Medicaid Program; Disproportionate Share Hospital Payments

AGENCY:

Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION:

Notice.

SUMMARY:

This notice announces the final Federal share disproportionate share hospital (DSH) allotments for Federal fiscal years (FFYs) 2001 and 2002, and the preliminary Federal share DSH allotments for FFYs 2003 and 2004. It also announces the final FFYs 2000, 2001, and 2002, and the preliminary FFYs 2003 and 2004, limitations on aggregate DSH payments that States may make to institutions for mental disease (IMDs) and other mental health facilities. In addition, this notice describes the methodologies for determining the amounts of States' FFY DSH allotments for FFY 2001 and thereafter. It also republishes the Federal share DSH allotments for FFYs 1998 through 2000, and the final FFYs 1998 and 1999 limitations on aggregate DSH payments that States may make to IMDs and other mental health facilities. Additionally, the notice specifies a format to be used by States when submitting their annual DSH report to ensure that Federal funds provided for DSH adjustments are made in accordance with the Medicaid statutory requirements.

FOR FURTHER INFORMATION CONTACT:

Richard Strauss, (410) 786-2019 (DSH Allotments and IMD DSH Limits); Jonas Eberly, (410) 786-6232 (Annual DSH report for DSH payments).

SUPPLEMENTARY INFORMATION:

I. Background

A. DSH Allotments and IMD DSH Limits Published in October 8, 1998 Federal Register.

We published a notice in the October 8, 1998 Federal Register (63 FR 54142) that announced the Federal share DSH allotments for FFYs 1998 through 2002 and the IMD DSH limits for FFYs 1998 and 1999. The DSH allotments and IMD DSH limits published in that notice specified and were determined in accordance with the sections 1923(f) and (1923(h) of the Social Security Act (the Act), as amended by the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33, enacted on August 5, 1997). The notice also reflected the FFY 1998 DSH allotment for one State, specified in accordance with section 601 of Pub. L. 105-78 (enacted on November 13, 1997).

Additional legislative changes relating to the amounts or methodologies for calculating the States' DSH allotments or IMD DSH limits have been made to the Act since the publication of the October 8, 1998 notice. In this section and in Section II of this notice, we describe each of the legislative changes related to the DSH allotments and IMD DSH limits for fiscal years that were not included in the October 8, 1998 notice.

B. DSH Allotments For FFYs 1998 Through 2000

Section 4721(a) of the BBA amended section 1923(f) of the Act to require that Federal Medicaid DSH expenditures be limited by the statutorily defined Federal share DSH allotments for FFYs 1998 through 2002 specified in a chart in section 1923(f)(2) of the Act. Section 601 of Pub. L. 105-78 amended the DSH allotment contained in this chart for the State of Minnesota for FFY 1998. The October 8, 1998 notice published the statutorily prescribed DSH allotments for all States for FFYs 1998 through 2002, in accordance with the amounts specified in the chart at section 1923(f)(2) of the Act, as established by the BBA and as amended by Pub. L. 105-78. Subsequent to the publication of the DSH allotments for these years, a number of legislative actions revised the DSH allotments specified in the chart at section 1923(f)(2) of the Act, for certain States. Specifically, sections 702, 703, and 704 of Pub. L. 105-277 (enacted on October 21, 1998) amended the FFY 1999 DSH allotments for Minnesota, New Mexico, and Wyoming, respectively, and section 601(a) of the Medicare, Medicaid, SCHIP Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113, enacted on November 29, 1999) amended the FFYs 2000, 2001, and 2002 DSH allotments for the District of Columbia, Minnesota, New Mexico, and Wyoming.

C. DSH Allotments For FFYs 2001 and 2002

Section 701(a) of the Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554, enacted on December 21, 2000) added a new section 1923(f)(4) of the Act that provided for a “Special Rule For Fiscal Years 2001 and 2002,” under which States' DSH allotments for FFY 2001 and 2002 would be determined through the application of a methodology. The DSH allotments for these fiscal years, calculated under this methodology, supercede the DSH allotments for the years that are specified in the chart at section 1923(f)(2) of the Act. Under section 1923(f)(4) of the Act, the DSH allotments for FFY 2001 and FFY 2002 are determined by increasing the States' prior FFY DSH allotments by the Consumer Price Index for all Urban Consumers (CPI-U) for the prior fiscal year, subject to the limitation that an increase to a State's DSH allotment for a fiscal year could not result in the DSH allotment exceeding 12 percent of the State's total Federal medical assistance expenditures for the allotment year (referred to as the 12-percent limit). The application of this special rule for FFY 2001 and FFY 2002 had the effect of increasing States' DSH allotments for those years, as compared to the allotments they would have received under the chart at section 1923(f)(2) of the Act. In fact, the chart contained at section 1923(f)(2) of the Act would have provided for a decrease in States' DSH allotments over the fiscal years.

