More than 250 hospitals, health systems urge a divided Congress to come together on DSH funding

Over 250 hospitals and health systems came together this week urging House and Senate leaders to again postpone or eliminate billions in funding cuts to the Medicaid disproportionate share hospital (DSH) program set to go into effect Oct. 1.

The DSH program has been in place for decades to offset the uncompensated care safety net hospitals provide. The Affordable Care Act installed cuts to those payments that to date have been punted 11 times by lawmaker intervention from both sides of the aisle—sometimes in dramatic, down-to-the-wire fashion.

Currently, DSH payments are set to drop by $8 billion annually beginning in the 2024 fiscal year through the 2027 fiscal year, an annual reduction of more than two-thirds of the federal program’s total spending. The payments are among several healthcare programs in limbo this month as legislators seek common ground to avoid a government shutdown.

In a letter quarterbacked by America’s Essential Hospitals (AEH) and delivered Thursday, the hospitals and health systems told top lawmakers that the cuts would be coming at a particularly bad time for facilities still reeling from the pandemic’s impact on expenses.

“These cuts would undermine America’s healthcare safety net and significantly reduce our hospitals’ ability to provide lifesaving services to the communities you represent,” they wrote in the letter. “The far-reaching effects would limit your constituents’ access to care and hurt our local economies, including through job losses.”

“Essential hospitals” such as those that signed onto the letter average almost $63 million in uncompensated care costs per hospital, which is over seven times that of other hospitals, according to AEH.

The signatory hospitals and health systems pointed to “ongoing high levels of uncompensated care across the country” putting strain on their operations. They urged the lawmakers to “at a minimum” take action on the $16 billion of reductions slated for the next two fiscal years.

Recent market reports have corroborated an uptick in hospitals’ uncompensated care and bad debt over the last few months, which they attributed in part to Medicaid redeterminations. These have landed alongside labor spending and other increased expenses that, while somewhat softening, remain well above pre-pandemic levels.

“At a time of substantial instability within the health care system, it is imperative Congress continue to delay and eliminate Medicaid DSH cuts,” the organizations wrote. “Our hospitals need the financial certainty such action would bring to continue providing needed care to the disadvantaged patients they disproportionately serve.”

In a March report to Congress, MacPAC said it was “concerned” that the scheduled payment cuts “may disrupt the financial viability of some safety-net hospitals.” It had previously recommended that such reductions should be phased in gradually.

“Phasing in reductions will give states time to adjust to other types of Medicaid hospital payment policies to account for DSH funding changes,” the commission wrote in its March report (PDF).

Healthcare groups have fretted that this session’s particularly divided Congress could leave traditionally bipartisan health initiatives by the wayside. Alongside the threat of a shutdown, the policy debates threaten continued funding for, among others, George W. Bush’s signature HIV-AIDS prevention program, PEPFAR.