CMS moves forward with $43B in DSH payment cuts

CMS issued a proposed rule Thursday that lays out a methodology for implementing cuts to Medicaid Disproportionate Share Hospital allotments under the ACA beginning in fiscal year 2018.

With the expectation of lower uninsured rates and lower levels of hospital uncompensated care, the ACA adjusted the amounts of funding available to states under the Medicaid program for hospitals that serve a disproportionate share of low-income patients. The ACA calls for aggregate reductions to Medicaid DSH payments annually from FY 2014 through FY 2020. Subsequent legislation delayed the start of the reductions until FY 2018 and pushed the end date back to FY 2025.

Medicaid DSH allotments are slated to be reduced by $2 billion in FY 2018. The reductions will grow by $1 billion per year through FY 2024, when payments will be cut by $8 billion. DSH allotments will be reduced by another $8 billion in FY 2025.

CMS proposed a methodology that would account for new data sources, some of which were unavailable during prior rulemaking. Those sources include DSH Medicaid Inpatient Utilization Rate data, U.S. Census Bureau data and existing state DSH allotments. "We are proposing to utilize the most recent year available for all data sources and are proposing to align data sources whenever possible," said CMS.

The proposed methodology would help ensure DSH payments reach hospitals with the most need for financial assistance due to high volumes of Medicaid inpatients and high levels of uncompensated care, according to CMS.

CMS will accept comments on the proposed rule until Aug. 28 at 5:00 p.m.

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