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District of Columbia Hospital Association
Robert A. Malson, President
Testimony to the City Council Committee on Human Services on the
DC Department of Health Proposed FY 2002 Budget
March 29, 2001




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Testimony Before the
Committee on Human Services of the District of Columbia
Concerning the District of Columbia Department of Health Fiscal Year 2002 Budget

Robert A. Malson

March 29, 2001


Chairperson Sandy Allen and members of the Committee on Human Services. I am Robert A. Malson, President of the District of Columbia Hospital Association (DCHA). On behalf of our 18 member hospitals, I appreciate the opportunity to express DCHA’s views during this Budget Hearing on the District of Columbia Department of Health’s (DOH) FY 2002 budget.

DCHA strongly endorses the Department’s Strategic Issues and the FY 2002 Initiatives.1 We are pleased to see those initiatives that involve increased government efficiency, improved monitoring of environmental health and safety programs, and enhanced availability and access to health care services. DCHA has worked consistently with Dr. Ivan Walks and his senior staff to resolve past problems while exploring new collaborative efforts that promote the Department’s missions. We are particularly grateful to Ted Gordon, Herb Weldon and Dr. Robert Vowels for their exemplary service and continued responsiveness to our hospitals.

I will limit my detailed remarks to the budget of the Medical Assistance Administration and other programs involved in assuring health care services for the uninsured, as well the Health Regulatory Administration, which has authority over the health professional licensing boards.


DCHA strongly supports the expansion of the Medicaid program to improve access to care for the District’s 65,000 to 80,000 uninsured in a structured, systematic manner. However, we continue to be concerned about enrollment and eligibility issues, which makes effective and meaningful expansion very difficult. While the Income Maintenance Administration (IMA), a division of the Department of Human Services, is not part of this budget hearing, its impact on the Medicaid Budget cannot be understated. It is imperative that IMA be adequately funded and staffed to efficiently implement any Medicaid expansion efforts. It defies logic to expect to increase Medicaid enrollment if IMA does not have the human resources to process those applications. You cannot expand access in theory. You must make it happen in practice.

We are also very concerned that Medicaid provider rates have not been updated for several years. The issue of updating provider rates under the Medicaid program has brought together an interesting group of provider organizations, including DCHA, DC HMO Association, DC Nurses Association, DC Dental Society, Non-Profit Clinic Consortium, among others, as well as some consumer groups, to form a Medicaid Reimbursement Coalition. While representatives of this group will be testifying today, I want to emphasize that the reason DCHA joined is because we support the Coalition’s principles, especially that of providing an adequate reimbursement for D.C. Medicaid contractors and providers, to ensure access to quality health care, as well as appropriate provider participation in the Medicaid program. We note that one of the FY 2002 goals of MAA is to re-evaluate provider outpatient reimbursement methodology. We applaud that goal, but believe it is time to increase the rates, not merely review them. We also note that the Office of Budget and Planning has recommended an $11.3 million increase as required under the Disproportionate Share Hospital (DSH) program. However, there is no indication how this increase will be allocated among health care providers. As always, “the devil is in the details.”

This caveat also applies to the Mayor’s health care privatization plans and the transformation of DC General Hospital. DCHA’s Medical Directors’ Forum recently addressed the capacity of private hospitals to take on additional emergency room patients or hospital inpatients. This is of increasing concern in light of the local and national trends for emergency department over-crowding. Statistics for all District acute care hospitals show a 16.7 percent increase in January 2001, including a 9.7 percent increase at D.C. General Hospital, and increases as much as 33 percent for other hospitals.2 Nationally, emergency department visits have increased annually by some five million visits. This growing problem must be factored into any privatization effort.

In the interest of time, I will now comment on the following specific budget issues of major concern to District hospitals:

  1. Inpatient Hospital Rates
  2. Outpatient Hospital Rates
  3. Medicaid Expansion
  4. Cost Settlements

A. Inpatient Hospital Rates

The local Medicaid share for inpatient rates is seriously underbudgeted. The federal share listed in the Department’s budget uses a 77 percent blended rate. In the Medicaid “Health Forward” budget document, MAA’s own cost analysis says that a 77 percent enhanced match refers primarily to program services computer systems. We maintain that inpatient rates still fall within the 70/30-match rate, except for those approximately 1,000 children who are enrolled as State Children’s Health Insurance Program (SCHIP) recipients within the DC Healthy Families Program (only a small number of whom are hospitalized). The match for those pure SCHIP children is 79 percent, so we believe that the maximum blended rate would be no more than 71 percent. By inflating the federal share, DCHA believes that inpatient care under Medicaid is presently under-budgeted by some $12 million.

