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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: 

GAO-13-48: 

GAO Highlights: 

Highlights of GAO-13-48, a report to the Committee on Finance, U.S. 
Senate. 

Why GAO Did This Study: 

In 2011, states reported making $43 billion in Medicaid supplemental 
payments-—payments above regular payments for Medicaid services—-to 
certain providers, mainly hospitals. The federal government shares in 
the cost of these payments. By law, states make certain supplemental 
payments, known as DSH payments, for uncompensated care costs 
experienced by hospitals serving large numbers of low-income and 
Medicaid patients. States also make other supplemental payments—-
referred to here as non-DSH payments—-to hospitals and other providers 
who, for example, serve high-cost Medicaid beneficiaries. Past GAO 
reports have found gaps in federal oversight of these high-risk 
payments: $a lack of information on the providers receiving them, 
inaccurate payment calculation methods, and a lack of assurances the 
payments were used for Medicaid purposes. CMS has required states to 
submit annual audits and reports on DSH payments since 2010. GAO was 
asked to review federal oversight of supplemental payments and 
examined (1) how information in DSH audits and reports facilitates 
CMS’s oversight of DSH payments, and (2) the extent to which similar 
information exists for non-DSH payments. GAO analyzed 2010 DSH audits 
and reports and interviewed CMS officials. 

What GAO Found: 

The recently implemented annual audits and reports for states’ 
disproportionate share hospital (DSH) payments could improve oversight 
by the Centers for Medicare & Medicaid Services (CMS)—-the federal 
agency that oversees Medicaid-—by illuminating needed changes. States 
are required to submit audits and reports to CMS as a condition for 
receiving federal funds for their DSH payments. The first set of DSH 
audits was submitted by states in 2010 and covers states’ 2007 DSH 
payments. The audits give CMS information on how well states are 
complying with six DSH requirements, including whether payments are 
limited to hospitals’ uncompensated care costs and are accurately 
calculated. Under a transition period, CMS will not act on audit 
findings until the 2014 audits are complete; however, findings from 
GAO’s analysis of the 2010 DSH audits show that 44 states will likely 
need to make changes to their DSH payments to come into compliance. 
For example, 

* 41 states made DSH payments to 717 hospitals that exceeded the 
individual hospitals’ uncompensated care costs as calculated by the 
auditors, and; 

* 9 states did not accurately calculate the uncompensated care costs of 
206 hospitals in those states for purposes of making DSH payments. 

The DSH reports can also improve oversight because they provide 
hospital-specific information that CMS can use to better align capped 
federal DSH funds with hospitals’ uncompensated care costs. Federal 
law reduces national DSH funding beginning in fiscal year 2014, and 
requires CMS to implement a method for corresponding reductions in 
each state’s DSH funding. GAO analysis of DSH reports shows that some 
states’ DSH payments are not proportionally targeted to hospitals with 
the highest uncompensated care. 

CMS lacks similar information for overseeing non-DSH payments; 
available information suggests that better reporting and audits of non-
DSH payments could improve CMS’s ability to oversee them. Reporting of 
non-DSH payments that states make to individual hospitals and other 
providers relative to the providers’ Medicaid costs could improve the 
transparency of these payments. Audits could improve accountability by 
providing information on how non-DSH payments are calculated and the 
extent to which payments to individual providers are consistent with 
the Medicaid payment principles of economy and efficiency. GAO 
analysis of the limited hospital-specific information available found 
that 39 states made non-DSH payments to 505 DSH hospitals that, along 
with their regular Medicaid payments, exceeded those hospitals’ total 
costs of providing Medicaid care by a total of about $2.7 billion. 
Although regular and non-DSH Medicaid payments are not required to be 
limited to a provider’s costs of delivering Medicaid services, 
payments that greatly exceed these costs raise questions, for example, 
as to whether payments are being used for Medicaid. As of November 
2012, CMS has no plans to require states to report provider-specific 
non-DSH 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. 

In reviewing a draft of this report, the Department of Health and 
Human Services agreed with GAO about the need to improve reporting and 
oversight of non-DSH payments and noted some efforts under way to do 
so. 

What GAO Recommends: 

Congress should consider requiring the Administrator of CMS to improve 
transparency of and accountability for non-DSH supplemental payments 
by requiring facility-specific payment reporting and annual audits, 
among other steps. 

View [hyperlink, http://www.gao.gov/products/GAO-13-48]. For more 
information, contact Katherine Iritani at (202) 512-7114 or 
iritanik@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

DSH Audits and Reports Provide Information That Can Improve Federal 
Oversight by Illuminating Needed Changes to DSH Payments: 

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: 

Conclusions: 

Matter for Congressional Consideration: 

Agency Comments: 

Appendix I: Scope and Methodology: 

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

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

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

Appendix V: DSH Hospitals' Non-DSH Payments and Medicaid Uncompensated 
Care Costs in 2010 DSH Reports: 

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

Appendix VII: DSH Hospitals with Medicaid Payments in Excess of 
Medicaid Costs in 2010 DSH Reports: 

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

Appendix IX: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Disproportionate Share Hospital (DSH) Audit Requirements 
Established by 2008 Final Rule: 

Table 2: Summary of the 2010 Disproportionate Share Hospital (DSH) 
Audit Findings for 49 States, by DSH Audit Requirement: 

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: 

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): 

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): 

Table 6: Data Elements on Disproportionate Share Hospital (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: 

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: 

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: 

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: 

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: 

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): 

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: 

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: 

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

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

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: 

[End of section] 

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.[Footnote 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.[Footnote 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,[Footnote 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 
increased.[Footnote 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. 
[Footnote 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.[Footnote 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. 
[Footnote 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.[Footnote 8] To fulfill these responsibilities, CMS needs to have 
relevant, reliable, and timely information available for management 
decision making and external reporting purposes.[Footnote 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.[Footnote 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. 
[Footnote 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.[Footnote 
12] In 2008, CMS issued a final rule to implement the 2003 DSH audit 
and report requirement.[Footnote 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,[Footnote 14] 
and non-DSH payments do not have a specified statutory or regulatory 
purpose.[Footnote 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.[Footnote 
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.[Footnote 17] The UPL is the upper 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.[Footnote 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.[Footnote 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.[Footnote 
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. 

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.[Footnote 21] A total of 49 states 
submitted DSH audits and reports covering about 3,000 DSH hospitals. 
[Footnote 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 states' 2010 DSH reports; and conducted interviews with 
CMS officials.[Footnote 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. 

Background: 

The two types of supplemental payments--DSH and non-DSH--had very 
different origins and have different requirements. Federal law 
requires states to make DSH payments to certain eligible hospitals. 
[Footnote 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,[Footnote 25] factors that may fluctuate 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.[Footnote 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.[Footnote 27] (See figure 1 for a description of how 
states make non-DSH supplemental payments in addition to regular 
Medicaid payments under the Medicaid UPL provisions.) 

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): 

[Refer to PDF for image: illustration] 

UPL establishes maximum limit for federal matching funds: 
[Maximum amount qualifying for federal matching funds] 
The UPL establishes the limit on federal matching funds for Medicaid 
services (such as inpatient hospital care). It is based on how much 
Medicare would pay for the same service. 

Regular Medicaid payments may total less than the UPL: 
[Regular Medicaid payments on which federal matching funds are based] 
Regular Medicaid payments made by the states for a particular service 
may be less than the UPL because Medicaid rates are often lower than 
Medicare rates for a comparable service. In that case, federal 
matching funds are based on Medicaid rates. 

Non-DSH supplemental payments can expand federal matching funds up to 
the UPL: 
[Additional amount available under UPL] 
A state can obtain additional federal matching funds up to the UPL for 
non-DSH supplemental payments made to providers. 

Source: GAO. 

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. 

[End of figure] 

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.[Footnote 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 estimates of individual hospitals' DSH payment limits. 
[Footnote 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.[Footnote 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,[Footnote 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.[Footnote 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 
been reviewed through this process.[Footnote 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.[Footnote 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.[Footnote 
35] 

DSH Audits and Reports Provide Information That Can Improve Federal 
Oversight by Illuminating Needed Changes to DSH Payments: 

The DSH audits can help improve oversight of states' DSH payments by 
providing CMS with information on state compliance with federal DSH 
requirements, and information from recent audits shows that most 
states may need to take corrective actions by 2014. The 2010 DSH 
reports provide CMS with information that can be used, for example, to 
better align DSH payments with hospitals' uncompensated care costs as 
required by recent federal law. 

Audits Provide CMS with Enhanced Information for Overseeing States' 
Compliance with Key DSH Requirements and Show That Most States May 
Need to Take Corrective Actions: 

The annual independent audits of state DSH payments provide 
information that CMS can use to improve its oversight of the extent of 
states' compliance with six key DSH requirements (see table 1 for a 
summary of the six DSH audit requirements). According to CMS 
officials, DSH audits provide more transparency about state DSH 
payments than previously existed, which can help the agency to better 
oversee these payments. CMS officials said that in the past the agency 
relied on states' assurances and HHS OIG investigations to ensure that 
DSH payments 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. 

Table 1: Disproportionate Share Hospital (DSH) Audit Requirements 
Established by 2008 Final Rule: 

DSH audit requirement: DSH payments do not exceed hospitals' 
uncompensated care costs; 
Description: DSH payments made to each hospital are limited to the 
uncompensated care costs calculated by the auditors using acceptable 
data sources and methods established by the Centers for Medicare & 
Medicaid Services (CMS) in the 2008 final rule.[A] 

DSH audit requirement: Hospital uncompensated care costs are 
accurately calculated; 
Description: Only the cost of inpatient and outpatient services 
provided to Medicaid and uninsured 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 
uncompensated care costs, which could result in a DSH overpayment.[B] 

DSH audit requirement: Any Medicaid payment surpluses are applied 
against the uncompensated care costs of uninsured patients when 
calculating hospitals' total uncompensated care costs; 
Description: States' procedures for calculating hospitals' 
uncompensated care costs must ensure that all Medicaid surpluses, that 
is, payments that are in excess of Medicaid costs for providing 
hospital services to Medicaid patients, are used to offset the 
uncompensated care costs of uninsured patients.[C] If hospitals did 
not account for all Medicaid payment surpluses, the amount of their 
uncompensated care costs would be inflated, which could result in a 
DSH overpayment. 

DSH audit requirement: Qualified hospitals are allowed to retain their 
DSH payments; 
Description: Hospitals must meet certain federal qualifications to be 
eligible to receive DSH payments, and payments must be retained by the 
hospital and be available to offset uncompensated care costs.[D] In 
addition, auditors must ensure that DSH payments made to each hospital 
are not returned to the state and used for other purposes. 

DSH audit requirement: State has records of all payments and 
expenditures related to Medicaid and uninsured patients; 
Description: States must document and retain all information and 
records of payments and expenditures related to hospital services 
provided to Medicaid and uninsured patients. 

DSH audit requirement: State has documented its methodologies for 
determining hospitals' uncompensated care costs; 
Description: States must have documentation describing their methods 
for calculating hospital-specific uncompensated care costs, including 
the state's definition of incurred costs for 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 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). 

[End of table] 

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.[Footnote 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.[Footnote 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 
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.[Footnote 38] 

* 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. 

Table 2: Summary of the 2010 Disproportionate Share Hospital (DSH) 
Audit Findings for 49 States, by DSH Audit Requirement: 

DSH audit requirements: DSH payments do not exceed hospital 
uncompensated care costs; 
Compliance with requirement: 
Number of hospitals: 2,008; 
As percentage of total hospitals[A]: 68.0%; 
Noncompliance with requirement: 
Number of hospitals: 717; 
As percentage of total hospitals[A]: 24.3%; 
Compliance with requirement could not be determined: 
Number of hospitals: 228; 
As percentage of total hospitals[A]: 7.7%. 

DSH audit requirements: Uncompensated care costs are accurately 
calculated; 
Compliance with requirement: 
Number of hospitals: 1,752; 
As percentage of total hospitals[A]: 59.3%; 
Noncompliance with requirement: 
Number of hospitals: 206[B]; 
As percentage of total hospitals[A]: 7.0%; 
Compliance with requirement could not be determined: 
Number of hospitals: 995; 
As percentage of total hospitals[A]: 33.7%. 

DSH audit requirements: Any Medicaid surplus is applied against 
uninsured uncompensated care costs; 
Compliance with requirement: 
Number of hospitals: 1,851[C]; 
As percentage of total hospitals[A]: 62.7%; 
Noncompliance with requirement: 
Number of hospitals: 18; 
As percentage of total hospitals[A]: 0.6%; 
Compliance with requirement could not be determined: 
Number of hospitals: 1,084; 
As percentage of total hospitals[A]: 36.7%. 

DSH audit requirements: Qualified hospitals are allowed to retain 
their DSH payments; 
Compliance with requirement: 
Number of hospitals: 2,638; 
As percentage of total hospitals[A]: 89.3%; 
Noncompliance with requirement: 
Number of hospitals: 58[D]; 
As percentage of total hospitals[A]: 2.0%; 
Compliance with requirement could not be determined: 
Number of hospitals: 257; 
As percentage of total hospitals[A]: 8.7%. 

DSH audit requirements: State has records of all payments and 
expenditures related to Medicaid and uninsured patients; 
Compliance with requirement: 
Number of hospitals: 2,470; 
As percentage of total hospitals[A]: 83.6%; 
Noncompliance with requirement: 
Number of hospitals: 106; 
As percentage of total hospitals[A]: 3.6%; 
Compliance with requirement could not be determined: 
Number of hospitals: 377; 
As percentage of total hospitals[A]: 12.8%. 

