Hospital DSH payments to plummet without Medicaid expansion

Hospitals in states that forgo Medicaid expansion could face unintended cuts to disproportionate share hospital (DSH) payments, as well as higher uncompensated care costs, according to an article in the New England Journal of Medicine.

Regardless of Medicaid expansion, the Affordable Care Act will cut Medicaid DSH payments by $18.1 billion between 2014 and 2020. And under a new Medicare DSH formula, even in a state that cuts its uninsured rate in half, a hospital could see Medicare DSH payments drop 38 percent, the article noted.

"The problem comes in states where much of the uncompensated care provided will remain the same if Medicaid is not expanded, yet DSH cuts will still occur," study author and policy expert John Graves at Vanderbilt University School of Medicine said in a statement.

To offset the substantial financial shortfall, hospitals in states without Medicaid expansion will have to provide less uncompensated care or shift the costs to privately insured patients, according to the article.

Hospitals will see the greatest unplanned cuts to DSH funding in Texas, Louisiana and Florida, which have all decided against expanding Medicaid.

The article echoes an October 2012 report from the National Association of Public Hospitals and Health Systems that concluded individual states rejecting Medicaid expansion, coupled with DSH payment reductions, could cause uncompensated care costs to soar $53.3 billion by 2019.

In addition to seeing higher uncompensated care costs, disproportionate share hospitals also are 30 percent more likely to have higher-than-average readmission rates than other facilities, and therefore, receive monetary penalties from the Centers for Medicare & Medicaid Services, according to a new study by the Commonwealth Fund, FierceHealthFinance reported yesterday.

For more:
- read the research announcement
- here's the NEJM article