The result is that MAA will begin FY 2002 in a deficit mode, as it did in FY 2000 when its budget was underfunded by $74.4 million. According to MAA’s own narrative, this underfunding created a structural deficit problem, compounded by a lack of funding for any growth in the program expenses in FY 2001. DCHA maintains that the costs associated with anticipated growth and continuations of the Mayor’s priorities for Medicaid in FY 2002, are not adequately reflected in this budget request, and have not been reflected for the past two years. The underbudgeting for FY 2002 will only compound Medicaid’s structural deficit problem. Let me explain.

In 1998, the District of Columbia issued an amendment to the D.C. Code of Municipal Regulations (DCMR) regarding the provision of inflation adjustments to the Inpatient Medicaid rates. Section 4803.2 in Chapter 9 of Title 29 reads:

“Beginning October 1, 1999, all base year payment rates shall be adjusted for inflation pursuant to the most recently published projected Hospital Index for the applicable Fiscal Year.”

To date, the District’s acute care and specialty hospitals are currently owed the following inflation updates on Medicaid inpatient DRG rates:

For Fiscal Year 2000: 2.3%
For Fiscal Year 2001: 3.4%

DCHA has been unsuccessful in trying to obtain both the total actual Fiscal Year 2000 Medicaid inpatient DRG expenditures that are subject to the 2.3 percent inflation increase and the total Fiscal Year 2001 projected Medicaid inpatient DRG expense that is subject to the 3.4 percent inflation increase from the Medical Assistance Administration. However, our estimates for what is owed to hospitals for FY 2000 and FY 2001 are over $8 million. Further, we do not believe that the FY 2002 update has been included in MAA’s calculations, which conservatively can be estimated at between $4 and $5 million. MAA cannot responsibly budget inpatient rates without including these legally required inflation adjustments.3

B. Outpatient Rates

As stated in the MAA budget narrative, outpatient rates for hospital services are currently paid at a pre-determined rate using 1989 costs as the base year. In the meantime, the FY 2002 budget has been reduced by 50 percent ($7.7million) for outpatient care without explanation. As you and other Councilmembers know, outpatient procedures have increased dramatically as a result of managed care, clinical advances and technological improvements. Reducing Medicaid expenditures for outpatient care will have two potentially negative effects:

  • Providers will be forced to treat outpatients as inpatients which is more costly for everyone, including Medicaid; or
  • Hospitals will be reimbursed even more poorly than they have been paid for years.

We urge the Council to increase this line item, not just to the FY 2001 amount, but to an amount based on an appropriate updating of the rate, in line with realistic 2001 hospital costs.

C. Medicaid Expansion – Health Privatization Reforms

The Medicaid “Health Forward” budget notes that $3.8 million of the DSH technical correction will be used to fund the Medicaid expansion initiative for childless adults, for which a waiver has still not been obtained. However, MAA has only budgeted $6.6 million to draw down the increased federal share provided under the technical correction. Thirty-two million dollars will be available, but MAA and the uninsured residents of our city will lose $12 million in available federal Medicaid for failure to budget the full local share. Frankly, this is irresponsible public policy to leave $12 million in federal dollars on the table that could readily fund at least some of the Mayor’s expansion priorities.

It is important to remember that MAA cannot legally implement expansion plans without a federal waiver. As a result, those individuals who would be eligible under the waiver will continue to be considered “uninsured” for purposes of provider reimbursement until a waiver is approved. This means that hospitals will still need to rely on charity care to subsidize services to these vulnerable populations with unique health and social needs. In addition, DSH hospitals have a special burden because of ongoing delays in payment. Even after all we have been through in prior years, DSH hospitals are still waiting for their FY 2001 payments. MAA has told DCHA that the first six-months of FY 2001 would be paid during the first week of April, but again, payments have been delayed for six months.

Perhaps what is even more troubling about the expansion plans is this: even if the expansion waiver were approved tomorrow, a fiscal calamity would result because the District’s Medicaid office would not have adequate funds to cover the additional enrollees and the services they would utilize. The budget as presently constructed is underfunded for the current enrollees; adding additional beneficiaries would wreak havoc on MAA and its contracting providers. We have said it before and it is worth repeating: expanding Medicaid without appropriate funding is meaningless, both to beneficiaries and providers alike.

