WAC 388-550-4900   Disproportionate share hospital (DSH) payments--General provisions.  (1) As required by section 1902 (a)(13)(A) of the Social Security Act (42 USC 1396 (a)(13)(A)) and RCW 74.09.730, the department makes payment adjustments to eligible hospitals that serve a disproportionate number of low-income clients with special needs. These adjustments are also known as disproportionate share hospital (DSH) payments.

     (2) No hospital has a legal entitlement to any DSH payment. A hospital may receive DSH payments only if:

     (a) It satisfies the requirements of 42 USC 1396r-4;

     (b) It satisfies all the requirements of department rules and policies; and

     (c) The legislature appropriates sufficient funds.

     (3) For purposes of eligibility for DSH payments, the following definitions apply:

     (a) "Base year" means the hospital fiscal year or medicare cost report year that ended during the calendar year immediately preceding the year in which the state fiscal year for which the DSH application is being made begins.

     (b) "Case mix index (CMI)" means the average of diagnosis related group (DRG) weights for all of an individual hospital's DRG-paid medicaid claims during the state fiscal year (SFY) two years prior to the SFY for which the DSH application is being made.

     (c) "Charity care" means necessary hospital care rendered to persons unable to pay for the hospital services or unable to pay the deductibles or coinsurance amounts required by a third-party payer. The charity care amount is determined in accordance with the hospital's published charity care policy.

     (d) "Disproportionate share hospital (DSH) cap" means the maximum amount per state fiscal year that the state can distribute in DSH payments to hospitals (statewide DSH cap), or the maximum amount of DSH payments a hospital may receive during a state fiscal year (hospital-specific DSH cap).

     (e) "DSH reporting data file (DRDF)" means the information submitted by hospitals to the department which the department uses to verify medicaid patient eligibility and patient days.

     (f) "Hospital-specific DSH cap" means the maximum amount of DSH payments a hospital may receive from the department during a state fiscal year. For a critical access hospital (CAH), the DSH cap is based strictly on the net cost to the hospital of providing services to uninsured patients.

     (g) "Low income utilization rate (LIUR)" means the sum of these two percentages: (1) The ratio of payments received by the hospital for patient services provided to clients under medicaid (including managed care) and state-administered programs, plus cash subsidies received by the hospital from state and local governments for patient services, divided by total payments received by the hospital from all patient categories; plus (2) the ratio of inpatient charity care charges (excluding contractual allowances), divided by total billed charges for inpatient services. The department uses LIUR as one criterion to determine a hospital's eligibility for the low income disproportionate share hospital (LIDSH) program. To qualify for LIDSH, a hospital's LIUR must be greater than twenty-five percent.

     (h) "Medicaid inpatient utilization rate (MIPUR)" means the number of inpatient days of service provided by a hospital to medicaid clients during its hospital fiscal year or medicare cost report year, divided by the number of inpatient days of service provided by that hospital to all patients during the same period.

     (i) "Medicare cost report year" means the twelve-month period included in the annual cost report a medicare-certified hospital or institutional provider is required by law to submit to its fiscal intermediary.

     (j) "Nonrural hospital" means a hospital that is not a peer group E hospital or a small rural hospital and is located inside the state of Washington or in a designated bordering city. For DSH purposes, the department considers as nonrural any hospital located in a designated bordering city.

     (k) "Obstetric services" means routine, nonemergency delivery of babies.

     (l) "Service year" means the one year period used to measure the costs and associated charges for hospital services. The service year may refer to a hospital's fiscal year or medicare cost report year, or to a state fiscal year.

     (m) "Small rural hospital" means a hospital that is not a peer group E hospital, has fewer than seventy-five acute licensed beds, is located inside the state of Washington, and is located in a city or town with a nonstudent population of no more than seventeen thousand one hundred fifteen in calendar year 2006 as determined by the Washington State office of financial management estimate. The nonstudent population ceiling increases cumulatively by two percent each succeeding state fiscal year.

     (n) "Uninsured patient" means an individual who does not have health insurance that would apply to the hospital service the individual sought and received. An individual who did have health insurance that applied to the hospital service the individual sought and received, is considered an insured individual for DSH program purposes, even if the insurer did not pay the full charges for the services. When determining the cost of a hospital service provided to an uninsured patient, the department uses as a guide whether the service would have been covered under medicaid.