The BIPA also added a new section 1923(f)(5) of the Act, which established a “Special Rule For Extremely Low DSH States.” Under this rule, States with FFY 1999 DSH expenditures that were greater than zero percent and less than 1 percent of the States' FFY 1999 total medical assistance expenditures were considered to be “low-DSH States.” Under section 1923(f)(5) of the Act, the Low-DSH States' FFY 2001 DSH allotments were increased to 1 percent of the States' total FFY 2001 medical assistance expenditures. The Low-DSH States' increased FFY 2001 DSH allotments were the basis for calculating the States' FFY 2002 DSH allotments. That is, similar to the methodology applied for determining the other (non-Low-DSH) States' allotments, the Low-DSH States' FFY 2002 allotments were determined by increasing their FFY 2001 allotment (as determined under the Low-DSH provision at section 1923(f)(5) of the Act) by the CPI-U for the prior fiscal year, subject to the 12-percent limit.

D. DSH Allotments for FFY 2003

Section 1923(f)(3) of the Act, as established by the BBA and amended by the BIPA, provides that the States' FFY 2003 DSH allotments are calculated by increasing their FFY 2002 allotments (as specified in the chart in Section 1923(f)(2) of the Act) by the CPI-U for the prior fiscal year, subject to the 12-percent limit. That is, the FFY 2003 allotments were not based on the FFY 2002 DSH allotments as were determined under section 1923(f)(4) of the Act. Since the FFY 2002 DSH allotments specified in the chart in section 1923(f)(2) of the Act are lower than the actual FFY 2002 DSH allotments (determined under section 1923(f)(4) of the Act), in general, States' FFY 2003 DSH allotments are lower than their FFY 2002 allotments. The exception to this, are the FFY 2003 DSH allotments for the Low-DSH States. Under the Low-DSH State provision, the Low-DSH States' FFY 2003 allotments are determined by increasing their actual FFY 2002 DSH allotments (not their FFY 2002 allotments specified in the chart in section 1923(f)(2) of the Act) by the CPI-U for the previous fiscal year. Therefore, Low-DSH States' DSH allotments increase (in general by the CPI-U) from FFY 2002 to FFY 2003.

E. DSH Allotments for FFY 2004

Section 1001(a) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (enacted on December 8, 2003) amended section 1923(f)(3) of the Act to provide for a “Special, Temporary Increase In Allotments On A One-Time, Non-Cumulative Basis.” Under this provision, States' FFY 2004 DSH allotments are determined by increasing their FFY 2003 allotments by 16 percent, and the fiscal year DSH allotment amounts so determined are not subject to the 12-percent limit.

F. DSH Allotments for FFY 2005, and Thereafter

Under the MMA amendments to section 1923(f) of the Act, each State's DSH allotment for FFY 2005 and for subsequent fiscal years is equal to the State's DSH allotment for FFY 2004, subject to the 12-percent limit. Furthermore, in the first fiscal year for which the Secretary estimates that a State's DSH allotment equals (or no longer exceeds) the DSH allotment as would have been determined under the statute in effect prior to the enactment of MMA, the allotment for that fiscal year will be calculated by increasing the State's DSH allotment for the previous fiscal year by the CPI-U for the prior fiscal year, subject to the 12-percent limit. The following example illustrates how the fiscal year DSH allotment would be calculated for fiscal years after FFY 2004.

