https://mailchi.mp/f9bf1e547241/gist-weekly-february-23-2024?e=d1e747d2d8

On Tuesday, the Centers for Medicare and Medicaid Services (CMS) published a final rule redefining how disproportionate share hospital (DSH) payments are determined.

Hospitals used to calculate their Medicaid shortfalls based on the costs and payments associated with all of their Medicaid-eligible patients, even if some of those patients used a different primary payer. Prompted by Congress to address this issue in 2021, CMS is now limiting the scope of Medicaid shortfall to only patients for whom Medicaid is their primary payer. The rule exempts safety-net hospitals providing care to the highest percentages of low-income patients, defined as those in the 97th percentile of inpatient days treating Medicare SSI (Social Security Income) recipients.

This change is expected to amount to an $8B annual reduction in DSH payments over the next four years. Congress has repeatedly delayed the implementation of these cuts, which are now set to go in effect on March 8, 2024.

The Gist: Though the formula for calculating appropriate DSH payments has always been complex, the point of the program is to provide additional support to hospitals caring for underserved, low-income populations.

This $8B cut may be targeted at hospitals with slightly better payer mixes, but it will be felt heavily by many safety-net providers reliant on the payments, especially in today’s challenging financial operating environment where over 40 percent of hospitals are still losing money on operations.