DSH audit requirements: State documented its method for calculating 
uncompensated costs; 
Compliance with requirement: 
Number of hospitals: 2,679; 
As percentage of total hospitals[A]: 90.7%; 
Noncompliance with requirement: 
Number of hospitals: 261; 
As percentage of total hospitals[A]: 8.8%; 
Compliance with requirement could not be determined: 
Number of hospitals: 13; 
As percentage of total hospitals[A]: 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. 

[End of table] 

DSH Reports Provide Information That Can Help CMS Align States' DSH 
Allotments with Uncompensated Care Costs: 

The annual DSH reports provide information CMS can use to better align 
the states' federal DSH allotments with their levels of uncompensated 
care, as required by the Patient Protection and Affordable Care Act 
(PPACA). This act reduces national DSH funding beginning in fiscal 
year 2014 and requires that CMS implement a method for making 
corresponding reductions in state DSH allotments on the basis of how 
states have distributed their DSH payments.[Footnote 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.[Footnote 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 appendix 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,[Footnote 41] the 
hospitals that received the largest share of the state's DSH payments 
did not provide the largest share of the state's total uncompensated 
care.[Footnote 42] (See figure 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.[Footnote 43] (See appendix 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.) 

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: 

[Refer to PDF for image: horizontal bar graph] 

State: Florida[A]; 
Percentage of DSH payments: 77.4%; 
Percentage of uncompensated care: 0.0. 

State: Arizona; 
Percentage of DSH payments: 87.1%; 
Percentage of uncompensated care: 27.0%. 

State: Michigan; 
Percentage of DSH payments: 90.9%; 
Percentage of uncompensated care: 39.5%. 

State: Oregon; 
Percentage of DSH payments: 97%; 
Percentage of uncompensated care: 45.6%. 

State: Utah; 
Percentage of DSH payments: 86.4%; 
Percentage of uncompensated care: 39.4%. 

State: District of Columbia[A]; 
Percentage of DSH payments: 44.8%; 
Percentage of uncompensated care: 0.0. 

State: North Carolina; 
Percentage of DSH payments: 74.7%; 
Percentage of uncompensated care: 37.9%. 

State: Oklahoma; 
Percentage of DSH payments: 76.8%; 
Percentage of uncompensated care: 40.3%. 

State: Washington; 
Percentage of DSH payments: 78.2%; 
Percentage of uncompensated care: 42.0%. 

State: Minnesota; 
Percentage of DSH payments: 70.6%; 
Percentage of uncompensated care: 34.5%. 

State: Nebraska; 
Percentage of DSH payments: 62.3%; 
Percentage of uncompensated care: 27.1%. 

State: Virginia; 
Percentage of DSH payments: 77.7%; 
Percentage of uncompensated care: 43.6%. 

State: Texas; 
Percentage of DSH payments: 66.9%; 
Percentage of uncompensated care: 33.0%. 

State: Kentucky; 
Percentage of DSH payments: 70.1%; 
Percentage of uncompensated care: 39.7%. 

State: Indiana; 
Percentage of DSH payments: 66.8%; 
Percentage of uncompensated care: 46.3%. 

State: Illinois; 
Percentage of DSH payments: 30.4%; 
Percentage of uncompensated care: 11.6%. 

State: West Virginia; 
Percentage of DSH payments: 61%; 
Percentage of uncompensated care: 42.2%. 

State: Kansas; 
Percentage of DSH payments: 65%; 
Percentage of uncompensated care: 46.4%. 

State: Colorado; 
Percentage of DSH payments: 82.6%; 
Percentage of uncompensated care: 64.8%. 

State: New York; 
Percentage of DSH payments: 67.3%; 
Percentage of uncompensated care: 53.1%. 

State: New Hampshire; 
Percentage of DSH payments: 44.8%; 
Percentage of uncompensated care: 32.0%. 

State: New Jersey; 
Percentage of DSH payments: 45.7%; 
Percentage of uncompensated care: 33.0%. 

State: Nevada; 
Percentage of DSH payments: 88.1%; 
Percentage of uncompensated care: 75.8%. 

State: Louisiana; 
Percentage of DSH payments: 60.3%; 
Percentage of uncompensated care: 49.6%. 

State: California; 
Percentage of DSH payments: 44%; 
Percentage of uncompensated care: 34.1%. 

State: Alaska; 
Percentage of DSH payments: 81.2%; 
Percentage of uncompensated care: 71.6%. 

State: Georgia; 
Percentage of DSH payments: 58%; 
Percentage of uncompensated care: 49.8%. 

State: Hawaii; 
Percentage of DSH payments: 61.7%; 
Percentage of uncompensated care: 54.3%. 

State: Vermont; 
Percentage of DSH payments: 55.8%; 
Percentage of uncompensated care: 49.3%. 

State: Ohio; 
Percentage of DSH payments: 47.2%; 
Percentage of uncompensated care: 40.8%. 

State: Maine; 
Percentage of DSH payments: 57.1%; 
Percentage of uncompensated care: 57.1%. 

State: South Carolina; 
Percentage of DSH payments: 40.7%; 
Percentage of uncompensated care: 41.6%. 

State: Connecticut; 
Percentage of DSH payments: 46.5%; 
Percentage of uncompensated care: 49.8%. 

State: New Mexico[B]; 
Percentage of DSH payments: 94.1%; 
Percentage of uncompensated care: 100.0%. 

State: Wyoming; 
Percentage of DSH payments: 47.8%; 
Percentage of uncompensated care: 54.7%. 

State: Maryland; 
Percentage of DSH payments: 29.2%; 
Percentage of uncompensated care: 36.9%. 

State: North Dakota; 
Percentage of DSH payments: 69.9%; 
Percentage of uncompensated care: 78.3%. 

State: Alabama; 
Percentage of DSH payments: 72.5%; 
Percentage of uncompensated care: 81.7%. 

State: Idaho; 
Percentage of DSH payments: 51.7%; 
Percentage of uncompensated care: 61.9%. 

State: Rhode Island; 
Percentage of DSH payments: 46.7%; 
Percentage of uncompensated care: 63.0%. 

State: Montana; 
Percentage of DSH payments: 42.5%; 
Percentage of uncompensated care: 79.5%. 

State: Missouri; 
Percentage of DSH payments: 53.1%; 
Percentage of uncompensated care: 92.5%. 

Source: GAO analysis of DSH 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. 

[End of figure] 

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: 

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

Facility-Specific Payment Information and Independent Audits Do Not 
Exist to the Same Extent for Non-DSH Payments That They Do for DSH 
Payments: 

Information specific to individual facilities is not available for non-
DSH payments to the same extent that it is for DSH payments, since non-
DSH payments are not subject to the same reporting and audit 
requirements. While some limited information about non-DSH payments 
made to DSH hospitals can be found in the annual DSH reports that 
states must submit, information about non-DSH payments made to 
hospitals that are not eligible to receive DSH payments--or other 
health care facilities, such as 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 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,[Footnote 44] but do not 
include facility-specific payments.[Footnote 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: 

Source: Annual DSH reports; 
Information: Supplemental Medicaid payments made, by facility; 
Required for DSH payments: Yes; 
Required for non-DSH payments: Partial[A]. 

Source: Quarterly state expenditure reports; 
Information: Payments made, by category of service; 
Required for DSH payments: Yes; 
Required for non-DSH payments: Partial[B]. 

Source: Quarterly state expenditure reports; 
Information: Payments made, by provider ownership type; 
Required for DSH payments: No; 
Required for non-DSH payments: Yes. 

Source: Annual DSH audits; 
Information: Independent audits of compliance with federal 
requirements; 
Required for DSH payments: Yes; 
Required for non-DSH payments: 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. 

[End of table] 

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 
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.[Footnote 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 would have received under regular Medicaid payment rates 
and were not retained by the providers for Medicaid purposes.[Footnote 
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.[Footnote 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.[Footnote 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.[Footnote 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 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 Suggests That Reports and Audits for Non-DSH 
Supplemental Payments Could Improve CMS's Ability to Oversee These 
Payments: 

The hospital-specific information on non-DSH payments that is 
available from DSH reports illustrates the potential utility of having 
such information for enhancing oversight. Using this information, CMS 
can determine the extent to which non-DSH payments are targeted to a 
small number of providers, are related to those providers' Medicaid 
workload, and resulted in total Medicaid payments (regular Medicaid 
and non-DSH supplemental payments) that exceeded an individual 
provider's costs of providing 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.[Footnote 51] Across the 43 states that reported making 
non-DSH payments in their DSH reports,[Footnote 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 hospitals in each state that received 
the largest non-DSH payments.[Footnote 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 
appendix 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. 
[Footnote 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 costs.[Footnote 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.[Footnote 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 figure 3 and appendix 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.) 

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: 

[Refer to PDF for image: interactive graphic: illustrated U.S. map] 

See appendix VII for text version. 

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. 

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. 

[End of figure] 

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.[Footnote 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.[Footnote 58] States' payment methods and payment 
arrangements can be complex and challenging to assess, and doing so 
can require significant time and resources. 

Conclusions: 

Medicaid is a large and growing program and is vital to tens of 
millions of 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 
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. 

Matter for Congressional Consideration: 

To improve transparency of and accountability for Medicaid non-DSH 
supplemental payments, we suggest that Congress consider requiring the 
Administrator of CMS to (1) improve state reporting of non-DSH 
supplemental payments, including requiring annual reporting of 
payments 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. 

Agency Comments: 

We provided a draft of this report to HHS for comment. In its written 
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 [hyperlink, http://www.gao.gov]. 

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. 

Signed by: 

Katherine M. Iritani: 
Director, Health Care: 

[End of section] 

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.[Footnote 59] 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. 

Analysis of DSH Audits and Reports for Oversight of DSH Payments: 

To determine how the information collected from DSH audits facilitates 
CMS's oversight of DSH payments, we analyzed the DSH audits for the 49 
states that submitted them to determine the extent of states' 
compliance with the six audit requirements established by the 2008 
final rule: (1) DSH payments do not exceed hospitals' uncompensated 
care 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. 

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.[Footnote 60] Of these states, 
7 states did not report the necessary data to analyze DSH payments and 
uncompensated care.[Footnote 61] 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. 
[Footnote 62] 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. 

Analysis of DSH Reports for Oversight of Non-DSH Supplemental Payments: 

To determine the extent to which similar information exists to 
facilitate CMS's oversight of non-DSH supplemental payments, we 
analyzed the information states submitted in their 2010 DSH reports 
for DSH payments made in 2007, which includes hospital-specific 
information on non-DSH payments made to DSH hospitals. Of the 49 
states that submitted a 2010 DSH report, 6 states were excluded from 
our analysis of non-DSH 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.[Footnote 63] 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 payment.[Footnote 
64] 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. 

[End of section] 

Appendix II: Extent of Compliance with DSH 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.[Footnote 65] In 2008, the Centers for 
Medicare & Medicaid Services (CMS) issued a final rule to implement 
the 2003 DSH audit and report requirement.[Footnote 66] 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, 

* 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. 

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): 

State: Alabama; 
Total number of hospitals: 98; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 49; 
Not met: 49; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 15; 
Not met: 6[A]; 
Could not be verified: 77; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 0; 
Not met: 0; 
Could not be verified: 98[B]. 

State: Alaska; 
Total number of hospitals: 4; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 4; 
Not met: 0; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 3; 
Not met: 0; 
Could not be verified: 1; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 4; 
Not met: 0; 
Could not be verified: 0. 

State: Arizona; 
Total number of hospitals: 40; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 40; 
Not met: 0; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 40; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 40; 
Not met: 0; 
Could not be verified: 0. 

State: Arkansas; 
Total number of hospitals: 4; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 3; 
Not met: 1; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 4; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 0; 
Not met: 0; 
Could not be verified: 4[B]. 

State: California; 
Total number of hospitals: 141; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 124; 
Not met: 17; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 1; 
Not met: 0; 
Could not be verified: 140; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 0; 
Not met: 0; 
Could not be verified: 141. 

State: Colorado; 
Total number of hospitals: 47; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 0; 
Not met: 0; 
Could not be verified: 47; 
Hospital uncompensated care costs are accurately calculated: 
Met: 0; 
Not met: 0; 
Could not be verified: 47; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 0; 
Not met: 0; 
Could not be verified: 47. 

State: Connecticut; 
Total number of hospitals: 35; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 0; 
Not met: 0; 
Could not be verified: 35; 
Hospital uncompensated care costs are accurately calculated: 
Met: 0; 
Not met: 0; 
Could not be verified: 35; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 0; 
Not met: 0; 
Could not be verified: 35. 

State: Delaware; 
Total number of hospitals: 1; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 1; 
Not met: 0; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 1; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 1; 
Not met: 0; 
Could not be verified: 0. 

State: District of Columbia; 
Total number of hospitals: 10; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 5; 
Not met: 1; 
Could not be verified: 4; 
Hospital uncompensated care costs are accurately calculated: 
Met: 6; 
Not met: 0; 
Could not be verified: 4; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 6; 
Not met: 0; 
Could not be verified: 4. 

State: Florida; 
Total number of hospitals: 63; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 44; 
Not met: 19; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 63; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 63; 
Not met: 0; 
Could not be verified: 0. 

State: Georgia; 
Total number of hospitals: 109; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 83; 
Not met: 26; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 109; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 109; 
Not met: 0; 
Could not be verified: 0. 

State: Hawaii; 
Total number of hospitals: 15; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 14; 
Not met: 1; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 15; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 15; 
Not met: 0; 
Could not be verified: 0. 

