CMS Issues Final Rule Cutting $1.1B in Medicaid DSH Payments

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CMS has issued a final rule on Medicaid disproportionate share hospital payments, cutting roughly $1.1 billion from the program over the next two fiscal years.

Under the Patient Protection and Affordable Care Act, Medicaid DSH payments to hospitals will be cut by $18.1 billion from fiscal year 2014 to FY 2020. Medicaid DSH payments go to safety-net hospitals and health systems that treat high volumes of low-income populations. The Medicaid DSH cuts were put into the law because Medicaid expansion and the health insurance exchanges are expected to reduce uncompensated care levels at hospitals.

In the federal government's 2014 fiscal year, which starts Oct. 1, hospitals will lose $500 million in Medicaid DSH payments, CMS officials said. Those cuts will increase to $600 million in 2015. The final rule only covers Medicaid DSH payments for those two years.

CMS also outlined its methodology on how it would carry out the reductions. Several factors will be taken into account for hospitals losing DSH funds: For example, states with the lowest percentages of uninsured people will receive larger reductions. States that do not target their DSH payments toward hospitals with the highest volumes of Medicaid patients and the highest levels of uncompensated care will receive larger reductions. CMS' formula for DSH cuts is similar to its proposed rule from May.

Many states have said they will not expand Medicaid under the PPACA, and safety-net hospitals in states declining Medicaid expansion are in precarious situations, as they are expected to simultaneously lose Medicaid DSH funds and not see gains from added Medicaid rolls.

President Obama and others have attempted to delay the Medicaid DSH payment cuts until 2015. Rep. John Lewis (D-Ga.) proposed delayed DSH payment cuts this past May, but Congress has not taken any action on the legislation. HHS and CMS officials said their hands were tied, and they had to issue the final rule, per the law's mandate.

"In the absence of a legislative change, the aggregate reductions in federal DSH funding will begin with FY 2014 as required by current law," according to the final rule. "HHS has no flexibility to institute a delay of the DSH allotment reductions without congressional action."

More Articles on Hospitals and Medicaid DSH Payments:
Should Hospitals Support Medicaid Expansion? Saint Joseph Mercy CEO Garry Faja Responds
Rep. John Lewis Proposes to Delay DSH Cuts
CMS Lays Out Formula for Medicaid DSH Cuts

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