Pursuant to a congressional request, GAO reviewed disproportionate share hospital (DSH) payment limits, focusing on: (1) whether state formulas vary in their inclusion of managed care costs and revenues when calculating the maximum amount a specific hospital can receive; and (2) whether such variation is allowed by the Medicaid program; and, if so, (3) Health Care Financing Administration (HCFA) officials' views on setting a uniform policy in this area.

GAO noted that: (1) state formulas for calculating maximum DSH payments to specific hospitals vary in whether or not they include Medicaid managed care costs and revenues; (2) the rules of the Medicaid program allow this variation; (3) HCFA officials told GAO that different state circumstances may warrant different state approaches; and (4) HCFA does not plan to impose new requirements to eliminate this variation.