I must also point out that there is no increase in the Medical Charities budget for FY 2002, which is particularly troubling because the funding typically runs out after the first six or seven months of every fiscal year. It is even more critical to fund Medical Charities adequately in light of the Mayor’s privatization plans. While we recognize that the contract negotiations have not been completed, our hospitals are extremely concerned because we understand that the proposal under consideration by the Financial Control Authority and the Mayor will only cover those patients who have been treated at DC General Hospital within the last two years. Therefore, we assume that any of the 9,000 Medical Charities patients who have not needed services at DC General in the last 24 months or any uninsured person who has not needed health care services recently, will not be able to receive care in the new “privatization plan.” So we must ask, will hospitals be paid for services provided to those Medical Charities patients that are still enrolled in the program, but who did not seek care at DC General within the 24-month cut? If not, where will they get care? Who will pay for it?

We understand that other hospitals will be expected to continue to provide care to the uninsured and that DSH allotments are designed for this purpose. We have been assured by Dr. Walks that hospitals will not be expected to provide more than the amount of unsponsored care they have been providing over the last few years. However, the District’s position is unclear and internally contradictory because several segments of the budget propose to use DSH monies for other initiatives. In addition, the DSH line item does not maximize the District’s federal share. The net result of private hospitals continuing to provide the same amount of unsponsored care but with reduced DSH funding is a more fragile safety net, and one that is increasingly financed by the private sector.

So once again, I must repeat the question that I raised during last September’s PBC oversight hearing which has yet to be clearly answered: What is the obligation of the District of Columbia to provide health care services to the poor?

This leads me to raise a final legal question that must be considered as the Financial Control Authority finalizes the privatization contract: Does limiting the class of patients to be covered under the contract to those treated at DC General Hospital within the prior 24 months constitute a residency requirement? HCFA and the courts have deemed such a requirement inappropriate. Specifically, will the District be discriminating against a class of patients who need health care services after the contract is signed? The courts have already struck down a California duration residency requirement and the more a service is considered a core service, such as health care or welfare benefits, the more likely it is that such a provision will be struck down. We urge the Council to recommend to the Mayor and Financial Control Authority that these legal issues be investigated as part of their present due diligence effort.

D. Cost Settlements

The final points I wish to make on the Medicaid Budget relate to settlements for prior year receivables. For the second year in a row, MAA has budgeted only $34.7 million for cost settlements. And, for the second year in a row, DCHA has provided information that outstanding prior year receivables are almost triple that amount – more than $92 million. (See attached chart)

While MAA has paid some of the settlements that go all the way back to 1992, MAA has also been incurring new settlement costs for FY 2000. MAA’s budget narrative specifically says: “all cost associated to appeals and litigation is treated as a cost settlement that is an accrued line item in the budget.” This should mean that the outstanding monies owed to DSH hospitals from DCHA’s lawsuit last year, including interest and attorney’s fees, are included in the $34.7 million. With everything we have documented, this amount is simply inadequate and does not cover outstanding cost settlements.

Last year Mr. Weldon testified that there is another $60 million in a reserve to cover these outstanding debts. However, we could not find it in the publicly available FY 2002 budget document and question where that reserve is budgeted, especially in light of other reserve commitments required by Congress.

Mrs. Allen, you and several of your colleagues recently introduced a “Prompt Payment for Health Care Providers Act of 2001” to set clear time tables and guidelines for HMO payment practices. We would urge this committee to use its oversight authority to ensure that MAA improves its own payment practices to hospitals and other contractors and set an example for managed care organizations and other government agencies. Settlements that go back nearly a decade should be unacceptable to the Council, the Mayor and the Financial Control Authority.


The Health Regulation Administration (HRA), particularly the Health Professional Licensing Boards, is another critical part of the Department of Health that has been seriously underfunded for several years. In fact, DCHA believes that this lack of funding and inadequate staffing is preventing the boards from fulfilling their mandated responsibilities and presents a public safety issue. Specifically, the Boards of Medicine and Nursing are faced with an insurmountable backlog of disciplinary cases, for which they have few or no legal advisors of their own or from the Corporation Counsel’s office, and, only bare-bones staffing for the Health Care Licensing and Customer Service Division. In spite of the stellar efforts by Dr. Robert Vowels, the Division’s Acting Executive Director, the boards are still plagued by technological and staffing deficiencies.