Example—A State's FFY 2003 DSH allotment is $100 million. Under the MMA, the State's FFY 2004 DSH allotment would be $116 million ($100 million increased by 16 percent). The State's DSH allotment continues to $116 million for fiscal years following FFY 2004. However, for each fiscal year after FFY 2004, CMS would calculate the DSH allotments for the State in accordance with the statute in effect prior to the enactment of MMA. Under this methodology, the State's DSH allotment is determined by increasing the State's DSH allotment for the previous fiscal year by the CPI-U for the previous fiscal year. For purposes of this example, in accordance with this methodology the State's FFY 2007 DSH allotment is determined to be $115 million and the CPI-U for FFY 2007 is 2 percent. Therefore, under the prior law methodology, the State's FFY 2008 DSH allotment would be $117.3 million, calculated as $115 million increased by the 2 percent CPI-U for FFY 2007. Since $117.3 is greater than $116 million (the FFY 2004 DSH allotment calculated under MMA), the State's FFY 2008 DSH allotment would be $118.32 million, calculated as $116 million increased by 2 percent (the CPI-U for FFY 2007, the previous fiscal year). For FFY 2009 and thereafter, the State's DSH allotment would be calculated by increasing the previous fiscal year's DSH allotment by the CPI-U. Note, in each of the FFYs 2005 and thereafter, the DSH allotment would be subject to the 12-percent limit (in this example, that is not an issue).

G. DSH Allotments For Low-DSH States for FFYs 2004 and Thereafter

The MMA also amended section 1923(f)(5) of the Act regarding the calculation of the DSH allotments for Low-DSH States for FFY 2004 and subsequent fiscal years. Under section 1923(f)(5)(B) of the Act, as amended by MMA, new criteria are applied for determining whether a State is a Low-DSH State beginning with FFY 2004. Specifically, under section 1923(f)(5)(B) of the Act, as amended by MMA, a State is considered a Low-DSH State for FFY 2004 if its total DSH payments under its State plan for FFY 2000 (including Federal and State shares) as reported to us as of August 31, 2003, is greater than 0 percent and less than 3 percent of the State's total FFY 2000 expenditures under its State plan for medical assistance. For States, that meet the new Low-DSH criteria, their FFY 2004 DSH allotments are calculated by increasing their FFY 2003 DSH allotments by 16 percent. Furthermore, the DSH allotments for FFYs 2005 through 2008 for the States meeting this Low-DSH criteria would be determined by increasing the previous fiscal year's allotment by 16 percent. The Low-DSH States' DSH allotments for FFYs 2004 through 2008 would not be subject to the 12-percent limit. The Low-DSH States' DSH allotments for FFYs 2009 and thereafter would be calculated by increasing such States' DSH allotments for the prior fiscal year by the CPI-U for that prior fiscal year. For FFYs 2009 and thereafter, the DSH allotments so determined would be subject to the 12-percent limit.

H. IMD DSH Limits for FFYs 1998 and Thereafter

Section 4721(b) of the BBA added section 1923(h) to the Act to provide that Federal financial participation (FFP) is not available for DSH payments to institutions for mental disease (IMD) and other mental health facilities that are in excess of a State-specific aggregate limit.

In the October 8, 1998 Federal Register notice, we interpreted the aggregate limit of IMD and other mental health facilities to be the lesser of a State's FFY 1995 total computable (State and Federal share) IMD and other mental health facility DSH expenditures applicable to the State's FFY 1995 DSH allotment (as reported on the Form CMS-64 as of January 1, 1997), or the amount equal to the product of the State's s current year total computable DSH allotment and the applicable percentage.

Each State's IMD limit on DSH payments to IMDs and other mental health facilities is calculated by first determining the State's total computable DSH expenditures attributable to the FFY 1995 DSH allotment for mental health facilities and inpatient hospitals. This is based on the total computable DSH expenditures reported by the State on the Form CMS-64 as mental health DSH and inpatient hospital as of January 1, 1997.

Once we determine the total computable amount of DSH expenditures applicable to the FFY 1995 DSH allotment, we then calculate an “applicable percentage.” The applicable percentage for FFY 1998 through FFY 2000 (1995 IMD DSH percentage) is calculated by dividing the total computable amount of IMD and mental health DSH expenditures applicable to the State's FFY 1995 DSH allotment by the total computable amount of all DSH expenditures (mental health facility plus inpatient hospital) applicable to the FFY 1995 DSH allotment. For FFY 2001 and thereafter, the applicable percentage is defined as the lesser of the applicable percentage as calculated above (for FFYs 1998 through 2001) or 50 percent for FFY 2001; 40 percent for FFY 2002; and 33 percent for each subsequent FFY.

The applicable percentage is then applied to each State's total computable FFY DSH allotment for the current FFY. The State's total computable FFY DSH allotment is calculated by dividing the State's Federal share DSH allotment for the FFY by the State's Federal medical assistance percentage (FMAP) for that FFY.