State: Idaho; 
Total number of hospitals: 35; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 30; 
Not met: 5; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 35; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 35; 
Not met: 0; 
Could not be verified: 0. 

State: Illinois; 
Total number of hospitals: 42; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 9; 
Not met: 32; 
Could not be verified: 1; 
Hospital uncompensated care costs are accurately calculated: 
Met: 41; 
Not met: 0; 
Could not be verified: 1; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 41; 
Not met: 0; 
Could not be verified: 1. 

State: Indiana; 
Total number of hospitals: 66; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 51; 
Not met: 15; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 66; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 66; 
Not met: 0; 
Could not be verified: 0. 

State: Iowa; 
Total number of hospitals: 12; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 9; 
Not met: 3; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 0; 
Not met: 0; 
Could not be verified: 12; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 0; 
Not met: 0; 
Could not be verified: 12. 

State: Kansas; 
Total number of hospitals: 45; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 23; 
Not met: 22; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 42; 
Not met: 0; 
Could not be verified: 3; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 45; 
Not met: 0; 
Could not be verified: 0. 

State: Kentucky; 
Total number of hospitals: 108; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 82; 
Not met: 26; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 105; 
Not met: 0; 
Could not be verified: 3; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 108; 
Not met: 0; 
Could not be verified: 0. 

State: Louisiana; 
Total number of hospitals: 118; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 55; 
Not met: 63; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 116; 
Not met: 0; 
Could not be verified: 2; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 118; 
Not met: 0; 
Could not be verified: 0. 

State: Maine; 
Total number of hospitals: 2; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 2; 
Not met: 0; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 2; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 2; 
Not met: 0; 
Could not be verified: 0. 

State: Maryland; 
Total number of hospitals: 20; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 14; 
Not met: 6; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 20; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 20; 
Not met: 0; 
Could not be verified: 0. 

State: Michigan; 
Total number of hospitals: 130; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 102; 
Not met: 28; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 18; 
Not met: 27[A]; 
Could not be verified: 85; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 0; 
Not met: 0; 
Could not be verified: 130[B]. 

State: Minnesota; 
Total number of hospitals: 106; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 39; 
Not met: 0; 
Could not be verified: 67; 
Hospital uncompensated care costs are accurately calculated: 
Met: 0; 
Not met: 0; 
Could not be verified: 106; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 38; 
Not met: 0; 
Could not be verified: 68. 

State: Mississippi; 
Total number of hospitals: 58; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 29; 
Not met: 29; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 0; 
Not met: 12[A]; 
Could not be verified: 46; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 0; 
Not met: 0; 
Could not be verified: 58[B]. 

State: Missouri; 
Total number of hospitals: 144; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 30; 
Not met: 114; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 144; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 144; 
Not met: 0; 
Could not be verified: 0. 

State: Montana; 
Total number of hospitals: 50; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 25; 
Not met: 25; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 41; 
Not met: 0; 
Could not be verified: 9; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 28; 
Not met: 0; 
Could not be verified: 22. 

State: Nebraska; 
Total number of hospitals: 28; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 24; 
Not met: 4; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 26; 
Not met: 0; 
Could not be verified: 2; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 28; 
Not met: 0; 
Could not be verified: 0. 

State: Nevada; 
Total number of hospitals: 12; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 9; 
Not met: 3[C]; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 11; 
Not met: 0; 
Could not be verified: 1; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 12; 
Not met: 0; 
Could not be verified: 0. 

State: New Hampshire; 
Total number of hospitals: 29; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 11; 
Not met: 15[C]; 
Could not be verified: 3; 
Hospital uncompensated care costs are accurately calculated: 
Met: 29; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 29; 
Not met: 0; 
Could not be verified: 0. 

State: New Jersey; 
Total number of hospitals: 88; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 72; 
Not met: 16; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 88; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 88; 
Not met: 0; 
Could not be verified: 0. 

State: New Mexico; 
Total number of hospitals: 23; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 9; 
Not met: 14; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 23; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 23; 
Not met: 0; 
Could not be verified: 0. 

State: New York; 
Total number of hospitals: 222; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 167; 
Not met: 32; 
Could not be verified: 23; 
Hospital uncompensated care costs are accurately calculated: 
Met: 171; 
Not met: 28; 
Could not be verified: 23; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 222; 
Not met: 0; 
Could not be verified: 0. 

State: North Carolina; 
Total number of hospitals: 110; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 103; 
Not met: 7; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 110; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 110; 
Not met: 0; 
Could not be verified: 0. 

State: North Dakota; 
Total number of hospitals: 7; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 4; 
Not met: 3; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 4; 
Not met: 0; 
Could not be verified: 3; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 7; 
Not met: 0; 
Could not be verified: 0. 

State: Ohio; 
Total number of hospitals: 176; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 168; 
Not met: 8; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 176; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 176; 
Not met: 0; 
Could not be verified: 0. 

State: Oklahoma; 
Total number of hospitals: 65; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 50; 
Not met: 6; 
Could not be verified: 9; 
Hospital uncompensated care costs are accurately calculated: 
Met: 0; 
Not met: 65; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 49; 
Not met: 3; 
Could not be verified: 13. 

State: Oregon; 
Total number of hospitals: 9; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 8; 
Not met: 1; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 9; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 9; 
Not met: 0; 
Could not be verified: 0. 

State: Pennsylvania; 
Total number of hospitals: 176; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 164; 
Not met: 12; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 0; 
Not met: 10; 
Could not be verified: 166; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 0; 
Not met: 1; 
Could not be verified: 175. 

State: Rhode Island; 
Total number of hospitals: 14; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 10; 
Not met: 4; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 14; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 14; 
Not met: 0; 
Could not be verified: 0. 

State: South Carolina; 
Total number of hospitals: 61; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 40; 
Not met: 19[C]; 
Could not be verified: 2; 
Hospital uncompensated care costs are accurately calculated: 
Met: 58; 
Not met: 0; 
Could not be verified: 3; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 58; 
Not met: 0; 
Could not be verified: 3. 

State: South Dakota; 
Total number of hospitals: 20; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 16; 
Not met: 4[C]; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 0; 
Not met: 20; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 0; 
Not met: 0; 
Could not be verified: 20. 

State: Texas; 
Total number of hospitals: 181; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 125; 
Not met: 39[C]; 
Could not be verified: 17; 
Hospital uncompensated care costs are accurately calculated: 
Met: 0; 
Not met: 22[A]; 
Could not be verified: 159; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 0; 
Not met: 0; 
Could not be verified: 181[B]. 

State: Utah; 
Total number of hospitals: 34; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 21; 
Not met: 13; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 34; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 34; 
Not met: 0; 
Could not be verified: 0. 

State: Vermont; 
Total number of hospitals: 14; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 0; 
Not met: 1[D]; 
Could not be verified: 13; 
Hospital uncompensated care costs are accurately calculated: 
Met: 0; 
Not met: 0; 
Could not be verified: 14; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 0; 
Not met: 14; 
Could not be verified: 0. 

State: Virginia; 
Total number of hospitals: 21; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 19; 
Not met: 2; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 21; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 21; 
Not met: 0; 
Could not be verified: 0. 

State: Washington; 
Total number of hospitals: 72; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 52; 
Not met: 13[C]; 
Could not be verified: 7; 
Hospital uncompensated care costs are accurately calculated: 
Met: 3; 
Not met: 16[A]; 
Could not be verified: 53; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 0; 
Not met: 0; 
Could not be verified: 72[B]. 

State: West Virginia; 
Total number of hospitals: 57; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 40; 
Not met: 17; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 57; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 57; 
Not met: 0; 
Could not be verified: 0. 

State: Wisconsin; 
Total number of hospitals: 26; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 26; 
Not met: 0; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 26; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 26; 
Not met: 0; 
Could not be verified: 0. 

State: Wyoming; 
Total number of hospitals: 5; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 3; 
Not met: 2; 
Could not be verified: 0; 
Hospital uncompensated care costs are accurately calculated: 
Met: 5; 
Not met: 0; 
Could not be verified: 0; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 5; 
Not met: 0; 
Could not be verified: 0. 

State: Total; 
Total number of hospitals: 2,953[D]; 
DSH payments do not exceed hospital uncompensated care costs: 
Met: 2,008; 
Not met: 717; 
Could not be verified: 228; 
Hospital uncompensated care costs are accurately calculated: 
Met: 1,752; 
Not met: 206; 
Could not be verified: 995; 
Any Medicaid surplus is applied against uninsured uncompensated care 
costs: 
Met: 1,851; 
Not met: 18; 
Could not be verified: 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. 

[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. 

[End of table] 

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: Alabama; 
Total number of hospitals: 98; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 66; 
Not met: 3[A]; 
Could not be verified: 29; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 64; 
Not met: 34; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 98; 
Not met: 0; 
Could not be verified: 0. 

State: Alaska; 
Total number of hospitals: 4; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 4; 
Not met: 0; 
Could not be verified: 0;
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 4; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 4; 
Not met: 0; 
Could not be verified: 0. 

State: Arizona; 
Total number of hospitals: 40; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 40; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 40; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 40; 
Not met: 0; 
Could not be verified: 0. 

State: Arkansas; 
Total number of hospitals: 4; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 4; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 4; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 4; 
Not met: 0; 
Could not be verified: 0. 

State: California; 
Total number of hospitals: 141; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 141; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 141; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 141; 
Not met: 0; 
Could not be verified: 0. 

State: Colorado; 
Total number of hospitals: 47; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 0; 
Not met: 11[A]; 
Could not be verified: 36; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 0; 
Not met: 0; 
Could not be verified: 47; 
State documented its method for calculating uncompensated costs: 
Met: 47; 
Not met: 0; 
Could not be verified: 0. 

State: Connecticut; 
Total number of hospitals: 35; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 0; 
Not met: 0; 
Could not be verified: 35; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 0; 
Not met: 0; 
Could not be verified: 35; 
State documented its method for calculating uncompensated costs: 
Met: 35; 
Not met: 0; 
Could not be verified: 0. 

State: Delaware; 
Total number of hospitals: 1; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 1; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 1; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 1; 
Not met: 0; 
Could not be verified: 0. 

State: District of Columbia; 
Total number of hospitals: 10; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 6; 
Not met: 0; 
Could not be verified: 4; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 10; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 10; 
Not met: 0; 
Could not be verified: 0. 

State: Florida; 
Total number of hospitals: 63; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 63; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 63; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 63; 
Not met: 0; 
Could not be verified: 0. 

State: Georgia; 
Total number of hospitals: 109; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 109; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 109; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 109; 
Not met: 0; 
Could not be verified: 0. 

State: Hawaii; 
Total number of hospitals: 15; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 15; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 15; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 15; 
Not met: 0; 
Could not be verified: 0. 

State: Idaho; 
Total number of hospitals: 35; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 32; 
Not met: 0; 
Could not be verified: 3; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 35; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 35; 
Not met: 0; 
Could not be verified: 0. 

State: Illinois; 
Total number of hospitals: 42; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 42; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 41; 
Not met: 0; 
Could not be verified: 1; 
State documented its method for calculating uncompensated costs: 
Met: 41; 
Not met: 0; 
Could not be verified: 1. 

State: Indiana; 
Total number of hospitals: 66; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 66; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 66; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 66; 
Not met: 0; 
Could not be verified: 0. 

State: Iowa; 
Total number of hospitals: 12; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 0; 
Not met: 0; 
Could not be verified: 12; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 0; 
Not met: 0; 
Could not be verified: 12; 
State documented its method for calculating uncompensated costs: 
Met: 0; 
Not met: 0; 
Could not be verified: 12. 

State: Kansas; 
Total number of hospitals: 45; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 45; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 45; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 45; 
Not met: 0; 
Could not be verified: 0. 

State: Kentucky; 
Total number of hospitals: 108; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 108; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 108; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 108; 
Not met: 0; 
Could not be verified: 0. 

State: Louisiana; 
Total number of hospitals: 118; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 118; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 118; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 118; 
Not met: 0; 
Could not be verified: 0. 

State: Maine; 
Total number of hospitals: 2; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 2; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 0; 
Not met: 2; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 2; 
Not met: 0; 
Could not be verified: 0. 

State: Maryland; 
Total number of hospitals: 20; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 20; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 20; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 20; 
Not met: 0; 
Could not be verified: 0. 

State: Michigan; 
Total number of hospitals: 130; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 126; 
Not met: 2[A]; 
Could not be verified: 2; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 130; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 130; 
Not met: 0; 
Could not be verified: 0. 

State: Minnesota; 
Total number of hospitals: 106; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 38; 
Not met: 0; 
Could not be verified: 68; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 0; 
Not met: 45; 
Could not be verified: 61; 
State documented its method for calculating uncompensated costs: 
Met: 101; 
Not met: 5; 
Could not be verified: 0. 

State: Mississippi; 
Total number of hospitals: 58; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 58; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 56; 
Not met: 2; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 58; 
Not met: 0; 
Could not be verified: 0. 

State: Missouri; 
Total number of hospitals: 144; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 144; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 144; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 144; 
Not met: 0; 
Could not be verified: 0. 

State: Montana; 
Total number of hospitals: 50; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 39; 
Not met: 0; 
Could not be verified: 11; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 50; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 50; 
Not met: 0; 
Could not be verified: 0. 

State: Nebraska; 
Total number of hospitals: 28; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 28; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 28; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 28; 
Not met: 0; 
Could not be verified: 0. 

State: Nevada; 
Total number of hospitals: 12; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 11; 
Not met: 1[A]; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 12; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 12; 
Not met: 0; 
Could not be verified: 0. 