     (4) To be considered for a DSH payment for each SFY, a hospital located in the state of Washington or in a designated bordering city must submit to the department a completed and final DSH application by the due date. The due date will be posted on the department's website.

     (5) A hospital is a disproportionate share hospital for a specific SFY if the hospital submits a completed DSH application for that specific year, if it satisfies the utilization rate requirement (discussed in (a) of this subsection), and the obstetric services requirement (discussed in (b) of this subsection).

     (a) The hospital must have a medicaid inpatient utilization rate (MIPUR) greater than one percent; and

     (b) Unless one of the exceptions described in (i)(A) or (B) of this subsection applies, the hospital must have at least two obstetricians who have staff privileges at the hospital and who have agreed to provide obstetric services to eligible individuals.

     (i) The obstetric services requirement does not apply to a hospital that:

     (A) Provides inpatient services predominantly to individuals younger than age eighteen; or

     (B) Did not offer nonemergency obstetric services to the general public as of December 22, 1987, when section 1923 of the Social Security Act was enacted.

     (ii) For hospitals located in rural areas, "obstetrician" means any physician with staff privileges at the hospital to perform nonemergency obstetric procedures.

     (6) To determine a hospital's eligibility for any DSH program, the department uses the criteria in this section and the information obtained from the DSH application submitted by the hospital, subject to the following:

     (a) Charity care. If the hospital's DSH application and audited financial statements for the relevant fiscal year do not agree on the amount for charity care, the department uses the lower amount listed. For purposes of calculating a hospital's LIUR, the department allows a hospital to claim charity care amounts related to inpatient services only. A hospital must submit a copy of its charity care policy for the relevant fiscal year as part of the hospital's DSH application.

     (b) Total inpatient hospital days. If the hospital's DSH application and its medicare cost report do not agree on the number of total inpatient hospital days, the department uses the higher number listed to determine the hospital's MIPUR. Labor and delivery days count towards total inpatient hospital days. Nursing facility and swing bed days do not count towards total inpatient hospital days.

     (7) The department administers the following DSH programs (depending on legislative budget appropriations):

     (a) Low income disproportionate share hospital (LIDSH);

     (b) Institution for mental diseases disproportionate share hospital (IMDDSH):

     (c) General assistance-unemployable disproportionate share hospital (GAUDSH);

     (d) Small rural disproportionate share hospital (SRDSH);

     (e) Small rural indigent assistance disproportionate share hospital (SRIADSH);

     (f) Nonrural indigent assistance disproportionate share hospital (NRIADSH);

     (g) Public hospital disproportionate share hospital (PHDSH); and

     (h) Psychiatric indigent inpatient disproportionate share hospital (PIIDSH).

     (8) Except for IMDDSH, the department allows a hospital to receive any one or all of the DSH payment adjustments it qualifies for, up to the individual hospital's DSH cap (see subsection (10) of this section). See WAC 388-550-5130 regarding IMDDSH. To be eligible for payment under multiple DSH programs, a hospital must meet:

     (a) The basic requirements in subsection (5) of this section; and

     (b) The eligibility requirements for the particular DSH payment, as discussed in the applicable DSH program WAC.

     (9) For each SFY, the department calculates DSH payments due an eligible hospital using data from the hospital's base year. The department does not use base year data for GAUDSH and PIIDSH payments, which are calculated based on specific claims data.

     (10) The department's total DSH payments to a hospital for any given SFY cannot exceed the individual hospital's annual DSH limit (also known as the hospital-specific DSH cap) for that SFY. Except for critical access hospitals (CAHs), the department determines a hospital's DSH cap as follows:

     (a) The cost to the hospital of providing services to medicaid clients, including clients served under medicaid managed care organization (MCO) plans;

     (b) Less the amount paid by the state under the non-DSH payment provision of the medicaid state plan;

     (c) Plus the cost to the hospital of providing services to uninsured patients;

     (d) Less any cash payments made by or on behalf of uninsured patients; and

     (e) Plus any adjustments required and/or authorized by federal statute or regulation.