In the final step of the calculation, the State's total computable IMD DSH limit for the FFY is set at the lesser of the product of a State's current fiscal year total computable DSH allotment and the applicable percentage for that fiscal year, or the State's FFY 1995 total computable IMD and other mental health facility DSH expenditures applicable to the State's FFY 1995 DSH allotment as reported on the Form CMS-64.

I. Preliminary and Final DSH Allotments and IMD DSH Limits

In general, we initially determines States' DSH allotments and IMD DSH limits for a fiscal year using estimates of medical assistance expenditures, including DSH expenditures in their Medicaid programs. These estimates are provided by States each year on the August quarterly Medicaid budget reports (Form CMS-37) prior to the Federal fiscal year for which the DSH allotments and IMD DSH limits are being determined. The DSH allotments and IMD DSH limits determined using these estimates are referred to as “preliminary.” Only after we receive States” reports of the actual related medical assistance expenditures through the quarterly expenditure report (Form CMS-64), are the “final” DSH Allotments and IMD DSH limits determined. In this regard, the DSH allotments for FFY 1998 through FFY 2000, as published in the October 8, 1998 Federal Register notice were considered as final since these allotments were prescribed in the chart in section 1923(f)(2) of the Act. Similarly, the FFY 1998 and FFY 1999 IMD DSH limits published in the October 8, 1998 Federal Register were also considered as final, since these limits were based on the actual expenditures from FFY 1995 and the final FFY 1998 and FFY 1999 DSH allotments. This notice also announces the final FFY 2001 and 2002 DSH allotments (since they are based on the actual related expenditures), the preliminary FFY 2003 and 2004 DSH allotments (based on estimated expenditures), the final FFY 2000 through 2002 IMD DSH limits (based on the final DSH allotments for those fiscal years), and the preliminary FFY 2003 and 2004 IMD DSH limits (based on the preliminary DSH allotments for those years).

J. Annual Reporting of DSH Payments

Section 4721(c) of the BBA added section 1923(a)(2)(D) of the Act to require that States submit an annual report to us describing the DSH payments made to each disproportionate share hospital. This notice describes the contents of the DSH report for FFY 2004.

II. Calculation of the Final FFY 2001 Federal Share State DSH Allotments, the Final FFY 2002 Federal Share State DSH Allotments, the Preliminary FFY 2003 Federal Share State DSH Allotments, and the Preliminary FFY 2004 Federal Share State DSH Allotments

Section 701(a)(1)(A) of BIPA, amended section 1923(f)(4) of the Act, to revise the formula for computing the Federal share DSH allotments for FFY 2001 and FFY 2002. For FFY 2001 and FFY 2002, a State's Federal share DSH allotment increased from the prior year allotment by the (CPI-U) to the extent that the current year DSH allotment or the increased allotment does not exceed 12 percent of the Federal share of the State's total medical assistance expenditures (including DSH) for the current year.

Section 701(a)(2)(A) of BIPA, amended section 1923(f)(5) of the Act, to provide for calculating the DSH allotment under a “special rule for extremely low DSH States.” The special rule applies to States whose FFY 1999 total DSH expenditures are greater than zero percent, but less than one percent, of their total FFY 1999 medical assistance expenditures (including DSH) as reported to us as of August 31, 2000. Under the special rule, the DSH allotments for FFY 2001 for these extremely Low-DSH States will be increased to 1 percent of the State's total amount of medical assistance expenditures (including DSH) under their plan for FFY 2001. However, application of the special rule cannot result in a decrease in the extremely Low-DSH State FFY 2001 allotments from an amount as would be calculated by application of the provisions of section 1923(f)(4) of the Act, as amended by BIPA. For subsequent fiscal years, the allotments for extremely Low-DSH States will be equal to their allotment for the previous FFY, increased by the percentage change in the CPI-U for the previous year, to the extent that the DSH allotment for that year does not exceed 12 percent of the Federal Share of the State's total medical assistance expenditures (including DSH) for the year.

Chart 1 of Addendum A to this notice represents a republication for the States' FFY 1998 through FFY 2000 DSH allotments; these amounts were previously published in the Federal Register on October 8, 1998, in a chart which reflected the DSH allotments in section 1923(f)(2) of the Act, as amended through the provisions of section 601 of Pub. L. 105-78. Chart 1 updates the chart published in the Federal Register on October 8, 1998 for certain States to reflect the further amendments made to the DSH allotments for FFY 1998 through FFY 2000 in section 1923(f)(2) of the Act, as amended by BBRA.