State: New Hampshire; 
Total number of hospitals: 29; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 24; 
Not met: 2[A]; 
Could not be verified: 3; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 29; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 29; 
Not met: 0; 
Could not be verified: 0. 

State: New Jersey; 
Total number of hospitals: 88; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 70; 
Not met: 18; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 88; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 88; 
Not met: 0; 
Could not be verified: 0. 

State: New Mexico; 
Total number of hospitals: 23; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 23; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 23; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 23; 
Not met: 0; 
Could not be verified: 0. 

State: New York; 
Total number of hospitals: 222; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 194; 
Not met: 5[A]; 
Could not be verified: 23; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 100; 
Not met: 23; 
Could not be verified: 99; 
State documented its method for calculating uncompensated costs: 
Met: 0; 
Not met: 222; 
Could not be verified: 0. 

State: North Carolina; 
Total number of hospitals: 110; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 110; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 110; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 110; 
Not met: 0; 
Could not be verified: 0. 

State: North Dakota; 
Total number of hospitals: 7; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 5; 
Not met: 0; 
Could not be verified: 2; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 7; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 7; 
Not met: 0; 
Could not be verified: 0. 

State: Ohio; 
Total number of hospitals: 176; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 176; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 176; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 176; 
Not met: 0; 
Could not be verified: 0. 

State: Oklahoma; 
Total number of hospitals: 65; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 52; 
Not met: 4[A]; 
Could not be verified: 9; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 0; 
Not met: 0; 
Could not be verified: 65; 
State documented its method for calculating uncompensated costs: 
Met: 65; 
Not met: 0; 
Could not be verified: 0. 

State: Oregon; 
Total number of hospitals: 9; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 7; 
Not met: 1[A]; 
Could not be verified: 1; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 9; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 9; 
Not met: 0; 
Could not be verified: 0. 

State: Pennsylvania; 
Total number of hospitals: 176; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 176; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 176; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 176; 
Not met: 0; 
Could not be verified: 0. 

State: Rhode Island; 
Total number of hospitals: 14; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 14; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 14; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 14; 
Not met: 0; 
Could not be verified: 0. 

State: South Carolina; 
Total number of hospitals: 61; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 58; 
Not met: 1[A]; 
Could not be verified: 2; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 61; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 61; 
Not met: 0; 
Could not be verified: 0. 

State: South Dakota; 
Total number of hospitals: 20; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 14; 
Not met: 4[A]; 
Could not be verified: 2; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 0; 
Not met: 0; 
Could not be verified: 20; 
State documented its method for calculating uncompensated costs: 
Met: 0; 
Not met: 20; 
Could not be verified: 0. 

State: Texas; 
Total number of hospitals: 181; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 170; 
Not met: 3[A]; 
Could not be verified: 8; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 164; 
Not met: 0; 
Could not be verified: 17; 
State documented its method for calculating uncompensated costs: 
Met: 181; 
Not met: 0; 
Could not be verified: 0. 

State: Utah; 
Total number of hospitals: 34; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 34; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 34; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 34; 
Not met: 0; 
Could not be verified: 0. 

State: Vermont; 
Total number of hospitals: 14; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 13; 
Not met: 1[A]; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 0; 
Not met: 0; 
Could not be verified: 14; 
State documented its method for calculating uncompensated costs: 
Met: 0; 
Not met: 14; 
Could not be verified: 0. 

State: Virginia; 
Total number of hospitals: 21; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 20; 
Not met: 1[A]; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 21; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 21; 
Not met: 0; 
Could not be verified: 0. 

State: Washington; 
Total number of hospitals: 72; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 64; 
Not met: 1[A]; 
Could not be verified: 7; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 66; 
Not met: 0; 
Could not be verified: 6; 
State documented its method for calculating uncompensated costs: 
Met: 72; 
Not met: 0; 
Could not be verified: 0. 

State: West Virginia; 
Total number of hospitals: 57; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 57; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 57; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 57; 
Not met: 0; 
Could not be verified: 0. 

State: Wisconsin; 
Total number of hospitals: 26; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 26; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 26; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 26; 
Not met: 0; 
Could not be verified: 0. 

State: Wyoming; 
Total number of hospitals: 5; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 5; 
Not met: 0; 
Could not be verified: 0; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 5; 
Not met: 0; 
Could not be verified: 0; 
State documented its method for calculating uncompensated costs: 
Met: 5; 
Not met: 0; 
Could not be verified: 0. 

State: Total; 
Total number of hospitals: 2,953[B]; 
Qualified hospitals are allowed to retain their DSH payments: 
Met: 2,638; 
Not met: 58[C]; 
Could not be verified: 257; 
State has records of all payments and expenditures related to Medicaid 
and uninsured patients: 
Met: 2,470; 
Not met: 106; 
Could not be verified: 377; 
State documented its method for calculating uncompensated costs: 
Met: 2,679; 
Not met: 261; 
Could not be verified: 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. 

[End of table] 

[End of section] 

Appendix III: Overview of the 17 Data 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. 
[Footnote 67] 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.[Footnote 68] 

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

Data element: 1. Hospital name; 
Description: 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. 

Data element: 2. State-estimated hospital-specific DSH limit; 
Description: 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. 

Data element: 3. Medicaid inpatient utilization rate; 
Description: 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. 

Data element: 4. Low-income utilization rate; 
Description: 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. 

Data element: 5. State-defined DSH qualification criteria; 
Description: 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. 

Data element: 6. Inpatient and outpatient Medicaid fee-for-service 
rate payments; 
Description: The total annual amount of Medicaid fee-for-service 
payments made to the hospital for inpatient and outpatient services 
furnished to Medicaid-eligible individuals, but excluding DSH payments 
or non-DSH supplemental payments. 

Data element: 7. Inpatient and outpatient Medicaid managed care 
organization payments; 
Description: The total annual amount paid to the hospital by Medicaid 
managed care organizations for inpatient hospital and outpatient 
hospital services furnished to Medicaid-eligible individuals. 

Data element: 8. Non-DSH supplemental inpatient and outpatient 
Medicaid payments; 
Description: The total annual amount of non-DSH supplemental 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. 

Data element: 9. Total Medicaid inpatient and outpatient payments; 
Description: 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). 

Data element: 10. Total cost of care--Medicaid inpatient and 
outpatient services; 
Description: The total annual costs incurred by each hospital for 
providing inpatient and outpatient hospital services to Medicaid-
eligible individuals. 

Data element: 11. Total Medicaid uncompensated care cost; 
Description: 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. 

Data element: 12. Uninsured inpatient and outpatient payments; 
Description: 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. 

Data element: 13. Total applicable Section 1011 payments[A]; 
Description: 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. 

Data element: 14. Total inpatient and outpatient uninsured cost of 
care; 
Description: The total costs incurred for furnishing inpatient and 
outpatient hospital services to individuals with no source of third-
party coverage for the hospital services they receive. 

Data element: 15. Total inpatient and outpatient uninsured 
uncompensated cost of care; 
Description: Total annual amount of uncompensated inpatient and 
outpatient care for 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. 

Data element: 16. Total annual uncompensated care cost; 
Description: 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). 

Data element: 17. Total DSH payments received; 
Description: 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). 

[End of table] 

[End of section] 

Appendix IV: Percentage of DSH Payments 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. 

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: 

State: Alabama; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 6; 
Percentage of DSH payments: $72.5%; 
Percentage of uncompensated care[A]: 81.7%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 48; 
Percentage of DSH payments: $27.5%; 
Percentage of uncompensated care[A]: 18.3%. 

State: Alaska; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 1; 
Percentage of DSH payments: $81.2%; 
Percentage of uncompensated care[A]: 71.6%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 1; 
Percentage of DSH payments: $18.8%; 
Percentage of uncompensated care[A]: 28.4%. 

State: Arizona; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 4; 
Percentage of DSH payments: $87.1%; 
Percentage of uncompensated care[A]: 27.1%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 33; 
Percentage of DSH payments: $12.9%; 
Percentage of uncompensated care[A]: 72.9%. 

State: California[B]; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 9; 
Percentage of DSH payments: $44.0%; 
Percentage of uncompensated care[A]: 34.1%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 77; 
Percentage of DSH payments: $56.0%; 
Percentage of uncompensated care[A]: 65.9%. 

State: Colorado; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 2; 
Percentage of DSH payments: $82.6%; 
Percentage of uncompensated care[A]: 64.8%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 10; 
Percentage of DSH payments: $17.4%; 
Percentage of uncompensated care[A]: 35.2%. 

State: Connecticut; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 4; 
Percentage of DSH payments: $46.5%; 
Percentage of uncompensated care[A]: 49.8%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 31; 
Percentage of DSH payments: $53.5%; 
Percentage of uncompensated care[A]: 50.2%. 

State: District of Columbia; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 1; 
Percentage of DSH payments: $44.8%; 
Percentage of uncompensated care[A]: (2.5%)[C]; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 4; 
Percentage of DSH payments: $55.2%; 
Percentage of uncompensated care[A]: 102.5%[C]. 

State: Florida; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 6; 
Percentage of DSH payments: $77.4%; 
Percentage of uncompensated care[A]: (2.6%)[C]; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 48; 
Percentage of DSH payments: $22.6%; 
Percentage of uncompensated care[A]: 102.6%[C]. 

State: Georgia; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 10; 
Percentage of DSH payments: $58.0%; 
Percentage of uncompensated care[A]: 49.8%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 88; 
Percentage of DSH payments: $42.0%; 
Percentage of uncompensated care[A]: 50.2%. 

State: Hawaii; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 1; 
Percentage of DSH payments: $61.7%; 
Percentage of uncompensated care[A]: 54.3%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 8; 
Percentage of DSH payments: $38.3%; 
Percentage of uncompensated care[A]: 45.7%. 

State: Idaho; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 3; 
Percentage of DSH payments: $51.7%; 
Percentage of uncompensated care[A]: 61.9%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 27; 
Percentage of DSH payments: $48.3%; 
Percentage of uncompensated care[A]: 38.1%. 

State: Illinois; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 1; 
Percentage of DSH payments: $30.4%; 
Percentage of uncompensated care[A]: 11.6%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 5; 
Percentage of DSH payments: $69.6%; 
Percentage of uncompensated care[A]: 88.4%. 

State: Indiana; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 6; 
Percentage of DSH payments: $66.8%; 
Percentage of uncompensated care[A]: 46.3%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 50; 
Percentage of DSH payments: $33.2%; 
Percentage of uncompensated care[A]: 53.7%. 

State: Kansas; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 3; 
Percentage of DSH payments: $65.0%; 
Percentage of uncompensated care[A]: 46.4%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 25; 
Percentage of DSH payments: $35.0%; 
Percentage of uncompensated care[A]: 53.6%. 

State: Kentucky; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 7; 
Percentage of DSH payments: $70.1%; 
Percentage of uncompensated care[A]: 39.7%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 57; 
Percentage of DSH payments: $29.9%; 
Percentage of uncompensated care[A]: 60.3%. 

State: Louisiana; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 9; 
Percentage of DSH payments: $60.3%; 
Percentage of uncompensated care[A]: 49.6%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 77; 
Percentage of DSH payments: $39.7%; 
Percentage of uncompensated care[A]: 50.4%. 

State: Maine; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 1; 
Percentage of DSH payments: $57.1%; 
Percentage of uncompensated care[A]: 57.1%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 1; 
Percentage of DSH payments: $42.9%; 
Percentage of uncompensated care[A]: 42.9%. 

State: Maryland; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 2; 
Percentage of DSH payments: $29.2%; 
Percentage of uncompensated care[A]: 36.9%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 16; 
Percentage of DSH payments: $70.8%; 
Percentage of uncompensated care[A]: 63.1%. 

State: Michigan; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 1; 
Percentage of DSH payments: $90.9%; 
Percentage of uncompensated care[A]: 39.5%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 1; 
Percentage of DSH payments: $9.1%; 
Percentage of uncompensated care[A]: 60.5%. 

State: Minnesota; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 5; 
Percentage of DSH payments: $70.6%; 
Percentage of uncompensated care[A]: 34.5%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 40; 
Percentage of DSH payments: $29.4%; 
Percentage of uncompensated care[A]: 65.5%. 

State: Missouri; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 10; 
Percentage of DSH payments: $53.1%; 
Percentage of uncompensated care[A]: 92.5%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 90; 
Percentage of DSH payments: $46.9%; 
Percentage of uncompensated care[A]: 7.5%. 

State: Montana; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 3; 
Percentage of DSH payments: $42.5%; 
Percentage of uncompensated care[A]: 79.5%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 20; 
Percentage of DSH payments: $57.5%; 
Percentage of uncompensated care[A]: 20.5%. 

State: Nebraska; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 2; 
Percentage of DSH payments: $62.3%; 
Percentage of uncompensated care[A]: 27.1%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 18; 
Percentage of DSH payments: $37.7%; 
Percentage of uncompensated care[A]: 72.9%. 

State: Nevada; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 1; 
Percentage of DSH payments: $88.1%; 
Percentage of uncompensated care[A]: 75.8%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 9; 
Percentage of DSH payments: $11.9%; 
Percentage of uncompensated care[A]: 24.2%. 

State: New Hampshire; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 3; 
Percentage of DSH payments: $44.8%; 
Percentage of uncompensated care[A]: 32.0%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 22; 
Percentage of DSH payments: $55.2%; 
Percentage of uncompensated care[A]: 68.0%. 

