An Act to Restore Adequate Funding for Disproportionate Share Hospitals
Joint Committee on Health Care Financing

The Massachusetts Health & Hospital Association (MHA), on behalf of our member hospitals, health systems, physician organizations and allied health care providers, appreciates the opportunity to submit comments in strong support of HB1150, “An Act to Restore Adequate Funding for Disproportionate Share Hospitals.

requires a 2 percent adjustment to MassHealth inpatient and outpatient reimbursement rates for disproportionate share hospitals (DSH). This bill additionally directs MassHealth to provide $12.3 million in supplementary payments for behavioral health services provided by DSH hospitals to MassHealth patients. Given that recent MassHealth policies have limited the effect and reliability of DSH hospital payment adjustments, this bill is necessary to support these hospitals.

For many years, the commonwealth has provided additional funding to DSH hospitals in recognition of the burden they face in delivering services to large numbers of patients covered by government programs. Prior to FY2014, DSH hospitals received an adjustment to their MassHealth inpatient and outpatient reimbursement rates per legislative budget directives. The amount of the rate adjustment was typically a 5% adjustment; however, for inpatient services it reached as high as 10%. In FY2017, the Executive Office of Health and Human Services (EOHHS) changed this rate adjustment to a supplemental payment. While this DSH adjustment was not paid in real time for each claim, this method at least attempted to reflect a reimbursement rate adjustment factoring in the level of services provided by DSH hospitals to MassHealth patients.

In FY2017, EOHHS changed the methodology again and this time greatly diminished the effectiveness of the DSH funding adjustment. First, instead of the supplemental payment serving as a vehicle to provide an enhanced reimbursement rate for inpatient and outpatient, EOHHS created a fixed pot of funding to be distributed among DSH hospitals. If DSH hospitals cared for more patients, funding remains fixed. The funding amount was also reduced to $13 million, much less than previous years’ totaled payment adjustments. The supplemental payments were also delayed and paid one year after the hospital fiscal year ended. For example, FY2019 DSH funding will pay for services provided in FY2018. Because of the payment and budget maneuver, no payment was made in FY2017.

MHA and our DSH members greatly appreciate the DSH funding support that has been traditionally provided by the legislature. However, in order to better fulfill the legislature’s intent to support DSH, the current formula must be modified. MassHealth DSH reimbursement has unfortunately become unreliable given the year-to-year differing budget assumptions, payment deferrals, and sometimes non-payment to hospitals. The current methodology also does not reflect the added
services provided by DSH hospitals due to increases in MassHealth caseloads -- including a 25% increase in the MassHealth population compared to the pre-ACA Medicaid population of 2013. Additionally, new hospitals have qualified as DSH over time -- meaning that more hospitals share in the same fixed pot of funding.

will return the state’s DSH funding to the mechanism that was previously utilized -- an adjustment to the actual reimbursement rate. This legislation calls for a 2 percent adjustment, which is more modest that what used in prior years. We believe this will provide meaningful support to these hospitals and will improve the reliability for the funding so that they incorporate it into hospital operations, including staffing, services provided to MassHealth patients, and facility investments.

The legislation also directs MassHealth to provide $12.3 million in supplementary payments for behavioral health services provided by DSH hospitals to MassHealth patients -- the same amount provided in FY2015 by the legislature. Additional support for mental health and substance use disorder care is greatly needed given the current inadequacies that stress the behavioral health system. As systemic challenges have not abated, it is important that the commonwealth maintain funding for these services. For these many reasons, MHA respectfully requests the committee to give a favorable report to HB1150.

Thank you for the opportunity to offer comments on this important matter. If you have any questions or concerns or require further information, please contact Michael Sroczynski, MHA’s Senior Vice President of Government Advocacy, at (781) 262-6055 or msroczynski@mhalink.org