We are extremely pleased that the Department of Health’s capital budget includes $1.5 million for an Occupational and Professional Licensing System. We also applaud the Department’s efforts in initiating a total review of HRA’s technological capability and statutory and regulatory framework. DCHA is participating with the consultants as they develop recommendations for updating these antiquated systems. We urge the Council to support these long overdue efforts by committing adequate resources to implement the forthcoming recommendations.

These licensing obstacles have become serious barriers to recruiting new health professionals in several disciplines. As a result, many badly needed nurses, pharmacists and technicians are choosing to go to Maryland and Virginia where the licensure process is not so difficult and time-consuming. The District cannot afford to lose new health professionals, because without them, hospitals, clinics and managed care organizations will be forced to reduce services. In fact, DCHA has recently formed a Workforce Shortage Group that is bringing together representatives from hospitals, nursing homes, non-profit clinics, other provider organizations, and health professional training programs to develop short and long term solutions for the workforce shortage problems plaguing the District’s health care facilities. We expect to look to HRA, as well as to the Council, as we plan actions to alleviate current shortages.

I also want to reiterate DCHA’s support for legislation, which would allow the fees and fines collected by licensing boards to be directed to those particular boards to bolster their ability to serve the professions and consumers. It is time that the District catches up to most other states that allow boards of medicine, nursing, and other health occupation boards to use their respective licensing fees to operate an efficient licensure system that includes authority to hire personnel and contract with outside vendors for accountable services.


Before I close, I want to applaud the funds allocated for the new Medicaid Management Information System (MMIS). The need for a new MMIS system has been discussed for several years. This is especially critical with the need to comply with the federal Health Insurance Portability and Accountability Act (HIPAA) Administrative Simplification requirements. We hope that Medicaid will work with the providers and payers similar to the Y2K efforts to ensure all systems are compatible with MAA by the implementation date. We suggest working with the Medicaid Reimbursement Coalition as a starting group to coordinate compliance activities in a systematic manner.

Once again, thank you for this opportunity to share our major concerns and recommendations regarding the Department of Health’s FY 2002 Budget Request. We are still hopeful that, with the support of this Council, that the DOH budget will be realigned to more realistically fund MAA and the Mayor’s health reform initiatives in an adequate and equitable fashion that ensures access to appropriate health care settings for all District citizens.

DCHA appreciates the Committee’s support for many of these positions. Please know that DCHA stands ready to assist this Committee with any expertise or information it may need.

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1. DOH’s Strategic Issues include:

  • Ensuring culturally and linguistically competent delivery systems;
  • Forging public and private partnerships and collaborations;
  • Assuring safe and healthy environments through licensing and regulation;
  • Prioritizing Environmental Health resources and functions to protect and enhance both private environments and the “public space”;
  • Optimizing health care financing to assure access to appropriate care;
  • Reducing or preventing the risk of disease, dysfunction and premature death. (FY2002 Proposed DC Budget and Financial Plan, Department of Health, pgs. E-14-15)

2. The District of Columbia Hospital Association Monthly Utilization Report, January 2001. (attached)

3. In a letter dated March 27, 2001, Herb Weldon indicated to DCHA that they would make a lump sum payment for the 2.3 percent FY 2000 inflation update to each District hospital not later than the first week of April. He did not indicate when the FY 2001 inflation update would be disbursed.

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Children's National Medical Center 4,451 33.1 3,844 11.9 3,534 -10.1
D.C. General Hospital 4,637 9.7 4,206 1.8 4,325 0.7
George Washington Univ. Hosp. 3,363 -9.5 3,403 05.6 3,708 2.4
Georgetown University Hospital 2,052 8.3 1,815 0.7 1,825 1.1
Greater S.E. Community Hospital 3,864 30.8 3,427 24.5 3,195 4.2
Howard University Hospital 4,256 20.7 3,832 11.7 3,710 8.7
Providence Hospital 3,406 20.7 3,073 11.5 2,935 5.2
Sibley Memorial Hospital 2,236 17.9 2,021 6.0 1,955 6.0
Washington Hospital Center 5,755 20.6 5,160 12.0 4,984 7.8