State: New Jersey; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 5; 
Percentage of DSH payments: $45.7%; 
Percentage of uncompensated care[A]: 33.0%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 45; 
Percentage of DSH payments: $54.3%; 
Percentage of uncompensated care[A]: 67.0%. 

State: New Mexico; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 1; 
Percentage of DSH payments: $94.1%; 
Percentage of uncompensated care[A]: 128.5%[D]; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 8; 
Percentage of DSH payments: $5.9%; 
Percentage of uncompensated care[A]: (28.5%)[D]. 

State: New York; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 19; 
Percentage of DSH payments: $67.3%; 
Percentage of uncompensated care[A]: 53.1%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 168; 
Percentage of DSH payments: $32.7%; 
Percentage of uncompensated care[A]: 46.9%. 

State: North Carolina; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 10; 
Percentage of DSH payments: $74.7%; 
Percentage of uncompensated care[A]: 37.9%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 87; 
Percentage of DSH payments: $25.3%; 
Percentage of uncompensated care[A]: 62.1%. 

State: North Dakota; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 1; 
Percentage of DSH payments: $69.9%; 
Percentage of uncompensated care[A]: 78.3%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 2; 
Percentage of DSH payments: $30.1%; 
Percentage of uncompensated care[A]: 21.7%. 

State: Ohio; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 18; 
Percentage of DSH payments: $47.2%; 
Percentage of uncompensated care[A]: 40.8%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 157; 
Percentage of DSH payments: $52.8%; 
Percentage of uncompensated care[A]: 59.2%. 

State: Oklahoma; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 5; 
Percentage of DSH payments: $76.8%; 
Percentage of uncompensated care[A]: 40.3%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 43; 
Percentage of DSH payments: $23.2%; 
Percentage of uncompensated care[A]: 59.7%. 

State: Oregon; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 1; 
Percentage of DSH payments: $97.0%; 
Percentage of uncompensated care[A]: 45.6%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 5; 
Percentage of DSH payments: $3.0%; 
Percentage of uncompensated care[A]: 54.4%. 

State: Rhode Island; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 2; 
Percentage of DSH payments: $46.7%; 
Percentage of uncompensated care[A]: 63.0%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 10; 
Percentage of DSH payments: $53.3%; 
Percentage of uncompensated care[A]: 37.0%. 

State: South Carolina; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 6; 
Percentage of DSH payments: $40.7%; 
Percentage of uncompensated care[A]: 41.6%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 52; 
Percentage of DSH payments: $59.3%; 
Percentage of uncompensated care[A]: 58.4%. 

State: Texas; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 15; 
Percentage of DSH payments: $66.9%; 
Percentage of uncompensated care[A]: 33.0%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 130; 
Percentage of DSH payments: $33.1%; 
Percentage of uncompensated care[A]: 67.0%. 

State: Utah; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 4; 
Percentage of DSH payments: $86.4%; 
Percentage of uncompensated care[A]: 39.4%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 27; 
Percentage of DSH payments: $13.6%; 
Percentage of uncompensated care[A]: 60.6%. 

State: Vermont; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 2; 
Percentage of DSH payments: $55.8%; 
Percentage of uncompensated care[A]: 49.3%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 12; 
Percentage of DSH payments: $44.2%; 
Percentage of uncompensated care[A]: 50.7%. 

State: Virginia; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 2; 
Percentage of DSH payments: $77.7%; 
Percentage of uncompensated care[A]: 43.6%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 12; 
Percentage of DSH payments: $22.3%; 
Percentage of uncompensated care[A]: 56.4%. 

State: Washington; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 7; 
Percentage of DSH payments: $78.2%; 
Percentage of uncompensated care[A]: 42.0%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 56; 
Percentage of DSH payments: $21.8%; 
Percentage of uncompensated care[A]: 58.0%. 

State: West Virginia; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 6; 
Percentage of DSH payments: $61.0%; 
Percentage of uncompensated care[A]: 42.2%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 49; 
Percentage of DSH payments: $39.0%; 
Percentage of uncompensated care[A]: 57.8%. 

State: Wyoming; 
The 10 percent of DSH hospitals with largest DSH payments: 
Number of hospitals: 1; 
Percentage of DSH payments: $47.8%; 
Percentage of uncompensated care[A]: 54.7%; 
The 90 percent of DSH hospitals with smallest DSH payments: 
Number of hospitals: 2; 
Percentage of DSH payments: $52.2%; 
Percentage of uncompensated care[A]: 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. 

[End of table] 

[End of section] 

Appendix V: DSH Hospitals' Non-DSH 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. 

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: 

State: Alabama; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 7; 
Percentage of non-DSH payments received[A]: 78.8%; 
Percentage of Medicaid uncompensated costs[A]: 46.1%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 57; 
Percentage of non-DSH payments received[A]: 21.2%; 
Percentage of Medicaid uncompensated costs[A]: 53.9%. 

State: Alaska; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 1; 
Percentage of non-DSH payments received[A]: 100.0%; 
Percentage of Medicaid uncompensated costs[A]: 9.2%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 3; 
Percentage of non-DSH payments received[A]: 0.0%; 
Percentage of Medicaid uncompensated costs[A]: 90.8%. 

State: Arizona; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 5; 
Percentage of non-DSH payments received[A]: 72.5%; 
Percentage of Medicaid uncompensated costs[A]: 35.3%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 38; 
Percentage of non-DSH payments received[A]: 27.5%; 
Percentage of Medicaid uncompensated costs[A]: 64.7%. 

State: Arkansas; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 1; 
Percentage of non-DSH payments received[A]: 93.9%; 
Percentage of Medicaid uncompensated costs[A]: 74.1%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 3; 
Percentage of non-DSH payments received[A]: 6.1%; 
Percentage of Medicaid uncompensated costs[A]: 25.9%. 

State: California; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 15; 
Percentage of non-DSH payments received[A]: 52.0%; 
Percentage of Medicaid uncompensated costs[A]: 39.2%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 128; 
Percentage of non-DSH payments received[A]: 48.0%; 
Percentage of Medicaid uncompensated costs[A]: 60.8%. 

State: Colorado; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 4; 
Percentage of non-DSH payments received[A]: 68.9%; 
Percentage of Medicaid uncompensated costs[A]: 33.6%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 28; 
Percentage of non-DSH payments received[A]: 31.1%; 
Percentage of Medicaid uncompensated costs[A]: 66.4% 

State: Connecticut; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 4; 
Percentage of non-DSH payments received[A]: 90.0%; 
Percentage of Medicaid uncompensated costs[A]: 8.4%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 31; 
Percentage of non-DSH payments received[A]: 10.0%; 
Percentage of Medicaid uncompensated costs[A]: 91.6%. 

State: District of Columbia; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 1; 
Percentage of non-DSH payments received[A]: (22.3%)[B]; 
Percentage of Medicaid uncompensated costs[A]: 0.4%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 7; 
Percentage of non-DSH payments received[A]: 122.3%[B]; 
Percentage of Medicaid uncompensated costs[A]: 99.6%. 

State: Florida; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 7; 
Percentage of non-DSH payments received[A]: 76.4%; 
Percentage of Medicaid uncompensated costs[A]: 35.8%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 54; 
Percentage of non-DSH payments received[A]: 23.6%; 
Percentage of Medicaid uncompensated costs[A]: 64.2%. 

State: Georgia; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 11; 
Percentage of non-DSH payments received[A]: 60.5%; 
Percentage of Medicaid uncompensated costs[A]: 48.8%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 98; 
Percentage of non-DSH payments received[A]: 39.5%; 
Percentage of Medicaid uncompensated costs[A]: 51.2%. 

State: Hawaii; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 1; 
Percentage of non-DSH payments received[A]: 64.6%; 
Percentage of Medicaid uncompensated costs[A]: 55.1%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 8; 
Percentage of non-DSH payments received[A]: 35.4%; 
Percentage of Medicaid uncompensated costs[A]: 44.9%. 

State: Idaho; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 4; 
Percentage of non-DSH payments received[A]: 62.1%; 
Percentage of Medicaid uncompensated costs[A]: 9.0%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 27; 
Percentage of non-DSH payments received[A]: 37.9%; 
Percentage of Medicaid uncompensated costs[A]: 91.0%. 

State: Illinois; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 4; 
Percentage of non-DSH payments received[A]: 34.1%; 
Percentage of Medicaid uncompensated costs[A]: 25.1%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 35; 
Percentage of non-DSH payments received[A]: 65.9%; 
Percentage of Medicaid uncompensated costs[A]: 74.9%. 

State: Indiana; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 7; 
Percentage of non-DSH payments received[A]: 57.5%; 
Percentage of Medicaid uncompensated costs[A]: 41.5%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 59; 
Percentage of non-DSH payments received[A]: 42.5%; 
Percentage of Medicaid uncompensated costs[A]: 58.5%. 

State: Iowa; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 1; 
Percentage of non-DSH payments received[A]: 78.4%; 
Percentage of Medicaid uncompensated costs[A]: 62.7%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 9; 
Percentage of non-DSH payments received[A]: 21.6%; 
Percentage of Medicaid uncompensated costs[A]: 37.3%. 

State: Kansas; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 5; 
Percentage of non-DSH payments received[A]: 80.9%; 
Percentage of Medicaid uncompensated costs[A]: 63.9%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 40; 
Percentage of non-DSH payments received[A]: 19.1%; 
Percentage of Medicaid uncompensated costs[A]: 36.1%. 

State: Kentucky; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 11; 
Percentage of non-DSH payments received[A]: 99.8%; 
Percentage of Medicaid uncompensated costs[A]: 56.4%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 97; 
Percentage of non-DSH payments received[A]: 0.2%; 
Percentage of Medicaid uncompensated costs[A]: 43.6%. 

State: Louisiana; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 12; 
Percentage of non-DSH payments received[A]: 100.0%; 
Percentage of Medicaid uncompensated costs[A]: 15.3%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 106; 
Percentage of non-DSH payments received[A]: 0.0%; 
Percentage of Medicaid uncompensated costs[A]: 84.7%. 

State: Maryland; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 2; 
Percentage of non-DSH payments received[A]: 71.3%; 
Percentage of Medicaid uncompensated costs[A]: (250.0%)[C]; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 18; 
Percentage of non-DSH payments received[A]: 28.7%; 
Percentage of Medicaid uncompensated costs[A]: 350.0%[C]. 

State: Michigan; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 13; 
Percentage of non-DSH payments received[A]: 62.7%; 
Percentage of Medicaid uncompensated costs[A]: 46.5%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 113; 
Percentage of non-DSH payments received[A]: 37.3%; 
Percentage of Medicaid uncompensated costs[A]: 53.5%. 

State: Minnesota; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 5; 
Percentage of non-DSH payments received[A]: 80.1%; 
Percentage of Medicaid uncompensated costs[A]: 43.9%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 40; 
Percentage of non-DSH payments received[A]: 19.9%; 
Percentage of Medicaid uncompensated costs[A]: 56.1%. 

State: Mississippi; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 6; 
Percentage of non-DSH payments received[A]: 50.0%; 
Percentage of Medicaid uncompensated costs[A]: 22.7%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 50; 
Percentage of non-DSH payments received[A]: 50.0%; 
Percentage of Medicaid uncompensated costs[A]: 77.3%. 

State: Missouri; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 15; 
Percentage of non-DSH payments received[A]: 67.4%; 
Percentage of Medicaid uncompensated costs[A]: 65.7%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 128; 
Percentage of non-DSH payments received[A]: 32.6%; 
Percentage of Medicaid uncompensated costs[A]: 34.3%. 

State: Montana; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 4; 
Percentage of non-DSH payments received[A]: 55.6%; 
Percentage of Medicaid uncompensated costs[A]: 65.2%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 35; 
Percentage of non-DSH payments received[A]: 44.4%; 
Percentage of Medicaid uncompensated costs[A]: 34.8%. 

State: Nebraska; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 3; 
Percentage of non-DSH payments received[A]: 100.0%; 
Percentage of Medicaid uncompensated costs[A]: 36.6%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 24; 
Percentage of non-DSH payments received[A]: 0.0%; 
Percentage of Medicaid uncompensated costs[A]: 63.4%. 

State: Nevada; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 2; 
Percentage of non-DSH payments received[A]: 97.9%; 
Percentage of Medicaid uncompensated costs[A]: 73.7%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 9; 
Percentage of non-DSH payments received[A]: 2.1%; 
Percentage of Medicaid uncompensated costs[A]: 26.3%. 

State: New Hampshire; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 3; 
Percentage of non-DSH payments received[A]: 135.1%[D]; 
Percentage of Medicaid uncompensated costs[A]: 16.4%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 26; 
Percentage of non-DSH payments received[A]: (35.1%)[D]; 
Percentage of Medicaid uncompensated costs[A]: 83.6%. 

State: New Jersey; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 9; 
Percentage of non-DSH payments received[A]: 63.0%; 
Percentage of Medicaid uncompensated costs[A]: 33.9%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 81; 
Percentage of non-DSH payments received[A]: 37.0%; 
Percentage of Medicaid uncompensated costs[A]: 66.1%. 

State: New Mexico; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 3; 
Percentage of non-DSH payments received[A]: 77.1%; 
Percentage of Medicaid uncompensated costs[A]: 192.1%[E]; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 20; 
Percentage of non-DSH payments received[A]: 22.9%; 
Percentage of Medicaid uncompensated costs[A]: (92.1%)[E]. 

State: New York; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 19; 
Percentage of non-DSH payments received[A]: 72.6%; 
Percentage of Medicaid uncompensated costs[A]: 29.3%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 170; 
Percentage of non-DSH payments received[A]: 27.4%; 
Percentage of Medicaid uncompensated costs[A]: 70.7%. 

