Moody's: 2-year delay on Medicaid DSH cuts credit positive for safety-net hospitals

Congress' decision to delay Medicaid Disproportionate Share Payment cuts two years is credit positive for safety-net hospitals, according to Moody's Investors Service.

Medicaid DSH payment cuts took effect Oct. 1, 2017. The recent delay restores Medicaid DSH payments for hospitals treating a large indigent population and relying on supplemental payments and government subsidies. 

Mandated under the ACA, DSH cuts totaled $2 billion nationwide, reflecting about 17 percent of the federal Medicaid DSH budget. "DSH payments are not distributed equally among states or even among safety-net hospitals, but safety-net hospitals, which have high exposure to patients covered by Medicaid or who have no insurance at all, generally receive the lion's share of DSH payments," according to Moody's.

Moody's noted the two-year delay is also credit positive for states and local governments, like New York, California and Texas, that own safety-net hospitals or provide a large portion of funding to safety nets.

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