26:2H-18.59a. Disproportionate share payments; formulation

12. The one-time additional disproportionate share payment to hospitals pursuant to paragraph (2) of subsection c. of section 9 of P.L.1992, c.160 (C.26:2H-18.59) shall be made according to the following methodology.

The hospital-specific additional payment shall be equal to the difference between the hospital's recalculated 1994 charity care value and the hospital's 1993 charity care amount as audited by the department and approved for reimbursement by the commission in 1994; except that, the amount a hospital may receive as an additional payment shall be limited so as to ensure that the hospital's adjusted operating margin is not in excess of the Statewide target adjusted operating margin. Those hospitals with an adjusted operating margin equal to or greater than the Statewide target adjusted operating margin shall not be eligible to receive an additional payment.

As used in this section:

a. The hospital-specific "1993 approved charity care" shall be equal to the hospital's 1993 charity care amount as audited by the department, plus 45.53% of the hospital's bad debt as reported on the hospital's 1993 Actual Cost Reports and valued at 1994 Medicaid reimbursement rates;

b. The hospital-specific "1993 revenue from private payers" shall be equal to the sum of the gross revenues, as reported to the department in the hospital's 1993 Actual Cost Reports for all non-governmental third party payers including, but not limited to, Blue Cross and Blue Shield plans, commercial insurers and health maintenance organizations;

c. The hospital-specific "payer mix factor" shall be equal to the hospital's 1993 approved charity care divided by its 1993 revenue from private payers;

d. The "Statewide target payer mix factor" is the lowest payer mix factor to which all hospitals receiving charity care subsidies can be reduced by spending all available charity care subsidy funding for that year;

e. The hospital-specific "recalculated 1994 charity care value" shall be determined by allocating available charity care funds so as to equalize hospital-specific payer mix factors to the Statewide target payer mix factor. For those hospitals with a payer mix factor greater than the Statewide target payer mix factor, the recalculated 1994 charity care value is the subsidy amount which would have been necessary to reduce their payer mix factor to that Statewide target payer mix factor; for those hospitals with a payer mix factor that is equal to or less than the Statewide target payer mix factor, their recalculated 1994 charity care value equals zero;

f. The hospital-specific "adjusted operating margin" shall be equal to the sum of the hospital's 1993 income from operations plus the hospital's 1994 commission approved charity care subsidy plus the hospital's additional payment minus the hospital's 1993 charity care subsidy, divided by the sum of the hospital's 1993 total operating revenue plus the hospital's 1994 commission approved charity care subsidy plus the hospital's additional payment minus the hospital's 1993 charity care subsidy; and

g. The "Statewide target adjusted operating margin" is the highest adjusted operating margin to which hospitals can be raised within the limit of the funds available for the additional payment.

L.1995,c.133,s.12.