Review of Washington State's Disproportionate Share Hospital Program

EXECUTIVE SUMMARY:

This final report points out that Washington made Medicaid disproportionate share hospital (DSH) payments in excess of hospital-specific limits and that were not in accordance with the approved state plan. Specifically, the state paid $43.9 million (federal share $23.1 million) in excess of hospital specific limits, and $0.4 million (federal share $0.2 million) to six hospitals not eligible for some DSH programs. This problem occurred because the state did not reconcile DSH payments to actual costs, used billed charge amounts (instead of actual costs) in some calculations, and included unallowable bad debt amounts in its limits calculations. Also, the state did not review hospital eligibility for all DSH programs on an annual basis. We recommended financial adjustments totaling $23.3 million (federal share). We also recommended procedural improvements intended to strengthen the state's management controls.