Disproportionate Share - General Program Overview

In 1965, Medicaid was established as a jointly funded Federal and State program providing medical assistance to qualified low-income people. At the Federal level, the program is administered by the Centers for Medicare & Medicaid Services (CMS), an agency within the Department of Health and Human Services. Within a broad legal framework, each State designs and administers its own Medicaid program. Each State prepares a State plan that defines how a State will operate its Medicaid program and is required to submit the plan for CMS approval.

The Omnibus Budget Reconciliation Act of 1981 established the DSH program by adding section 1923 to the Social Security Act. Section 1923 required State Medicaid agencies to make additional payments to hospitals serving disproportionate numbers of low-income patients with special needs. States had considerable flexibility to define DSH under sections 1923(a) and (b) of the Act.

States receive allotments of DSH funds as set forth by Federal statute. The Federal Government cost-shares Medicaid DSH expenditures based upon the applicable Federal medical assistance percentage. States report DSH expenditures on CMS Form-64, the Quarterly Medicaid Statement of Expenditures for the Medical Assistance Program.

Ohio DSH Program – General Hospitals

During the Federal fiscal year 2000 funding period, Ohio made DSH payments exceeding $526 million to over 180 general hospitals and fully expended its Federal DSH allotment of $363 million. The Federal financial participation rate was 58.7 percent of the total expenditures. The aggregate hospital-specific DSH limits calculated by the Ohio Department of Job & Family Services for the review period exceeded the total DSH payments by over $200 million. As a result, some hospitals were paid at levels below their hospital-specific DSH limits.

The DSH program for general hospitals in Ohio was established in 1989 and is referred to as the Hospital Care Assurance Program. The program provides funds to qualified hospitals and helps to offset the costs incurred by these facilities in furnishing services to a disproportionate share of the indigent population. The program is primarily funded at the State level through a tax assessed on participating general hospitals. The assessments are combined with Federal funding to make DSH payments to the qualified facilities.

Hospitals may receive DSH payments up to the amount of their calculated hospital-specific DSH limits. For the review period, this DSH limit was the net of the Medicaid shortfall plus the reported uncompensated care costs for uninsured persons based on the hospital cost reporting periods ended during State fiscal year 1999. Uncompensated care charges were reported by general hospitals on Schedule F of the Ohio Medicaid cost report.

Hospitals Selected for Review

During the review period, St. Vincent Charity Hospital and St. Luke’s Medical Center, jointly referred to as the Provider, participated together in the Ohio DSH program as a single reporting entity. Both hospitals, located in downtown Cleveland, were among the holdings of the Caritas Healthcare Partnership and provided medical services to individuals residing in some of the lowest income neighborhoods in the metropolitan area.