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Medicaid: Ongoing Federal Oversight of Payments to Offset Uncompensated Hospital Care Costs Is Warranted

GAO-10-69 Published: Nov 20, 2009. Publicly Released: Dec 22, 2009.
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Highlights

In addition to standard Medicaid payments, hospitals receive supplemental payments for uncompensated costs of care provided to uninsured and Medicaid patients. These supplemental payments are referred to as disproportionate share hospital (DSH) payments. Hospitals may also receive non-DSH supplemental payments. In fiscal year 2006, DSH payments totaled about $17 billion and non-DSH supplemental payments exceeded $6 billion. Hospitals' DSH payments are limited to their uncompensated care costs, that is, their costs for covered care less Medicaid and other payments. Concerns have been raised about the accuracy of DSH payment limits, particularly as states may estimate limits using data that are not audited or up to date. The Government Accountability Office (GAO) was asked to examine (1) how state DSH payments in 2006 compared to DSH payment limits, and (2) certain aspects of states' calculations of 2006 DSH payment limits. In selected states, GAO analyzed state Medicaid payment data and interviewed officials from the states and from the Centers for Medicare & Medicaid Services (CMS), the federal agency that oversees Medicaid.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Centers for Medicare & Medicaid Services In light of our findings from selected states that existing DSH requirements are not always followed, the CMS should ensure that states account for all Medicaid payments, including non-DSH supplemental payments, when calculating DSH payment limits.
Closed – Implemented
In 2012, CMS reported that starting with DSH audits submitted in 2014 for DSH payments made in 2011 the agency will recoup any payments as appropriate based on audit findings. This timeframe reflects a transition period in the final rule that established the annual DSH auditing requirement.

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Topics

Accounting proceduresCompensationCost accountingCost analysisHealth care costsHealth care facilitiesHospital care servicesHospitalsUnderpaymentsMedicaidstate relationsFederal aid to statesMedically uninsuredReporting requirements