State: North Carolina; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 11; 
Percentage of non-DSH payments received[A]: 59.6%; 
Percentage of Medicaid uncompensated costs[A]: 51.6%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 99; 
Percentage of non-DSH payments received[A]: 40.4%; 
Percentage of Medicaid uncompensated costs[A]: 48.4%. 

State: Ohio; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 18; 
Percentage of non-DSH payments received[A]: 98.8%; 
Percentage of Medicaid uncompensated costs[A]: 34.2%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 158; 
Percentage of non-DSH payments received[A]: 1.2%; 
Percentage of Medicaid uncompensated costs[A]: 65.8%. 

State: Oklahoma; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 6; 
Percentage of non-DSH payments received[A]: 83.3%; 
Percentage of Medicaid uncompensated costs[A]: 45.2%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 46; 
Percentage of non-DSH payments received[A]: 16.7%; 
Percentage of Medicaid uncompensated costs[A]: 54.8%. 

State: Oregon; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 1; 
Percentage of non-DSH payments received[A]: 104.1%[D]; 
Percentage of Medicaid uncompensated costs[A]: 61.8%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 8; 
Percentage of non-DSH payments received[A]: (4.1%)[D]; 
Percentage of Medicaid uncompensated costs[A]: 38.2%. 

State: Pennsylvania; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 19; 
Percentage of non-DSH payments received[A]: 82.7%; 
Percentage of Medicaid uncompensated costs[A]: 34.2%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 169; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
$Percentage of non-DSH payments received[A]: 17.3%; 
Percentage of Medicaid uncompensated costs[A]: 65.8%. 

State: Rhode Island; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 2; 
Percentage of non-DSH payments received[A]: 322.9%[D]; 
Percentage of Medicaid uncompensated costs[A]: 9.1%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 11; 
Percentage of non-DSH payments received[A]: (222.9%)[D]; 
Percentage of Medicaid uncompensated costs[A]: 90.9%. 

State: South Carolina; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 6; 
Percentage of non-DSH payments received[A]: 46.5%; 
Percentage of Medicaid uncompensated costs[A]: 41.8%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 54; 
Percentage of non-DSH payments received[A]: 53.5%; 
Percentage of Medicaid uncompensated costs[A]: 58.2%. 

State: Texas; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 17; 
Percentage of non-DSH payments received[A]: 85.3%; 
Percentage of Medicaid uncompensated costs[A]: 53.5%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 144; 
Percentage of non-DSH payments received[A]: 14.7%; 
Percentage of Medicaid uncompensated costs[A]: 46.5%. 

State: Utah; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 4; 
Percentage of non-DSH payments received[A]: 98.4%; 
Percentage of Medicaid uncompensated costs[A]: 446.6%[E]; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 29; 
Percentage of non-DSH payments received[A]: 1.6%; 
Percentage of Medicaid uncompensated costs[A]: (346.6%)[E]. 

State: Virginia; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 2; 
Percentage of non-DSH payments received[A]: 81.3%; 
Percentage of Medicaid uncompensated costs[A]: 35.3%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 13; 
Percentage of non-DSH payments received[A]: 18.7%; 
Percentage of Medicaid uncompensated costs[A]: 64.7%. 

State: Washington; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 7; 
Percentage of non-DSH payments received[A]: 121.3%[D]; 
Percentage of Medicaid uncompensated costs[A]: 41.8%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 56; 
Percentage of non-DSH payments received[A]: (21.3%)[D]; 
Percentage of Medicaid uncompensated costs[A]: 58.2%. 

State: West Virginia; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 6; 
Percentage of non-DSH payments received[A]: 72.2%; 
Percentage of Medicaid uncompensated costs[A]: 62.1%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 51; 
Percentage of non-DSH payments received[A]: 27.8%; 
Percentage of Medicaid uncompensated costs[A]: 37.9%. 

State: Wyoming; 
The 10 percent of DSH hospitals with largest non-DSH payments: 
Number of hospitals: 1; 
Percentage of non-DSH payments received[A]: 85.5%; 
Percentage of Medicaid uncompensated costs[A]: 72.1%; 
The 90 percent of DSH hospitals with smallest non-DSH payments: 
Number of hospitals: 4; 
Percentage of non-DSH payments received[A]: 14.5%; 
Percentage of Medicaid uncompensated costs[A]: 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. 

[End of table] 

[End of section] 

Appendix VI: DSH Payments and 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.[Footnote 69] For 
these hospitals, we compared DSH payments to uncompensated care costs--
the costs incurred in providing 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.[Footnote 70] 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,[Footnote 71] while these hospitals' 
Medicaid and uninsured care costs were about $4.1 billion. (See figure 
4 and table 9 for these payments and costs.) 

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

[Refer to PDF for image: stacked vertical bar graph] 

Payments: 
Regular Medicaid: $3.416 billion; 
Non-DSH Supplemental: $1.152 billion;   
Uninsured: $0.107 billion; 
DSH: $0.439 billion. 

Costs: 
Regular Medicaid: $3.522 billion; 
Non-DSH Supplemental: $0.599 billion. 

Source: GAO analysis of CMS data. 

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

[End of figure] 

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: 

State: Alabama; 
Number of DSH hospitals: 12; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $206,133; 
Total uninsured costs of care: $47,304; 
Total costs: $253,437; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $323,626; 
Total non-DSH supplemental payments[A]: $80,361; 
Total uninsured patient payments: $6,284; 
Total DSH payments received: $41,293; 
Total payments: $$451,564; 
Amount by which payments exceed costs: $198,126. 

State: California[B]; 
Number of DSH hospitals: 7; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $287,490; 
Total uninsured costs of care: $54,063; 
Total costs: $341,553; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $323,669; 
Total non-DSH supplemental payments[A]: $80,029; 
Total uninsured patient payments: $12,570; 
Total DSH payments received: less than $1; 
Total payments: $416,268; 
Amount by which payments exceed costs: $74,715. 

State: District of Columbia; 
Number of DSH hospitals: Alabama: California[B]: 1; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $144,590; 
Total uninsured costs of care: $4,649; 
Total costs: $149,239; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $150,428; 
Total non-DSH supplemental payments[A]: $0; 
Total uninsured patient payments: $609; 
Total DSH payments received: 24,583; 
Total payments: $175,620; 
Amount by which payments exceed costs: $26,381. 

State: Florida; 
Number of DSH hospitals: 6; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $479,144; 
Total uninsured costs of care: $193,057; 
Total costs: $672,201; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $394,642; 
Total non-DSH supplemental payments[A]: $349,704; 
Total uninsured patient payments: $29,334; 
Total DSH payments received: 98,697; 
Total payments: $872,376; 
Amount by which payments exceed costs: $200,175. 

State: Idaho; 
Number of DSH hospitals: 1; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $194; 
Total uninsured costs of care: $50; 
Total costs: $244; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $174; 
Total non-DSH supplemental payments[A]: $91; 
Total uninsured patient payments: $2; 
Total DSH payments received: 17; 
Total payments: $284; 
Amount by which payments exceed costs: $40. 

State: Indiana; 
Number of DSH hospitals: 1; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $2,522; 
Total uninsured costs of care: $26; 
Total costs: $2,548; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $2,865; 
Total non-DSH supplemental payments[A]: $0; 
Total uninsured patient payments: $1; 
Total DSH payments received: 298; 
Total payments: $3,163; 
Amount by which payments exceed costs: $614. 

State: Kentucky; 
Number of DSH hospitals: 3; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $6,242; 
Total uninsured costs of care: $674; 
Total costs: $6,916; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $7,227; 
Total non-DSH supplemental payments[A]: $105; 
Total uninsured patient payments: $326; 
Total DSH payments received: 434; 
Total payments: $8,092; 
Amount by which payments exceed costs: $1,176. 

State: Maryland; 
Number of DSH hospitals: 4; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $177,370; 
Total uninsured costs of care: $24,404; 
Total costs: $201,774; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $204,468; 
Total non-DSH supplemental payments[A]: $3,203; 
Total uninsured patient payments: $1,044; 
Total DSH payments received: 13,803; 
Total payments: $222,517; 
Amount by which payments exceed costs: $20,743. 

State: Minnesota; 
Number of DSH hospitals: 1; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $1,378; 
Total uninsured costs of care: $566; 
Total costs: $1,944; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $1,768; 
Total non-DSH supplemental payments[A]: $33; 
Total uninsured patient payments: $694; 
Total DSH payments received: 48; 
Total payments: $2,543; 
Amount by which payments exceed costs: $599. 

State: Missouri; 
Number of DSH hospitals: 31; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $1,408,130; 
Total uninsured costs of care: $175,489; 
Total costs: $1,583,619; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $1,123,949; 
Total non-DSH supplemental payments[A]: $563,885; 
Total uninsured patient payments: $25,454; 
Total DSH payments received: 163,612; 
Total payments: $1,876,900; 
Amount by which payments exceed costs: $293,281. 

State: Montana; 
Number of DSH hospitals: 6; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $8,241; 
Total uninsured costs of care: $2,076; 
Total costs: $10,317; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $8,356; 
Total non-DSH supplemental payments[A]: $1,901; 
Total uninsured patient payments: $815; 
Total DSH payments received: 1,432; 
Total payments: $12,503; 
Amount by which payments exceed costs: $2,186. 

State: New Hampshire; 
Number of DSH hospitals: 1; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $6,204; 
Total uninsured costs of care: $60; 
Total costs: $6,264; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $6,468; 
Total non-DSH supplemental payments[A]: $68; 
Total uninsured patient payments: $1; 
Total DSH payments received: 2,284; 
Total payments: $8,821; 
Amount by which payments exceed costs: $2,557. 

State: New Mexico; 
Number of DSH hospitals: 6; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $28,735; 
Total uninsured costs of care: $14,557; 
Total costs: $43,292; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $40,460; 
Total non-DSH supplemental payments[A]: $15,746; 
Total uninsured patient payments: $3,225; 
Total DSH payments received: 702; 
Total payments: $60,133; 
Amount by which payments exceed costs: $16,842. 

State: New York; 
Number of DSH hospitals: 5; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $125,661; 
Total uninsured costs of care: $13,526; 
Total costs: $139,187; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $156,817; 
Total non-DSH supplemental payments[A]: $1,191; 
Total uninsured patient payments: $1,515; 
Total DSH payments received: 19,220; 
Total payments: $178,743; 
Amount by which payments exceed costs: $39,557. 

State: North Carolina; 
Number of DSH hospitals: 2; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $5,116; 
Total uninsured costs of care: $389; 
Total costs: $5,505; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $6,283; 
Total non-DSH supplemental payments[A]: $303; 
Total uninsured patient payments: $138; 
Total DSH payments received: 1; 
Total payments: $6,725; 
Amount by which payments exceed costs: $1,220. 

State: Ohio; 
Number of DSH hospitals: 4; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $4,954; 
Total uninsured costs of care: $713; 
Total costs: $5,667; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $6,509; 
Total non-DSH supplemental payments[A]: $0; 
Total uninsured patient payments: $125; 
Total DSH payments received: 1,522; 
Total payments: $8,156; 
Amount by which payments exceed costs: $2,489. 

State: Oklahoma; 
Number of DSH hospitals: 1; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $16,511; 
Total uninsured costs of care: $547; 
Total costs: $17,058; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $19,456; 
Total non-DSH supplemental payments[A]: $45; 
Total uninsured patient payments: $1,575; 
Total DSH payments received: 309; 
Total payments: $21,430[C]; 
Amount by which payments exceed costs: $4,372. 

State: Rhode Island; 
Number of DSH hospitals: 1; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $1,535; 
Total uninsured costs of care: $596; 
Total costs: $2,131; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $2,134; 
Total non-DSH supplemental payments[A]: $(302); 
Total uninsured patient payments: $2,239; 
Total DSH payments received: 2,648; 
Total payments: $6,718; 
Amount by which payments exceed costs: $4,587. 

State: South Carolina; 
Number of DSH hospitals: 2; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $31,058; 
Total uninsured costs of care: $7,272; 
Total costs: $38,330; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $32,662; 
Total non-DSH supplemental payments[A]: $4,447; 
Total uninsured patient payments: $2,922; 
Total DSH payments received: 5,458; 
Total payments: $45,489; 
Amount by which payments exceed costs: $7,159. 

State: Texas; 
Number of DSH hospitals: 10; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $517,775; 
Total uninsured costs of care: $44,310; 
Total costs: $562,085; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $526,283; 
Total non-DSH supplemental payments[A]: $50,221; 
Total uninsured patient payments: $12,579; 
Total DSH payments received: 61,060; 
Total payments: $655,554[C]; 
Amount by which payments exceed costs: $93,468. 

State: Utah; 
Number of DSH hospitals: 7; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $35,464; 
Total uninsured costs of care: $9,922; 
Total costs: $45,386; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $47,060; 
Total non-DSH supplemental payments[A]: $0; 
Total uninsured patient payments: $3,117; 
Total DSH payments received: 313; 
Total payments: $50,392[C]; 
Amount by which payments exceed costs: $5,006. 

State: Washington; 
Number of DSH hospitals: 2; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $3,376; 
Total uninsured costs of care: $132; 
Total costs: $3,508; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $4,197; 
Total non-DSH supplemental payments[A]: $(59); 
Total uninsured patient payments: $28; 
Total DSH payments received: 231; 
Total payments: $4,403[C]; 
Amount by which payments exceed costs: $894. 