34,020 16.7 30,780 8.3 30.171 2.7


Veterans Affairs Medical Center 1,479 27.5 1,373 19.7 1,237 10.7
Walter Reed Army Medical Center 1,856 2.8 1,678 1.3 1,687 3.3
Malcolm Grow Medical Center/AAFB 2,776 15.1 2,541 N/A 2,400 N/A


37,355 16.3 33,831 8.3 33,095 3.0


40,131 16.2 36,372 N/A 35,495 N/A


Children's National Medical Center 423 27.4 407 21.5 440 27.5
D.C. General Hospital 272 22.0 256 -5.5 281 50.0
George Washington Univ. Hosp. 395 -10.2 428 -4.4 440 -6.9
Georgetown University Hospital 649 -1.1 658 -5.4 688 -2.6
Greater S.E. Community Hospital 239 43.1 220 -9.1 219 -7.1
Hadley Memorial Hospital 55 -29.5 47 -49.8 72 -31.1
Howard University Hospital 372 6.0 361 -0.8 407 4.5
Providence Hospital 522 28.3 533 6.1 530 -4.1
Sibley Memorial Hospital 692 22.3 668 23.0 616 17.1
Washington Hospital Center 932 16.2 878 1.6 933 2.1


4,496 14.0 4,409 3.4 4,554 5.2

Other Specialty

Hadley Memorial Hospital 5,784 15.7 5,591 3.5 5,831 3.5


Veterans Affairs Medical Center 221 1.8 237 1.1 260 6.9
Walter Reed Army Medical Center 1,012 32.8 898 11.4 945 -1.0
Malcolm Grow Medical Center/AAFB 244 21.4 226 N/A 251 N/A


5,784 15.7 5,591 3.5 5,831 3.5


6,028 15.9 5,818 N/A 6,082 N/A

Note: Hospital averages are rounded; therefore, their sums may not match totals. Hospital figures are self-reported.
Note: A computer upgrade at D.C. General Hospital has enabled a more accurate reflection of utilization statistics.

Prior Year Hospital Settlement Issues


PRIOR YEAR ISSUES 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 TOTAL
1. Cost Report Settlements:                      
a. Open: no NPR*       86,499 1,147,336 (458,693) 4,944,469 3,059,001 8.938,528 8.582,702 26,301,842
b. Closed: NPR*     (919,526) 1,696,796 (10,014,475) (2,388,004)         (11,625,209)
2. Appeals 223,211 6,793,319 1,057,764 463,302 1,131,536           9,669,732
3. Graduate Medical Education                      
a. Non-specified FFS or MC           262,000 344,000 1,929,200 2,604,191 2,339,359 7,478,750
b. Managed Care (MC)         48,094 28,170 119,590 883,831 1,199,788 2,304,698 4,584,171
4. Outstation Payments         40,000 300,000 278,000 332,000 348,600 366,030 1,664,630
5. Disproportionate Share Payments -HMO   222,128 769,317 843,993 2,714,510 3,441,788 1,171,913 5,092,762 8,027,099 5,703,689 27,987,199
6. Disproportionate Share Payments -OTHER         113,907 5,279,640 (1,488,8010 6,120,730 10,652,715 6,210,768 26,888,959
TOTAL 223,211 7,016,047 907,555 3,090,590 (4,817,092) 6,464,901 5,369,171 17,417,524 31,770,921 25,507,246 92,950,074

*Note: The Notice of Program Reimbursement (NPR) is a notice forwarded to a hospital from MAA indicating the amount to be reimbursed to that hospital.
"Open" means that there are negotiations between MAA and a hospital on the amount to be settled.
"Closed" means that MAA and a hospital have reached consensus on the amount to be settled and that the reimbursement is pending.
Note: Included information submitted by the Children's National Medical Center, D.C. General Hospital, George Washington University Hospital, Howard University Hospital, Georgetown University Hospital, National Rehabilitation Hospital, Providence Hospital, Psychiatric Institute of Washington, Riverside Hospital, and Washington Hospital Center.
Note: The following hospitals have not yet submitted their Prior Year Settlement Worksheets: Greater Hospital Community Hospital and Hadley Memorial Hospital.
Excluded: Sibley Memorial Hospital, Saint Elizabeths Hospital, Veterans Affairs Medical Center, and Walter Reed Army Medical Center.

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