Charts 2 and 3 of Addendum A to this notice provides the States' final FFY 2001 and FFY 2002 DSH allotments, respectively.

Charts 4 and 5 of Addendum A to this notice provides the States' “preliminary” FFY 2003 and FFY 2004 DSH allotments. These preliminary allotments for each State were computed using the August 2002 and August 2003 estimates submitted by the States on the Form CMS-37. We will publish the final FFY 2003 and FFY 2004 DSH allotments for each State following receipt of, the States' four quarterly Medicaid expenditure reports (Form CMS-64) for FFY 2003 and FFY 2004.

Chart 6 of Addendum A to this notice provides the determination of the Low-DSH States in accordance with the 1-percent test established by BIPA for determining State FY 2001 DSH allotments.

Chart 7 of Addendum A to this notice provides the determination of the Low-DSH States in accordance with the 3-percent test established by MMA for determining State FY 2004 DSH allotments.

III. Calculation of the FFYs 2000 through 2004 IMD DSH Limits

Section 1923(h) of the Act specifies the methodology to be used to establish the limits on the amount of DSH payments that a State can make to IMDs and other mental health facilities. FFP is not available for IMD/DSH payments that exceed the lesser of the State's FFY 1995 total computable mental health DSH expenditures applicable to the State's FFY 1995 DSH allotment as reported to us on the Form CMS-64 as of January 1, 1997; or the amount equal to the product of the State's current FFY total computable DSH allotment and the applicable percentage. The amounts of the limits on IMD DSH expenditures were made available to the States as part of their CMS-64 report. We are publishing these limits along with an explanation of the calculation of these limits in the Federal Register notice as a courtesy to providers and the general public.

For FFY 2000, the applicable percentage is computed as the ratio of—

(1) The State's FFY 1995 total computable (Federal and State share) mental health DSH payments applicable to the State's FFY 1995 DSH allotment and as reported on the Form CMS-64 as of January 1, 1997

(2) The State's FFY 1995 total computable amount of all DSH expenditures (mental health facility and inpatient hospital) applicable to the State's FFY 1995 DSH allotment as reported on the Form CMS-64 as of January 1, 1997.

For FFY 2000, the applicable percentage is calculated and applied to the State's FFY 2000 total computable DSH allotment. A State's total computable FFY 2000 DSH allotment is calculated by dividing the State's Federal share DSH allotment for FFY 2000 by the State's Federal medical assistance percentage (FMAP) for FFY 2000. This result is then compared to the State's FFY 1995 total computable mental health DSH expenditures applicable to the State's FFY 1995 DSH allotment as reported on the Form CMS-64 as of January 1, 1997. The lesser of these two amounts is the State's limitation on total computable IMD/DSH expenditures for FFY 2000.

For FFY 2001, the applicable percentage is the lesser of 50 percent or the 1995 DSH IMD percentage of the amount computed for FFY 2000. This percentage is applied to the State's FFY 2001 total computable DSH allotment. This result is then compared to the State's FFY 1995 total computable mental health DSH expenditures applicable to the State's FFY 1995 DSH allotment as reported on the Form CMS-64 as of January 1, 1997. The lesser of these two amounts is the State's limitation on total computable IMD/DSH expenditures for FFY 2001.

For FFY 2002, the applicable percentage is the lesser of 40 percent or the 1995 DSH IMD percentage of the amount computed for FFY 2000. This percentage is applied to the State's FFY 2002 total computable DSH allotment. This result is then compared to the State's FFY 1995 total computable mental health DSH expenditures applicable to the State's FFY 1995 DSH allotment as reported on the Form CMS-64 as of January 1, 1997. The lesser of these two amounts is the State's limitation on total computable IMD/DSH expenditures for FFY 2002.

For FFY 2003, the applicable percentage is the lesser of 33 percent or the 1995 DSH IMD percentage of the amount computed for FFY 2000. This percentage is applied to the State's FFY 2003 total computable DSH allotment. This result is then compared to the State's FFY 1995 total computable mental health DSH expenditures applicable to the State's FFY 1995 DSH allotment as reported on the Form CMS-64 as of January 1, 1997. The lesser of these two amounts is the State's limitation on total computable IMD/DSH expenditures for FFY 2003.