     (11) A CAH's DSH cap is based strictly on the cost to the hospital of providing services to uninsured patients. In calculating a CAH's DSH cap, the department deducts payments received by the hospital from and on behalf of the uninsured patients from the hospital's costs of services for the uninsured patients.

     (12) In any given federal fiscal year, the total of the department's DSH payments cannot exceed the statewide DSH cap as published in the federal register.

     (13) If the department's DSH payments for any given federal fiscal year exceed the statewide DSH cap, the department will adjust DSH payments to each hospital to account for the amount overpaid. The department makes adjustments in the following program order:

     (a) PHDSH;

     (b) SRIADSH;

     (c) SRDSH;

     (d) NRIADSH;

     (e) GAUDSH;

     (f) PIIDSH;

     (g) IMDDSH; and

     (h) LIDSH.

     (14) If the statewide DSH cap is exceeded, the department will recoup DSH payments made under the various DSH programs, in the order of precedence described in subsection (13) of this section, starting with PHDSH, until the amount exceeding the statewide DSH cap is reduced to zero. See specific program WACs for description of how amounts to be recouped are determined.

     (15) The total amount the department may distribute annually under a particular DSH program is capped by legislative appropriation, except for PHDSH, GAUDSH, and PIIDSH, which are not fixed pools. Any changes in payment amount to a hospital in a particular DSH pool means a redistribution of payments within that DSH pool. When necessary, the department will recoup from hospitals to make additional payments to other hospitals within that DSH pool.

     (16) If funds in a specific DSH program need to be redistributed because of legislative, administrative, or other state action, only those hospitals eligible for that DSH program will be involved in the redistribution.

     (a) If an individual hospital has been overpaid by a specified amount, the department will recoup that overpayment amount from the hospital and redistribute it among the other eligible hospitals in the DSH pool. The additional DSH payment to be given to each of the other hospitals from the recouped amount is proportional to each hospital's share of the particular DSH pool.

     (b) If an individual hospital has been underpaid by a specified amount, the department will pay that hospital the additional amount owed by recouping from the other hospitals in the DSH pool. The amount to be recouped from each of the other hospitals is proportional to each hospital's share of the particular DSH pool.

     (17) All information submitted by a hospital related to its DSH application is subject to audit. The department may audit any, none, or all DSH applications for a given state fiscal year. The department determines the extent and timing of the audits. For example, the department may choose to do a desk review upon receipt of an individual hospital's DSH application and/or supporting documentation, or audit all hospitals that qualified for a particular DSH program after payments have been distributed under that program.

     (18) If a hospital's submission of incorrect information or failure to submit correct information results in DSH overpayment to that hospital, the department will recoup the overpayment amount, in accordance with the provisions of RCW 74.09.220 and 43.20B.695.

     (19) DSH calculations use fiscal year data, and DSH payments are distributed based on funding for a specific state fiscal year. Therefore, unless otherwise specified, changes and clarifications to DSH program rules apply for the full state fiscal year in which the rules are adopted.



[Statutory Authority: RCW 74.08.090, 74.09.500. 07-14-090, § 388-550-4900, filed 6/29/07, effective 8/1/07; 06-08-046, § 388-550-4900, filed 3/30/06, effective 4/30/06. Statutory Authority: RCW 74.04.050, 74.08.090. 05-12-132, § 388-550-4900, filed 6/1/05, effective 7/1/05. Statutory Authority: RCW 74.08.090, 74.04.050, and 2003 1st sp.s. c 25. 04-12-044, § 388-550-4900, filed 5/28/04, effective 7/1/04. Statutory Authority: RCW 74.08.090, 74.09.500, 74.09.035(1), and 43.88.290. 03-13-055, § 388-550-4900, filed 6/12/03, effective 7/13/03. Statutory Authority: RCW 74.08.090, 74.09.730 and 42 U.S.C. 1396r-4. 99-14-040, § 388-550-4900, filed 6/30/99, effective 7/1/99. Statutory Authority: RCW 74.08.090, 74.09.730, 74.04.050, 70.01.010, 74.09.200,[74.09.]500 , [74.09.]530 and 43.20B.020. 98-01-124, § 388-550-4900, filed 12/18/97, effective 1/18/98.]