Medicaid DSH John Berta Senior Director, Policy Analysis Texas Hospital Association June 19, 2014

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Medicaid DSH - Outline FY2011 FY2012-13 – Waiver DY1 & DY2 FY2014-15 – DY3 & DY4 FY2016 and Beyond

FY2011 DSH (and Before) DSH & UPL – Pre-Waiver Programs Related to each other Public Hospitals have incentive to Fund DSH Fully Funded for Every Year

DSH Funding Incentive UPL at Maximum – No Other Funds Available DSH IGT ~$0.40 Paid $1.00 DSH Paid ~$0.55

Medicaid DSH - Outline FY2011 FY2012-13 – Waiver DY1 & DY2 FY2014-15 – DY3 & DY4 FY2016 and Beyond

FY2012 Financing Transformation Transformation Waiver Shifting Landscape DSH & UC - Closer Connection Additional PCP Costs Allowed for UC Result = Alternate Funding Opportunities for Public Hospitals DSH Audit Dollars Recouped beginning in Program Year 2011

FY2012 - Shifting Landscape FY2011 UPL $2.8B FY2012 UC & DSRIP $4.2B DSH & UC Closely Aligned Medicaid Shortfall Growing Larger

Medicaid Disproportionate Share FY2012 Public Hospitals Agree to Fund $502M of $569 Potential DSH Dollars Unspent THA Forms Task Force on DSH

THA Task Force Concepts 2012-2013 Medicaid Disproportionate Share Hospital Task Force – 6/1/2012 the money follows the work shared responsibility for funding the Medicaid DSH program protection for the most vulnerable classes of hospitals

UC and DSRIP Funding= $29B UC/UPL Transition- $466M

Medicaid DSH FY2013 - Issues FY 2013 Payments – 100% Amounts - $138M GR $323M IGT New DSH Rule Lubbock and Odessa drop out of 8 hospital coalition leaving big 6 DSH is Regionalized Pass 3 Rural Funding Mechanism Developed GR and IGT are separated Texas Children’s Lawsuit Max TPL payment = Cost DSH paid @ 90% (10% Expected)

Medicaid DSH - Outline FY2011 FY2012-13 – Waiver DY1 & DY2 FY2014-15 – DY3 & DY4 FY2016 and Beyond

Medicaid Disproportionate Share FY2014 New Rider 86 covers DSH & UC $300M GR authorized for FY2014 & FY2015 2014 = $160M 2015 = $140M No General Revenue Funds appropriated after FY2015 Other Budget Riders not written in this manner

Medicaid DSH Rider 86 Proportional allocation of supplemental hospital payments among large public, small public, and non-public providers Mechanisms though which Medicaid payments are made through managed care organizations Recommended statutory changes and any other legislative direction needed to fully implement the plan

Medicaid DSH Rider 86 (cont’d) Assess the extent to which supplemental payments are needed to cover Medicaid and uninsured/uncompensated care costs Transition plan from supplemental payments to rates that recognize improvements in quality of patient care, the most appropriate use of care, and patient outcomes No General Revenue Funds appropriated after FY2015

Medicaid DSH Rider 86 (cont’d) FY 2014 request must show a measurable progress in developing the plan FY 2015 request should include the final plan No GR funds may be expended for FY 15 until plan is finalized

Medicaid DSH FY2014 2011-Before Transformation Waiver Non-State Hospital DSH Pool = $1.2B UPL Payments = $2.8B Total = $4.0B 2014-After Transformation Waiver FY2014 UC & DSRIP = $6.2B FY2014 DSH Non State = $1.3B Total = $7.5B

2014 DSH – Attributes - 1 State-owned hospitals – No change 2013 – Regional Approach (RHP) 2014 – Hospitals in statewide pools 2013 – Funds for Low Income and Medicaid 2014 – Days added together

2014 DSH – Attributes - 2 2013 - GR funded non RHP areas 2014 – Hospitals share in GR and related FF 2014 – 3 Pools = all GR and FF in Pools 1&2 shared by all (e.g. net DSH proceeds) 2014 - Pool 3 = IGT back to IGT hospitals 2013 – Pass 3 Methodology in place 2014 – No change 2013 – 6 Large public hospitals transfer for their region 2014 – Fed Funds on IGT by 6 shared by all

2014 DSH – Attributes - 3 2013 – no provision 2014 – Most other public hospitals IGT ½ of their DSH (Lubbock & Ector IGT for themselves) 2014 – Non-8 public hospitals have their days weighted such that net DSH is equal 2014 – Big 6 = $377 total = $396

2014 UC Attributes - 1 UC funds are divided into seven pools state-owned hospitals COTH members (6 large public) other public hospitals private hospitals physician group practices governmental ambulance publicly owned dental providers

2014 UC Attributes - 2 Pool amounts are Allocated pro-rata Allocation basis: Hospitals - Post DSH Payment unpaid HSL Other groups – UC Cost

2014 UC Attributes - 3 6 Large transferring hospitals receive “bump” on allocation basis (pre-allocation basis) UC pre-allocation “bump” equals amount of DSH IGT made for other hospitals

$284M added to 6 UC Pool Net DSH proceeds = $1.344B - $395M IGT = $949M Big 6 = 23% of $949M net proceeds Total IGT = $395M * 23% = $93M $377M – $93M = $284M $284M = UC bump for big 6

2014 UC Attributes - 4 Special Provision for smaller (Rider 38) hospitals: The reduction in future years is limited to decreases in UC Pool E.g. $3.9 billion to 3.1 billion Reduction is still significant but no greater than this amount Applies to county < 60k, RRC,SCH,CAH

2014-17 Key Dates Fall 2014 - FY 2014 DSH paid (1/2 paid) Jan 2015 – 84th TX Leg in session Spring 2015 – last half of 2014 DSH Paid June 2015 TX Leg leaves FY2015 DSH – needs final plan FY2016 – last year of 5 year waiver 2017 DSH cuts begin

Medicaid DSH - Outline FY2011 FY2012-13 – Waiver DY1 & DY2 FY2014-15 – DY3 & DY4 FY2016 and Beyond

Medicaid DSH – Future Years Composition of 84th Legislature Federal DSH Allotment DSH Audit Outcomes Waiver Extension/Renewal/Replacement Available UC Funds CMS Negotiation / Federal Outlook Medicaid Shortfall ~$3B

Medicaid Federal DSH Reductions Revised Schedule Allotments - April 3, 2014   Year Total Reduction Note – if Texas maintains existing policy then 100% of the reduced allotment will be absorbed by non-state hospitals 2017 TX~20% 1,800,000,000 2018 TX~50% 4,700,000,000 2019 2020 2021 4,800,000,000 2022 5,000,000,000 2023 2024 4,400,000,000

Texas Hospital Association Questions? John Berta Texas Hospital Association 512/465-1556 jberta@tha.org