension/Renewal/Replacement–Available UC Funds

–CMS Negotiation / Federal Outlook

Medicaid Shortfall ~$3B 30

Medicaid Federal DSH Reductions

Revised Schedule Allotments - April 3, 2014

Year

TotalReduction

Note – if Texas maintains existing policy then 100% of the reduced allotment will be absorbed

by non-state hospitals2017

TX~20% 1,800,000,000 2018

TX~50% 4,700,000,000 2019 4,700,000,000 2020 4,700,000,000 2021 4,800,000,000 2022 5,000,000,000 2023 5,000,000,000 2024 4,400,000,000

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Questions?

John Berta

Texas Hospital Association

512/465-1556

jberta@tha.org

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