DSH system Could See Reduction in CMS Funding
The Affordable Care Act and congressional action could drop DSH funding by as much as $35.1 billion by 2024.
- Disproportionate Share Hospitals serve a significantly disproportionate number of low-income patients and receive payments from the Centers for Medicaid and Medicare Services to cover the costs of providing care to uninsured patients. However, according to a new report from Health Affairs, payments to these hospitals could be reduced by as much as $35.1 billion between the fiscal years of 2017 and 2024 because of the Affordable Care Act (ACA) and congressional action.
The DSH program is a government funded system to fund hospitals that treat indigent patients. The facilities are able to receive at least partial compensation. Qualifying hospitals need to meet one of the following criteria:
Primary – A complex statutory formula that creates the Medicare DSH patient percentage. It is equal to the sum of the percentage of Medicare inpatient days attributed to patients entitled to both Medicare Part A and Supplemental Security Income and the percentage of total inpatient days attributed to patients eligible for Medicaid not eligible for Medicare Part A.
Alternative Special Exemption – Urban hospitals with more than 100 beds that can demonstrate more than 30 percent of their total net inpatient care revenues, other than Medicare or Medicaid, come from state and local government sources for indigent care.
Number of Beds in Hospital Determination – Days attributed to units or wards generally payable under the Inpatient Prospective Payment System.
Each hospital’s uncompensated care payment is the result of three factors. Seventy-five percent of the estimated DSH payment is under the original DSH methodology, one minus the percent change in the percent of individuals under the age of 65 who are uninsured and a hospital’s amount of uncompensated care relative to the amount of uncompensated care for all DHS hospitals expressed as a percentage.
Payments from DSH has long been part of the Medicaid program as a way to partially offset uncompensated care costs for hospitals that treat uninsured and Medicaid populations. The cost cutting is predicted to happen as the ACA expands health insurance to millions of American. This would bring about a decline in many hospitals’ uncompensated care costs.
“However, the decision of 25 states not to expand their Medicaid programs, combined with residual coverage gaps, may leave as many as 30 million people uninsured, and hospitals will bear the burden of their uncompensated care costs,” the report reads.
The study then went on to identify hospitals that it believed would be the most financially vulnerable to reductions in Medicaid DSH payments. It is estimated that of the 529 acute care hospitals that will be particularly affected by the cuts 42.5 percent (225 hospitals) are in a weak financial condition. Furthermore, hospitals whose Medicaid DSH payments exceed 2.52 percent of total revenues as having high reliance on the payments.
“Policy makers should recognize that decreases in revenue may affect these hospitals’ ability to give vulnerable populations access to care,” the report reads.