State: West Virginia; 
Number of DSH hospitals: 3; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $22,044; 
Total uninsured costs of care: $3,424; 
Total costs: $25,468; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $25,446; 
Total non-DSH supplemental payments[A]: $382; 
Total uninsured patient payments: $2,044; 
Total DSH payments received: 1,413; 
Total payments: $29,284; 
Amount by which payments exceed costs: $3,816. 

State: Wyoming; 
Number of DSH hospitals: 1; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $1,653; 
Total uninsured costs of care: $769; 
Total costs: $2,422; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $1,292; 
Total non-DSH supplemental payments[A]: $812; 
Total uninsured patient payments: $339; 
Total DSH payments received: 14; 
Total payments: $2,456; 
Amount by which payments exceed costs: $34. 

State: Total; 
Number of DSH hospitals: 118; 
Costs (dollars in thousands); 
Total Medicaid costs of care: $$3,521,520; 
Total uninsured costs of care: $$598,574; 
Total costs: $4,120,094; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $$3,416,236; 
Total non-DSH supplemental payments[A]: $1,152,163; 
Total uninsured patient payments: $$106,980; 
Total DSH payments received: $439,388; 
Total payments: $$5,120,134; 
Amount by which payments exceed costs: $1,000,040. 

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] 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. 

[End of table] 

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,[Footnote 72] while Medicaid and uninsured care 
costs were about $5.7 billion. (See figure 5 and table 10 for these 
payments and costs.) 

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

[Refer to PDF for image: stacked vertical bar graph] 

Payments: 
Regular Medicaid: $3.061 billion. 
Non-DSH Supplemental: $1.227 billion. 
Uninsured: $0.205 billion. 
DSH: $1.797 billion. 

Costs: 
Regular Medicaid: $3.691 billion; 
Non-DSH Supplemental: $1.982 billion. 

Source: GAO analysis of CMS data. 

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

[End of figure] 

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: 

State: Alabama; 
Number of hospitals: 9; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $249,062; 
Total uninsured costs of care: $99,163; 
Total costs: $348,225; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $231,517; 
Total non-DSH supplemental payments: $41,319; 
Total uninsured patient payments: $5,918; 
Total DSH payments received: $140,781; 
Total payments: $419,534; 
Amount by which payments exceed costs: $71,309. 

State: Colorado; 
Number of hospitals: 2; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $74,102; 
Total uninsured costs of care: $42,146; 
Total costs: $116,248; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $50,978; 
Total non-DSH supplemental payments: $41,341; 
Total uninsured patient payments: $0; 
Total DSH payments received: $47,871; 
Total payments: $140,190; 
Amount by which payments exceed costs: $23,942. 

State: Florida; 
Number of hospitals: 6; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $145,745; 
Total uninsured costs of care: $136,327; 
Total costs: $282,072; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $139,277; 
Total non-DSH supplemental payments: $97,289; 
Total uninsured patient payments: $36,865; 
Total DSH payments received: $23,320; 
Total payments: $296,751; 
Amount by which payments exceed costs: $14,679. 

State: Georgia; 
Number of hospitals: 9; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $58,443; 
Total uninsured costs of care: $15,475; 
Total costs: $73,918; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $59,630; 
Total non-DSH supplemental payments: $1,797; 
Total uninsured patient payments: $3,288; 
Total DSH payments received: $13,047; 
Total payments: $77,763; 
Amount by which payments exceed costs: $3,845. 

State: Illinois; 
Number of hospitals: 2; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $136; 
Total uninsured costs of care: $7,938; 
Total costs: $8,074; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $181; 
Total non-DSH supplemental payments: $0; 
Total uninsured patient payments: $66; 
Total DSH payments received: $19,259; 
Total payments: $19,506; 
Amount by which payments exceed costs: $11,432. 

State: Indiana; 
Number of hospitals: 5; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $130,736; 
Total uninsured costs of care: $131,393; 
Total costs: $262,129; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $90,903; 
Total non-DSH supplemental payments: $44,682; 
Total uninsured patient payments: $5,210; 
Total DSH payments received: $144,354; 
Total payments: $285,148; 
Amount by which payments exceed costs: $23,019. 

State: Kansas; 
Number of hospitals: 2; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $6,533; 
Total uninsured costs of care: $1,101; 
Total costs: $7,634; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $6,344; 
Total non-DSH supplemental payments: $286; 
Total uninsured patient payments: $234; 
Total DSH payments received: $1,374; 
Total payments: $8,238; 
Amount by which payments exceed costs: $604. 

State: Kentucky; 
Number of hospitals: 1; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $5,836; 
Total uninsured costs of care: $1,138; 
Total costs: $6,974; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $6,797; 
Total non-DSH supplemental payments: $0; 
Total uninsured patient payments: $0; 
Total DSH payments received: $329; 
Total payments: $7,126; 
Amount by which payments exceed costs: $153. 

State: Louisiana; 
Number of hospitals: 7; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $212,447; 
Total uninsured costs of care: $118,919; 
Total costs: $331,366; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $215,095; 
Total non-DSH supplemental payments: $5,062; 
Total uninsured patient payments: $3,632; 
Total DSH payments received: $158,226; 
Total payments: $382,015; 
Amount by which payments exceed costs: $50,649. 

State: Missouri; 
Number of hospitals: 39; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $656,970; 
Total uninsured costs of care: $349,330; 
Total costs: $1,006,300; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $531,967; 
Total non-DSH supplemental payments: $199,098; 
Total uninsured patient payments: $35,527; 
Total DSH payments received: $390,702; 
Total payments: $1,157,293; 
Amount by which payments exceed costs: $150,993. 

State: Montana; 
Number of hospitals: 4; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $1,139; 
Total uninsured costs of care: $968; 
Total costs: $2,107; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $1,138; 
Total non-DSH supplemental payments: $392; 
Total uninsured patient payments: $398; 
Total DSH payments received: $395; 
Total payments: $2,323; 
Amount by which payments exceed costs: $215. 

State: Nevada; 
Number of hospitals: 1; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $369; 
Total uninsured costs of care: $455; 
Total costs: $824; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $345; 
Total non-DSH supplemental payments: $255; 
Total uninsured patient payments: $32; 
Total DSH payments received: $418; 
Total payments: $1,058[A]; 
Amount by which payments exceed costs: $234. 

State: New Jersey; 
Number of hospitals: 3; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $130,844; 
Total uninsured costs of care: $87,550; 
Total costs: $218,394; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $118,602; 
Total non-DSH supplemental payments: $34,665; 
Total uninsured patient payments: $1,938; 
Total DSH payments received: $86,398; 
Total payments: $241,603; 
Amount by which payments exceed costs: $23,208. 

State: New York; 
Number of hospitals: 12; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $398,218; 
Total uninsured costs of care: $42,942; 
Total costs: $441,160; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $418,510; 
Total non-DSH supplemental payments: $957; 
Total uninsured patient payments: $5,005; 
Total DSH payments received: $37,657; 
Total payments: $462,129; 
Amount by which payments exceed costs: $20,969. 

State: North Carolina; 
Number of hospitals: 1; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $27,297; 
Total uninsured costs of care: $4,944; 
Total costs: $32,241; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $24,904; 
Total non-DSH supplemental payments: $3,632; 
Total uninsured patient payments: $631; 
Total DSH payments received: $4,635; 
Total payments: $33,802; 
Amount by which payments exceed costs: $1,560. 

State: Ohio; 
Number of hospitals: 2; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $44,564; 
Total uninsured costs of care: $5,708; 
Total costs: $50,272; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $47,397; 
Total non-DSH supplemental payments: $0; 
Total uninsured patient payments: $312; 
Total DSH payments received: $4,650; 
Total payments: $52,359; 
Amount by which payments exceed costs: $2,087. 

State: Rhode Island; 
Number of hospitals: 1; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $38,198; 
Total uninsured costs of care: $3,408; 
Total costs: $41,606; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $37,033; 
Total non-DSH supplemental payments: $1,726; 
Total uninsured patient payments: $140; 
Total DSH payments received: $7,848; 
Total payments: $46,746; 
Amount by which payments exceed costs: $5,140. 

State: South Carolina; 
Number of hospitals:8; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $140,998;
Total uninsured costs of care: $49,455; 
Total costs: $190,453; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $119,627; 
Total non-DSH supplemental payments: $25,790; 
Total uninsured patient payments: $4,520;
Total DSH payments received: $57,983; 
Total payments: $207,920; 
Amount by which payments exceed costs: $17,466. 

State: Texas; 
Number of hospitals: 14; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $1,138,527; 
Total uninsured costs of care: $817,206; 
Total costs: $1,955,733; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $746,220; 
Total non-DSH supplemental payments: $691,512; 
Total uninsured patient payments: $91,620; 
Total DSH payments received: $612,229; 
Total payments: $2,181,744[A]; 
Amount by which payments exceed costs: $226,011. 

State: Utah; 
Number of hospitals: 1; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $1,236; 
Total uninsured costs of care: $334; 
Total costs: $1,570; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $1,329; 
Total non-DSH supplemental payments: $0; 
Total uninsured patient payments: $206; 
Total DSH payments received: $372; 
Total payments: $1,907; 
Amount by which payments exceed costs: $337. 

State: Virginia; 
Number of hospitals: 1; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $110,779; 
Total uninsured costs of care: $49,312; 
Total costs: $160,091; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $97,968; 
Total non-DSH supplemental payments: $31,565; 
Total uninsured patient payments: $6,504; 
Total DSH payments received: $21,749; 
Total payments: $161,887[A]; 
Amount by which payments exceed costs: $1,795. 

State: Washington; 
Number of hospitals: 3; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $112,464; 
Total uninsured costs of care: $14,392; 
Total costs: $126,856; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $108,406; 
Total non-DSH supplemental payments: $5,670; 
Total uninsured patient payments: $3,045; 
Total DSH payments received: $19,605; 
Total payments: $138,963[A]; 
Amount by which payments exceed costs: $12,106. 

State: West Virginia; 
Number of hospitals: 4; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $6,665; 
Total uninsured costs of care: $2,347; 
Total costs: $9,012; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $7,076; 
Total non-DSH supplemental payments: $235; 
Total uninsured patient payments: $222; 
Total DSH payments received: $3,628; 
Total payments: $11,161; 
Amount by which payments exceed costs: $2,149. 

State: Total; 
Number of hospitals: 137; 
Costs (dollars in thousands): 
Total Medicaid costs of care: $3,691,309; 
Total uninsured costs of care: $1,981,950; 
Total costs: $5,673,259; 
Payments (dollars in thousands): 
Total regular Medicaid payments: $3,061,242; 
Total non-DSH supplemental payments: $1,227,270; 
Total uninsured patient payments: $205,309; 
Total DSH payments received: $1,796,832; 
Total payments: $6,337,164; 
Amount by which payments exceed costs: $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. 

[End of table] 

[End of section] 

Appendix VII: DSH Hospitals with Medicaid 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. 

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: 

State: Alabama; 
Number of DSH hospitals: 22; 
Percentage of DSH hospitals: 34%; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $204,012,498. 

State: Alaska; 
Number of DSH hospitals: 1; 
Percentage of DSH hospitals: 25; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $182,708. 

State: Arizona; 
Number of DSH hospitals: 1; 
Percentage of DSH hospitals: 2; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $134,246. 

State: Arkansas; 
Number of DSH hospitals: 1; 
Percentage of DSH hospitals: 25; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $2,917,316. 

State: California; 
Number of DSH hospitals: 23; 
Percentage of DSH hospitals: 16; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $148,499,802. 

State: Colorado; 
Number of DSH hospitals: 2; 
Percentage of DSH hospitals: 6; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $18,216,205. 

State: Connecticut; 
Number of DSH hospitals: 0; 
Percentage of DSH hospitals: 0; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $0. 

State: District of Columbia; 
Number of DSH hospitals: 0; 
Percentage of DSH hospitals: 0; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $0. 

State: Florida; 
Number of DSH hospitals: 37; 
Percentage of DSH hospitals: 61; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $625,694,383. 

State: Georgia; 
Number of DSH hospitals: 17; 
Percentage of DSH hospitals: 16; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $1,693,135. 

State: Hawaii; 
Number of DSH hospitals: 0; 
Percentage of DSH hospitals: 0; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $0. 

State: Idaho; 
Number of DSH hospitals: 10; 
Percentage of DSH hospitals: 32; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $561,101. 

State: Illinois; 
Number of DSH hospitals: 29; 
Percentage of DSH hospitals: 74; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $262,185,810. 

State: Indiana; 
Number of DSH hospitals: 9; 
Percentage of DSH hospitals: 14; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $5,994,186. 

State: Iowa; 
Number of DSH hospitals: 4; 
Percentage of DSH hospitals: 40; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $3,412,828. 

State: Kansas; 
Number of DSH hospitals: 7; 
Percentage of DSH hospitals: 16; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $4,291,691. 

State: Kentucky; 
Number of DSH hospitals: 5; 
Percentage of DSH hospitals: 5; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $18,314,308. 

State: Louisiana; 
Number of DSH hospitals: 2; 
Percentage of DSH hospitals: 2; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $4,372,258. 

State: Maryland; 
Number of DSH hospitals: 6; 
Percentage of DSH hospitals: 30; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $53,652,164. 

State: Michigan; 
Number of DSH hospitals: 25; 
Percentage of DSH hospitals: 20; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $34,774,182. 

State: Minnesota; 
Number of DSH hospitals: 9; 
Percentage of DSH hospitals: 20; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $15,700,509. 

State: Mississippi; 
Number of DSH hospitals: 30; 
Percentage of DSH hospitals: 54; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $53,338,361. 

