The Texas Disproportionate Share Program Favors Public Hospitals

HRD-93-86: Published: Mar 30, 1993. Publicly Released: Mar 30, 1993.

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Pursuant to a congressional request, GAO reviewed how the Medicaid disproportionate share hospital program affects hospitals in Texas, focusing on: (1) the formula Texas uses in its Dispro I program and its effect on qualifying hospitals; and (2) other states' measurement of low-income patient care and their collection and validation of hospital data.

GAO found that: (1) Texas' Dispro I formula favors public hospitals and only counts indigent care paid for by state or local funds; (2) the only nonprofit and proprietary hospitals that receive Dispro I funds are those with a proportionately high number of Medicaid inpatients; (3) Texas' additional-indigent-days (AID) factor significantly affects hospitals' eligibility for Dispro I payments; (4) 33 percent of the public hospitals qualifying for Dispro I funds would not qualify absent the AID factor; (5) 24 of 31 nonqualifying hospitals that would have qualified absent the AID factor are nonprofit or proprietary hospitals; (6) Texas officials know that the Dispro I formula is weighted in favor of public hospitals, but believe the formula is equitable because of the higher level of charity care provided by public hospitals; (7) most states use one or more of three basic payment formulas and some states use of alternative formulas that measure charity care provided to their low-income patients; (8) in the four states sampled, each state determines the actual dollar amount of charity or uncompensated care and requires hospitals to document the amount of charity or uncompensated provided; and (9) each state uses charity or uncompensated care differently in their reimbursement formulas.

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