For FFY 2004, the applicable percentage is the lesser of 33 percent or the 1995 DSH IMD percentage of the amount computed for FFY 2000. This percentage is applied to the State's FFY 2004 total computable DSH allotment. This result is then compared to the State's FFY 1995 total computable mental health DSH expenditures applicable to the State's FFY 1995 DSH allotment as reported on the Form CMS-64 as of January 1, 1997. The lesser of these two amounts is the State's limitation on total computable IMD/DSH expenditures for FFY 2004.

Charts 8 and 9 of Addendum A to this notice represents a republication of the detail of each States' IMD/DSH limitation for FFY 1998 and FFY 1999; these amounts were previously published in the Federal Register on October 8, 1998, in a chart which reflected the IMD DSH limits in section 1923(h) of the Act, as amended through the provisions of section 601 of Pub. L. 105-78. Charts 8 and 9 updates the chart published in the Federal Register on October 8, 1998 for certain States to reflect the further amendments made to the DSH allotments for FFY 1998 through FFY 2000 in section 1923(f)(2) of the Act (which are used in the determination of the IMD DSH limits), as amended BBRA.

Charts 10 through 14 of Addendum A to this notice detail each State's IMD/DSH limitation for FFYs 2000 through 2004, respectively, in accordance with section 1923(h) of the Act. We will address future payments in subsequent issuances.

IV. Annual Reporting Requirements

Section 4721(a) of Pub. L. 105-33, amended section 1923(a) of the Act requiring States to provide an annual report to the Secretary describing the disproportionate share payments to each DSH.

In the October 8, 1998 Federal Register (63 FR 54142), we published a notice that addressed the annual reporting requirements. In that notice, we recommended that a State submit hospital-specific data (name of hospital, type of hospital—for example, children's, psychiatric, public versus private—and annual payment) to its CMS regional office at the close of the first quarter of the FFY following the FFY in which the DSH was paid. We requested comments from the public regarding the format and the data that would be collected in this report.

In response to the October 8, 1998 notice, we received several comments regarding the content and the availability of this report. Many comments indicated that the reports should include more specific details including the formula the State uses for qualifying the hospital for the DSH payment, and the components used to calculate the hospital-specific DSH payments.

In addition to these comments requesting that more detailed data would be required on the DSH annual report, the Office of the Inspector General (OIG) made recommendations about States' DSH programs based on the findings from their State audits. The BIPA provided that the 175 percent hospital specific DSH limit would apply to qualifying public hospitals in all States. The limit, allowing DSH payments of up to 175 percent of each hospital's cost of unreimbursed care, would apply for two State fiscal years beginning on the first day of the State fiscal year that begins after September 30, 2002 and ends on the last day of the succeeding State fiscal year.

The OIG has begun to monitor States' disproportionate share hospital payments to determine whether the results from their reviews of uncompensated care claimed by hospitals at selected States and their review of enhanced payments and intergovernmental transfer of funds by public hospitals to the States would support the need for increased DSH reimbursements. To date, they have completed or are in the process of completing audits in several States.

Based on current audit results, the OIG believes that DSH payments presently are not always being retained and used by the public hospitals and the DSH payments received are not always correctly calculated.

Based upon the statutory requirement that States provide an annual report to the Secretary describing the disproportionate share hospital payments, each State must submit DSH expenditure information utilizing an Excel format containing the mandatory requirements listed in Addendum B.

States may submit their annual report electronically to NIRT@cms.hhs.gov. These reports must be submitted by the end of the first quarter of the FFY following the reporting FFY. Therefore, by December 31, 2004, all FFY 2004 DSH reports must be sent to the CMS Central Office at the following address: National Institutional Reimbursement Team, CMS, CMSO, Mailstop: S3-13-15, 7500 Security Boulevard, Baltimore, Maryland 21244-1850.

V. Collection of Information Requirements

Under the Paperwork Reduction Act of 1995 (PRA), we are required to provide 60-day notice in the Federal Register and solicit public comment before a collection of information requirement is submitted to the Office of Management and Budget (OMB) for review and approval. In order to fairly evaluate whether OMB approves an information collection, section 3506(c)(2)(A) of the PRA requires that we solicit comment on the following issues:

• The need for the information collection and its usefulness in carrying out the proper functions of our agency.
• The accuracy of our estimate of the information collection burden.
• The quality, utility, and clarity of the information to be collected.
• Recommendations to minimize the information collection burden on the affected public, including automated collection techniques.

