CMS issues DSH final rule, cuts $1.1B from payments

The Centers for Medicare & Medicaid Services issued a final rule regarding Medicaid payments to disproportionate share hospitals (DSH), cutting approximately $1.1 billion from the program in the next two fiscal years.

As a result of healthcare reform, CMS announced it will reduce DSH payments by $18.1 billion between fiscal year 2014 and FY 2020.

"Implementation of the Affordable Care Act's coverage expansion is expected to affect the amount of uncompensated care and the percentage of uninsured individuals within states," the final rule states. "Generally, we expect that states that do not implement the new coverage group would have relatively higher rates of uninsurance, and more uncompensated care, than states that adopt the new coverage group."

The rule states the methodology for making the cuts will incorporate the following factors:

  • smaller reductions in low-DSH states;

  • larger reductions in states with smaller numbers of uninsured people;

  • larger reductions in states that "do not target their DSH payments on hospitals with high volumes of Medicaid inpatients;" and

  • larger reductions in states that "do not target their DSH payments on hospitals with high levels of uncompensated care."

The cuts may hit states that have refused to expand Medicaid under healthcare reform the hardest. The government will make the cuts as scheduled, regardless of whether a state expands the program. Because of this, many hospitals in the affected states --which include Texas, Louisiana and Florida--will have to offset the cuts with less uncompensated care or by shifting the costs to patients with private insurance.

A report last October from the National Association of Public Hospitals and Health Systems similarly estimated failure to expand Medicaid combined with DSH cuts could cause an increase of up to $53.3 billion in uncompensated care costs by the end of the decade, FierceHealthcare previously reported.

To learn more:
- here's the CMS rule (.pdf)

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