PRB Targeted Distribution FAQ
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Safety Net Hospitals
To be eligible, a children's hospital must meet the following criteria:
- Be an inpatient prospective payment system (IPPS)-exempt facility as defined by the Centers for Medicare & Medicaid Services (CMS), or
- Be a Children's Hospital Graduate Medical Education (CHGME) facility.
Children's hospitals that meet these criteria are free-standing facilities not affiliated with larger hospital systems. In contrast to affiliated children's hospitals, these facilities have not, with minor exceptions, qualified for targeted relief to the same degree as system-affiliated children's hospitals.
As the revenue from children's hospitals was included in the calculations (particularly with regard to general distributions) when paying the larger hospital systems, HHS expects that in kind, the systems will ensure that resources are being provided to ensure patient access and care for parents seeking care for their children.
Eligible facilities received a payment that equals 2.5% of the annualized net patient revenue. Facility's calculated payment amount below $5,000,000 were adjusted to $5,000,000 and any values above $50,000,000 were adjusted to $50,000,000.
HRSA used the children's hospitals' most recent CMS Cost Report to determine eligibility. HRSA used Worksheet G-3, line 3 of the cost report to determine payment amounts. Net patient revenues were annualized prior to payment calculation. For those hospitals that do not file Cost Reports, HRSA calculated net patient revenue from tax information and audited financial statements submitted by those affected children's hospitals.
Working with stakeholders and Congress, HHS learned that certain acute care hospitals did not qualify for the initial Safety Net Targeted Distribution that HHS believed were the target of the allocation. To address this, community hospitals meeting an expanded profitability threshold will now be eligible for payment.
HHS is expanding the eligibility criteria for payment qualification under the second round of Safety Net Hospitals Targeted Distribution so that certain acute care hospitals that have (1) a profit margin threshold of less than or equal to 3% averaged consecutively over two or more of the last five cost reporting periods and (2) an annualized uncompensated care cost (UCC) of at least $25,000 per bed in the most recent cost report. The other criterion (Medicare Disproportionate Patient Percentage (DPP) of 20.2% or higher) for acute care hospitals remains the same.
HHS used the same formula for determining payments from the previous Safety Net Hospitals Targeted Distribution.
HHS used hospitals' last two to five Medicare cost report filings for determining eligibility based on profit margin and the latest Medicare cost report filing for determining eligibility based on annualized UCC per bed and Medicare DPP.
Safety net payments are allocated to acute care and children's hospitals that serve a disproportionate number of Medicaid patients and provide large amounts of uncompensated care.
Qualifying acute care hospitals will have:
- Medicare Disproportionate Patient Percentage (DPP) of 20.2% or higher.
- Uncompensated Care (UCC) of at least $25,000 per bed. (For example, a cost report would need to have 100 beds and $2,500,000 in Uncompensated Care to meet this requirement.)
- Profit Margin of 3% or less.
Qualifying children's hospitals will have:
- A Medicaid-only Ratio of 20.2% or greater.
- Profit Margin of 3.0% or less.
The distribution amount for an eligible safety net hospital is the proportion of the individual facility score (number of facility beds multiplied by DPP for an acute care facility or number of facility beds multiplied by Medicaid only ratio for a children's hospital) to the cumulative facility scores for all safety net hospitals, times the $10 billion safety net distribution. Hospitals with a calculated distribution amount of less than $5,000,000 received a minimum amount of $5,000,000, and those with a calculated distribution amount of more than $50,000,000 received a maximum amount of $50,000,000.
HHS pulled the cost reports on May 27, 2020. The latest available cost report period available for a respective facility was used.
HHS pulled the data from the CMS Hospital Cost Reports:
|DPP:||W/S E Part A, Line 32, Col. 1|
|Hospital Beds:||W/S S-3 Part I, Line 14, Col. 2|
|Net Patient Revenue:||W/S G-3, Line 3, Col. 1|
|Total Other Income:||W/S G-3, Line 25, Col. 1|
|Total Revenue:||Net Patient Revenue + Total Other Income|
|Net Income:||W/S G-3, Line 29, Col. 1|
|Profit Margin:||Net Income / Total Revenue|
|Medicaid Only Days:||Worksheet S-3, Part I, column 7, line 14, plus line 2 and line 32, minus the sum of lines 5 and 6.|
|Total Days:||Worksheet S-3, Part I, column 8, line 14; plus line 32; minus the sum of lines 5 and 6; plus employee discount days reported on line 30.|
|Medicaid Only %:||Medicaid Only Days / Total Days|
Profit margin of 3.0% or less was used as one of the criteria to determine whether a hospital was eligible for payment. The calculations were based on total margins. The calculation is "Net Patient Revenue" plus "Total Other Income", which equals "Total Revenue". The calculation is "Net Patient Revenue" plus "Total Other Income", which equals "Total Revenue". The "Net Income" divided by "Total Revenue" is the "Net Profit Margin" percent.
The most recent cost report was used to calculate eligibility for the Safety Net Hospital Targeted Distribution. For most hospitals, the 2018 Medicare cost report was used because the verified 2019 cost report was not yet available.