The requirements associated with this notice are currently approved under OMB approval number 0938-0746 (CMS-R-0266, Medicaid Disproportionate Share Annual Report for Hospitals and Institutions), with a current expiration date of October 30, 2005. However, as reflected in this notice, we are proposing to modify the currently approved requirements by providing a structured format for State reporting and refining the currently approved collection requirements. The format will not impose any additional burden.

If you comment on these information collection and recordkeeping requirements, please mail copies directly to the following:

Centers for Medicare & Medicaid Services, Office of Strategic Operations and Regulatory Affairs, Attn: John Burke (CMS-2062-N), Room C5-13-28, 7500 Security Boulevard, Baltimore, MD 21244-1850;

  and

Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10235, New Executive Office Building, Washington, DC 20503, Attn: Brenda Aguilar, CMS Desk Officer (CMS-2062-N).

VI. Impact Statement

The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 through 612, requires a regulatory flexibility analysis for every rule subject to proposed rulemaking procedures under the Administrative Procedure Act, 5 U.S.C. 553, unless we certify that the rule will not have a significant economic impact on a substantial number of small entities. For purposes of the RFA, States and individuals are not considered small entities. However, providers with receipts ranging from less than $5 million to less than $25 million depending on their provider type are considered small entities (65 FR 69432, November 17, 2000). Due to the various controlling statutes, the effects on providers are not a result of any independent regulatory impact and not this notice. The purpose of the notice is to simply announce the latest distributions as required by the statute.

Additionally, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a notice may have a significant impact on the operations of a substantial number of small rural hospitals. Such an analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area and has fewer than 100 beds.

The BBA and the BBRA set statutorily defined limits on the amount of Federal share DSH expenditures available for FFYs 1998 through 2002. The BIPA amended sections of the Act that set forth these statutorily defined Federal DSH allotments. The following table displays our estimates of the impact of changes to the Federal DSH allotments as a result of BBA, BBRA, and BIPA.

Based on these findings, the limits initially imposed by the BBA and the BBRA will negatively impact the availability of FFP to States, thus potentially negatively impacting the availability of Medicaid expenditures to hospitals, especially IMDs. However, the BIPA reduces the Federal savings, thus increasing the amount of Federal funding available to States under the DSH program. While overall, the statute still mandates some reduction in DSH payments, we do not believe that this notice will have a significant economic impact on a substantial number of small entities because it reflects no new policies or procedures.

In section 202 of the Unfunded Mandates Reform Act requires that agencies prepare an assessment of anticipated costs and benefits for any rule that may result in an annual expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, of $110 million or more. This notice has no consequential effect on State, local, or tribal governments, or the private sector, and will not create an unfunded mandate.

In accordance with the provisions of Executive Order 12866, this notice was reviewed by the Office of Management and Budget (OMB).

We have reviewed this notice under the threshold criteria of Executive Order 13132, Federalism. We have determined that it does not significantly affect the rights, roles, and responsibilities of States.

Addendum A

This addendum contains the charts 1 through 6 (including associated keys) that are referred to in the preamble of this notice.

Addendum B: General Instructions and Mandatory Hospital DSH Reporting Requirements

States are required to submit, at least annually, DSH expenditure information by December 31 of each year for the prior Federal fiscal year (FFY). For example, FFY 2004 reports should be submitted electronically to CMS central office no later than December 31, 2004. Total DSH expenditures reported on this form must reflect the total DSH expenditures reported on the form CMS 64-9D for that year. States must use an Excel spreadsheet format, as specified in Addendum C.

(Please see Addendum C for spreadsheet format and a sample spreadsheet.)

Addendum C: The Formatting Requirements for Submission of the Annual DSH Report

Excel Spreadsheet Format Requirements and Sample Spreadsheet

The following is the format for and a sample of the DSH report that States must submit beginning with FFY 2004:

Part I. Definition of Uncompensated Care

• Indicate the components and methodology used by the State to calculate uncompensated care.

Part II. FFY (Insert Year Reported)

Authority: Section 1923(a)(2), (f), and (h) of the Social Security Act (42 U.S.C. 1396r-4(a)(2), (f), and (h), and Public Law 105-33).

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical Assistance Program)