More on Reimbursement

Hospitals are fighting DSH payment cuts

America's Essential Hospitals said it is working with lawmakers to stop $4 billion in cuts for 2020 from taking effect November 22.

Susan Morse, Managing Editor

The Centers for Medicare and Medicaid Services has released a final rule implementing $44 billion in Medicaid disproportionate share hospital payment cuts through 2025.

In 2020, DSH payments will be cut by $4 billion, and from 2021 to 2025 the amount will be reduced by $8 billion each year.

By law, state DSH allotments need to be reduced by $44 billion through 2025, CMS said. The reductions were to take effect on October 1.

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However, hospitals are fighting back in lobbying Congress for an extension.

The House of Representatives has approved a temporary extension of DSH funding through November 21, according to America's Essential Hospitals and the American Hospital Association. The Senate is expected to vote on the continuing resolution this week.

"If passed, Congress will have more time to reach a long-term agreement to stop these cuts for at least two years," America's Essential Hospitals said. "America's Essential Hospitals continues to be a leader on this issue, building bipartisan support in Congress to stop these cuts. We will continue working with lawmakers to stop the cut from taking effect November 22."

Hospitals have been successful in past attempts to delay the cuts.

"In 2013, CMS issued a final rule to implement the ACA state Medicaid DSH allotment reductions and described the methodology it planned to use," the American Hospital Association said. "Subsequent legislative actions, led by the AHA, delayed the implementation of the cuts until FY 2020."


The Disproportionate Share Hospital payments go to hospitals that serve a large number of Medicaid and uninsured patients to help cover the cost of care.

When the Affordable Care Act took effect, the assumption was that the amount of uncompensated care would decline as the number of insured people increased under the law.

The ACA modified the amount of funding available to states under the Medicaid program. DSH reductions were scheduled to start in 2014 through 2020. Congress has delayed implementation and modified the reduction amounts.

However, CMS said some commenters to the final rule expressed concern that Congress passed Medicaid DSH allotment reductions expecting that hospitals would care for fewer uninsured patients as a result of the ACA.

Under the ACA, all states were to have expanded Medicaid coverage, but this provision was contested and found unconstitutional by the Supreme Court. An estimated 37 states, including the District of Columbia, have expanded Medicaid.


The Omnibus Budget Reconciliation Act of 1981 required that Medicaid payment rates for hospitals take into account the situation of hospitals that serve a disproportionate share of low-income patients with special needs.

The final rule uses a methodology that would mitigate the negative impact on states that continue to have high percentages of uninsured and are targeting DSH payments to hospitals that have a high volume of Medicaid patients and to hospitals with high levels of uncompensated care, CMS said.


CMS said it received approximately 140 public comments on the proposed rule from organizations, individuals, healthcare providers, advocacy groups and states.

There were numerous comments in opposition.

Many urged delaying the implementation of the annual reductions to state DSH allotments, but CMS said, "We have no flexibility administratively to delay the start of the statutory reductions."

Multiple commenters expressed concern that unreduced DSH allotments are inequitable.

"A number of commenters expressed concern that the DSH allotment reductions will cause financial distress to hospitals," CMS said. "Response: We understand the commenters' concerns. However, the statute requires annual aggregate reductions in DSH allotments starting in FY 2020 and the use of a DHRM (DHS health reform methodology) to determine the percentage reduction in annual state DSH allotments to achieve the required aggregate annual reduction amounts."

Multiple commenters suggested that the DHRM does not take into consideration that Medicaid reimbursement rates are considerably lower than private insurance.

A few commenters suggested that CMS finalize the rule for a limited period of time to allow for re-evaluation and refinement to strengthen the DHRM methodology in future years.

"Response: We recognize the importance of the DHRM to states, hospitals, and other stakeholders. Therefore, we will monitor and reevaluate the DHRM and its application throughout implementation. If necessary, we will undertake future rulemaking to make modifications to the DHRM," CMS said.

Twitter: @SusanJMorse
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