CMS issues DSH final rule
$1.1B will be cut from the Medicaid DSH payment program
The Centers for Medicare & Medicaid Services (CMS) issued a final rule on Medicaid payments to disproportionate share hospitals (DSH) last week, cutting approximately $1.1 billion from the program over the next two fiscal years.
When the federal government’s 2014 fiscal year begins on Oct. 1, 2013, hospitals will lose $500 million in Medicaid DSH payments. The cut will increase to $600 million in 2015.
Due to the Affordable Care Act (ACA), CMS will be reducing DSH payments to hospitals by $18.1 billion between fiscal years 2014 and 2020. Last week’s final rule only covers DSH payments for 2014 and 2015.
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CMS’ final rule outlined its methodology on how the DSH payment reductions would be made. There will be smaller reductions for hospitals in low-DSH states, larger reductions in states with smaller numbers of uninsured people, larger reductions in states that don’t target DSH payments on hospitals with high volumes of Medicaid inpatients and larger reductions in states that don’t target DSH payments on hospitals with high levels of uncompensated care.
Because many states, such as Texas, Louisiana and Florida, have said they won’t expand Medicaid under the ACA, safety-net hospitals in those states will find themselves in difficult financial situations. According to the final rule, those hospitals will still face the same DSH cuts but will also not see gains from the Medicaid expansion.
[See also: Medicaid cuts to Florida hospitals would harm local economies]
"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,” CMS wrote in the final rule.
According to CMS, President Barack Obama and various lawmakers have attempted to delay the Medicaid DSH payment cuts until 2015, but those proposals have not been passed.
"In the absence of a legislative change, the aggregate reductions in federal DSH funding will begin with FY 2014 as required by current law," CMS wrote in the final rule. "HHS has no flexibility to institute a delay of the DSH allotment reductions without congressional action."
[See also: Final CMS rule adds 'never events' that Medicare won't pay for]