State: Missouri; 
Number of DSH hospitals: 101; 
Percentage of DSH hospitals: 71; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $424,467,105. 

State: Montana; 
Number of DSH hospitals: 23; 
Percentage of DSH hospitals: 59; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $5,598,006. 

State: Nebraska; 
Number of DSH hospitals: 0; 
Percentage of DSH hospitals: 0; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $0. 

State: Nevada; 
Number of DSH hospitals: 1; 
Percentage of DSH hospitals: 9; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $239,852. 

State: New Hampshire; 
Number of DSH hospitals: 1; 
Percentage of DSH hospitals: 3; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $331,755. 

State: New Jersey; 
Number of DSH hospitals: 9; 
Percentage of DSH hospitals: 10; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $37,682,503. 

State: New Mexico; 
Number of DSH hospitals: 15; 
Percentage of DSH hospitals: 65; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $119,893,213. 

State: New York; 
Number of DSH hospitals: 11; 
Percentage of DSH hospitals: 6; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $45,332,681. 

State: North Carolina; 
Number of DSH hospitals: 8; 
Percentage of DSH hospitals: 7; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $3,387,059. 

State: Ohio; 
Number of DSH hospitals: 2; 
Percentage of DSH hospitals: 1; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $16,128,593. 

State: Oklahoma; 
Number of DSH hospitals: 11; 
Percentage of DSH hospitals: 21; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $27,891,507. 

State: Oregon; 
Number of DSH hospitals: 1; 
Percentage of DSH hospitals: 11; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $25,926. 

State: Pennsylvania; 
Number of DSH hospitals: 6; 
Percentage of DSH hospitals: 3; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $9,375,010. 

State: Rhode Island; 
Number of DSH hospitals: 1; 
Percentage of DSH hospitals: 8; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $560,581. 

State: South Carolina; 
Number of DSH hospitals: 13; 
Percentage of DSH hospitals: 22; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $11,905,483. 

State: Texas; 
Number of DSH hospitals: 35; 
Percentage of DSH hospitals: 22; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $496,527,209. 

State: Utah; 
Number of DSH hospitals: 6; 
Percentage of DSH hospitals: 18; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $45,025,319. 

State: Virginia; 
Number of DSH hospitals: 2; 
Percentage of DSH hospitals: 13; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $34,006,273. 

State: Washington; 
Number of DSH hospitals: 9; 
Percentage of DSH hospitals: 14; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $6,182,632. 

State: West Virginia; 
Number of DSH hospitals: 8; 
Percentage of DSH hospitals: 14; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $5,081,405. 

State: Wyoming; 
Number of DSH hospitals: 2; 
Percentage of DSH hospitals: 40; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $539,407. 

State: Total; 
Number of DSH hospitals: 505; 
Percentage of DSH hospitals: 19%; 
Dollar amount by which regular Medicaid and non-DSH supplemental 
payments exceeded Medicaid costs: $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. 

[End of table] 

[End of section] 

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

Department of Health & Human Services: 
Office of The Secretary: 
Assistant Secretary for Legislation: 
Washington, DC 20201: 

November 6, 2012: 

Katherine Iritani: 
Director, Health Care: 
U.S. Government Accountability Office: 
441 G Street NW: 
Washington, DC 20548: 

Dear Ms. Iritani: 

Attached are comments on the U.S. Government Accountability Office's 
(GAO) report entitled, "Medicaid: More Transparency of and 
Accountability for Supplemental Payments Is Needed" (GAO-13-48). 

The Department appreciates the opportunity to review this report prior 
to publication. 

Sincerely, 

Signed by: 

Jim R. Esquea: 
Assistant Secretary for Legislation: 

Attachment: 

General Comments Of The Department Of Health And Human Services (HHS) 
On The Government Accountability Office's (GAO) Draft Report Entitled, 
"Medicaid: More Transparency Of And Accountability For Supplemental 
Payments In Needed" (GAO-13-48): 

The Department appreciates the opportunity to review and comment on 
the Government Accountability Office Draft Report entitled: "MEDICAID: 
More Transparency of and Accountability for Supplemental Payments is 
Needed" (GAO-13-48). The purpose of the report is to consider the 
Centers for Medicare & Medicaid Services (CMS) oversight of hospital 
supplemental payments. The report highlights that both 
disproportionate share hospital (DSH) and non-DSH supplemental 
payments are a significant and growing component of Medicaid spending 
and includes background and summary information regarding the recently 
implemented regulations that require annual audits and reports for 
states' DSH payments. The report concludes that there is an urgent 
need for improvements in the transparency of and accountability for 
non-DSH supplemental payments that are similar to the steps taken to 
address DSH payments and raises these issues to Congress for its 
consideration. 

HHS agrees with GAO about the need to improve reporting and oversight 
of non-DSH supplemental payments and would like to share some of the 
work underway. 

It is important to note that any supplemental payment that is newly 
proposed or modified under a state plan amendment (SPA) is subject to 
CMS' oversight through its SPA review and approval process. This 
requires that the state respond to detailed questions regarding how 
the state will finance its share of the payment. Supplemental payment 
proposals will not be approved until CMS has determined that the state 
is securing appropriate non-federal funding to finance its share of 
its Medicaid program. In addition, for any supplemental payment 
proposal, a state must demonstrate that the aggregate payment amount 
will be within the state's applicable upper payment limit (UPL). The 
UPL requires that a total Medicaid payment (which includes base rate 
payments and any supplemental payments) cannot exceed a reasonable 
estimate of what Medicare would pay for similar services. 

In order to ensure a consistent policy across states and over the 
years, and to evaluate the need for further guidance and oversight, we 
are undertaking a comprehensive review of all approved SPAs to 
scrutinize supplemental payment methodologies. As part of this 
activity, we are identifying any states that are failing to report 
supplemental payments through the Medicaid Budget and Expenditure 
System (MBES) as required, and taking necessary steps to ensure 
compliance with the requirement and address methodologies that are not 
compliant with the Medicaid statute and federal regulation. This 
analysis will assist us in determining the need for more guidance or 
definition of formulas, data sources, validation, and updates of UPL 
demonstrations and payments. 

Finally, we also want to note the work we are doing to evaluate and 
improve our work with respect to the Medicaid DSH certified audits and 
reports. In fiscal year 2011, CMS began an in-depth review of a select 
number of states and hospitals in different regions of the country in 
an attempt to obtain a nationwide representation of audit 
implementation. We have continued this work in fiscal years 2012 and 
2013. This effort is intended to produce a greater understanding of 
how states, hospitals and auditors completed the DSH audits and 
reports. CMS is compiling the information it learns and will be 
issuing further national guidance to ensure proper implementation of 
the audit and reporting requirements. 

[End of section] 

Appendix IX: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Katherine Iritani, (202) 512-7114 or iritanik@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Tim Bushfield, Assistant 
Director; Helen Desaulniers; Carolyn Fitzgerald; Sandra George; Peter 
Mangano; Roseanne Price; and Said Sariolghalam made key contributions 
to this report. 

[End of section] 

Related GAO Products: 

Medicaid: States Reported Billions More in Supplemental Payments in 
Recent Years. [hyperlink, http://www.gao.gov/products/GAO-12-694]. 
Washington, D.C.: July 20, 2012. 

Opportunities to Reduce Potential Duplication in Government Programs, 
Save Tax Dollars, and Enhance Revenue. [hyperlink, 
http://www.gao.gov/products/GAO-11-318SP]. Washington, D.C.: March 1, 
2011. 

High-Risk Series: An Update. [hyperlink, 
http://www.gao.gov/products/GAO-11-278]. Washington, D.C.: February 
2011. 

Medicaid: Ongoing Federal Oversight of Payments to Offset 
Uncompensated Hospital Care Costs Is Warranted. [hyperlink, 
http://www.gao.gov/products/GAO-10-69]. Washington, D.C.: November 20, 
2009. 

Medicaid: CMS Needs More Information on the Billions of Dollars Spent 
on Supplemental Payments. [hyperlink, 
http://www.gao.gov/products/GAO-08-614]. Washington, D.C.: May 30, 
2008. 

Medicaid Financing: Long-standing Concerns about Inappropriate State 
Arrangements Support Need for Improved Federal Oversight. [hyperlink, 
http://www.gao.gov/products/GAO-08-650T]. Washington, D.C.: April 3, 
2008. 

Medicaid Financing: Long-Standing Concerns about Inappropriate State 
Arrangements Support Need for Improved Federal Oversight. [hyperlink, 
http://www.gao.gov/products/GAO-08-255T]. Washington, D.C.: November 
1, 2007. 

Medicaid Financing: Federal Oversight Initiative Is Consistent with 
Medicaid Payment Principles but Needs Greater Transparency. 
[hyperlink, http://www.gao.gov/products/GAO-07-214]. Washington, D.C.: 
March 30, 2007. 

Medicaid Financial Management: Steps Taken to Improve Federal 
Oversight but Other Actions Needed to Sustain Efforts. [hyperlink, 
http://www.gao.gov/products/GAO-06-705]. Washington, D.C.: June 22, 
2006. 

Medicaid Financing: States' Use of Contingency-Fee Consultants to 
Maximize Federal Reimbursements Highlights Need for Improved Federal 
Oversight. [hyperlink, http://www.gao.gov/products/GAO-05-748]. 
Washington, D.C.: June 28, 2005. 

Medicaid: States' Efforts to Maximize Federal Reimbursements Highlight 
Need for Improved Federal Oversight. [hyperlink, 
http://www.gao.gov/products/GAO-05-836T]. Washington, D.C.: June 28, 
2005. 

Medicaid: Intergovernmental Transfers Have Facilitated State Financing 
Schemes. [hyperlink, http://www.gao.gov/products/GAO-04-574T]. 
Washington, D.C.: March 18, 2004. 

Medicaid: Improved Federal Oversight of State Financing Schemes Is 
Needed. [hyperlink, http://www.gao.gov/products/GAO-04-228]. 
Washington, D.C.: February 13, 2004. 

Major Management Challenges and Program Risks: Department of Health 
and Human Services. [hyperlink, 
http://www.gao.gov/products/GAO-03-101]. Washington, D.C.: January 
2003. 

Medicaid: HCFA Reversed Its Position and Approved Additional State 
Financing Schemes. [hyperlink, 
http://www.gao.gov/products/GAO-02-147]. Washington, D.C.: October 30, 
2001. 

Medicaid: State Financing Schemes Again Drive Up Federal Payments. 
[hyperlink, http://www.gao.gov/products/GAO/T-HEHS-00-193]. 
Washington, D.C.: September 6, 2000. 

Medicaid: Disproportionate Share Payments to State Psychiatric 
Hospitals. [hyperlink, http://www.gao.gov/products/GAO/HEHS-98-52]. 
Washington, D.C.: January 23, 1998. 

Medicaid: Disproportionate Share Hospital Payments to Institutions for 
Mental Diseases. [hyperlink, 
http://www.gao.gov/products/GAO/HEHS-97-181R]. Washington, D.C.: July 
15, 1997. 

Medicaid: States Use Illusory Approaches to Shift Program Costs to 
Federal Government. [hyperlink, 
http://www.gao.gov/products/GAO/HEHS-94-133]. Washington, D.C.: August 
1, 1994. 

[End of section] 

Footnotes: 

[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. 

[4] GAO, Medicaid: CMS Needs More Information on the Billions of 
Dollars Spent on Supplemental Payments, [hyperlink, 
http://www.gao.gov/products/GAO-08-614] (Washington, D.C.: May 2008). 

[5] GAO, Medicaid: States Reported Billions More in Supplemental 
Payments in Recent Years, [hyperlink, 
http://www.gao.gov/products/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, [hyperlink, 
http://www.gao.gov/products/GAO-11-278] (Washington, D.C.: February 
2011). 

[8] 42 U.S.C § 1396a(a)(30)(A). 

[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, [hyperlink, 
http://www.gao.gov/products/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)). 

[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 [hyperlink, 
http://www.gao.gov/products/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). 

[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, [hyperlink, 
http://www.gao.gov/products/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). 

[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. 

[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. 

[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, [hyperlink, http://www.gao.gov/products/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. 

[28] [hyperlink, http://www.gao.gov/products/GAO-08-614]. 

[29] GAO, Medicaid: Ongoing Federal Oversight of Payments to Offset 
Uncompensated Hospital Care Costs Is Warranted, [hyperlink, 
http://www.gao.gov/products/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] [hyperlink, http://www.gao.gov/products/GAO-04-228]. 

[33] [hyperlink, http://www.gao.gov/products/GAO-08-614]. 

[34] [hyperlink, http://www.gao.gov/products/GAO-04-228] and 
[hyperlink, http://www.gao.gov/products/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). 

[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. 

[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. 

[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. 

[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. 

[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 [hyperlink, 
http://www.gao.gov/products/GAO-12-694]. 

[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). 

[47] [hyperlink, http://www.gao.gov/products/GAO-04-228]. 

[48] [hyperlink, http://www.gao.gov/products/GAO-08-614] and 
[hyperlink, http://www.gao.gov/products/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] [hyperlink, http://www.gao.gov/products/GAO-04-228]. 

[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. 

[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. 

[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 
appendix VI for the results of this analysis.) 

[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 [hyperlink, http://www.gao.gov/products/GAO-08-614]. 

[59] 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. 

[60] 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. 

[61] 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. 

[62] 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. 

[63] 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. 

[64] 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. 

[65] 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)). 

[66] 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). 

[67] 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)). 

[68] 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). 

[69] 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. 

[70] 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. 

[71] 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. 

[72] 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. 

[End of section] 

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