What is a Disproportionate Share Hospital?
Disproportionate Share Hospitals, also known as DSH hospitals, provide services for a disproportionate percentage of low-income patients that are uninsured or covered by Medicaid in comparison to other hospitals within the state.
What is a Disproportionate Share Hospital payment?
Section 1923 of the Social Security Act requires states take into account the situation of hospitals that serve a disproportionate share of low-income patients when making Medicaid payments to the hospitals. To make this payment, the state of Minnesota processes DSH adjustments through a percent increase on each inpatient hospital claim. The percentage add on varies by hospital depending on factors.
State Plan – DSH methodology
Disproportionate population adjustment or DPA eligibility
A Minnesota hospital must meet specific qualifications to qualify for a DSH payment. DSH payments to state-owned and Indian Health Service facilities are not covered by the methodology described by the following. A hospital must not be a critical access hospital and it must meet the following criteria to be eligible for a DSH payment.
- A hospital must have at least two obstetricians with staff privileges who have agreed to provide obstetric services to Medical Assistance recipients. For hospitals outside of the metro, the term "obstetrician" includes any physician with staff privileges at the hospital to perform non-emergency obstetric procedures.
Exceptions to this rule:
- A hospital that did not offer non-emergency obstetric services as of December 21, 1987.
- A hospital whose inpatients are predominately under 18 years of age.
- A hospital must have a base year Medical Assistance (MA) inpatient utilization rate that exceeds 1 percent. See the following formula:
Medical Impatient Utilization Rate Formula
Medical Inpatient Utilization Rate = Medical Assistance inpatient days, divided by total inpatient days
Disproportionate population adjustment factors – safety net hospitals
Eligible children’s and non-children’s hospitals that are also designated as essential safety net hospitals may qualify for a safety net DPA factor in addition to the other factors already determined.
Disproportionate population adjustment factors
Eligible hospitals that are not licensed children’s hospitals may qualify for the contract bed factor, the transplant hospital factor and one of three volume factors.
- Contract Bed Factor – a hospital that has a contract with the Department to provide extended inpatient psychiatric services in the rate year shall have a factor of 0.0160.
- Transplant Factor – a hospital that has received Medical Assistance payment for at least 20 transplant services in the base year shall have a factor of 0.0435.
- Volume Factor
- Hospitals with an MIUR in the base year of at least 20 percent up to one standard deviation above the statewide mean shall have a factor of 0.0468.
- Hospitals with an MIUR in the base year that is at least one standard deviation above the statewide mean, but less than three standard deviations above the statewide mean shall have a factor of 0.2300.
- Hospitals with an MIUR in the base year that is more than three standard deviations above the statewide mean shall have a factor of 0.3711.
- Final DPA Factor Methodology for Hospitals Qualifying under Disproportionate Population = 1 + Contact Bed Factor + Transplant Factor + Volume Factor. See the following formula for the full Final DPA Factor.
Full Final DPA Factor Formula
Final DPA Factor = 1 + Contract Bed Factor + Transplant Factor + Volume Factor + Safety Net Factor
Disproportionate population adjustment factors – children’s hospitals
Eligible hospitals that are licensed children’s hospitals may qualify for one DPA factor based on the number of fee-for-service Medical Assistance discharges in the base year.
- Licensed children’s hospitals with at least 1,000 fee-for-service (FFS) discharges in the base year shall have a factor equal to 1.868.
- Licensed children’s hospitals with fewer than 1,000 FFS discharges in the base year shall have a factor equal to 1.7880.
The applicable DPA factor (from licensed children’s hospitals with at least 1,000 FFS discharges in the base year OR licensed children’s hospitals with fewer than 1,000 FFS discharges in the base year) plus the applicable factor from safety net hospitals is the final DPA factor for the qualifying children’s hospital.
Limitation on DPA payment amounts
In the event that DPA payments to a qualifying hospital exceed the facility-specific DSH limit for the hospital for the applicable DSH year, the DPA payment to the hospital will be limited to the facility-specific DSH limit. Payments in excess of the applicable facility specific DSH limit are returned to the Department for redistribution to qualifying hospitals. The facility-specific DSH limit is the hospital’s inpatient and outpatient costs for services to Medicaid patients and the uninsured, minus payments received for medicaid patients, or from uninsured patients.
Redistribution of Returned DPA amounts
Excess DPA payments that are returned to the Department according to their limitations shall be redistributed to qualifying hospitals. Hospitals qualified to accept redistributed DPA funding must:
- Be eligible to receive DPA payments;
- Be eligible to receive DPA payment factors and have a volume factor as described in the second and third sub-bullets under Volume Factor; and
- Not have exceeded their defined limitation.
Distribution of the returned DPA funding to qualifying hospitals is based on each hospital’s Medical Assistance fee-for-service discharges expressed as a percentage of the total Medical Assistance fee-for-service discharges of all of the hospitals qualified to receive additional DPA payments. The final redistributed DPA payment amount to a receiving hospital may not result in total DPA payments to that hospital exceeding the limit defined in the limitation of the DPA amount.
Final Redistributed DPA Payment Amount Formula
|Final Redistributed DPA Payment Amount =
The difference between the amount paid according to the hospital’s factors and their limitation
The amount equal to the total amount of refundable DPA funding, multiplied by (the hospital’s number of fee-for-service MA discharges divided by the total number of fee-for-service MA discharges of all of the hospitals eligible to receive redistributed DPA funds in the rate year).
What is the DSH audit?
The Federal Medicaid agency, CMS, requires states to have an annual DSH audit performed by an agency that is independent of the state Medicaid agency, and any of the DSH Hospitals that are subject to the audit. The purpose of the audit is to verify that DSH payments to any given hospital do not exceed that hospital’s losses for treating Medicaid patient or patients that are uninsured.
The Minnesota Department of Human Services is required to have an independent certified audit of its Disproportionate Share Hospital Program (DSH). The following documents contain the protocol that is provided to the auditor along with the current list of hospitals that receive DSH payments.