Medicare DSH

What’s new?

  • On June 3, the Supreme Court issued a 7-1 decision that the Department of Health and Human Services (HHS) improperly changed the formula used to calculate disproportionate hospital share (DSH) payments.  The Supreme Court affirmed the decision reached by the Court of Appeals.
  • The decision which encompasses federal fiscal years from 2005 through 2013 could affect between $3 – 4 billion in Medicare payments to hospitals.
  • On May 3, 2019, 179 Congressional Representatives signed a letter imploring leadership on both sides to delay Medicare Disproportionate Share Hospital (DSH) program cuts scheduled to take place on October 1, 2019.  The request was for a two year delay in order to protect the most vulnerable hospitals and the communities they serve.  See letter below under External Resources.
  • These cuts would cost Safety Net Hospitals $4 billion in FY2020.

What’s the issue?

  • The Medicare Disproportionate Share Hospital (DSH) program provides vital financial support to hospitals that serve the nation’s most vulnerable populations, including low-income Medicare beneficiaries, the uninsured and underinsured.
  • These payments are designed to compensate hospitals for the higher operating costs they incur in treating a large share of low-income patients, as these patients tend to require more care and are costlier to treat than other Medicare patients. Other factors increasing costs for hospitals serving these patients include the need for additional staffing and services, such as translators and social workers.
  • The Affordable Care Act (ACA) was estimated to expand public and private health care coverage to 32 million more Americans by 2019. In response to these projections, Congress cut Medicare DSH payments to hospitals, reasoning that hospitals would care for fewer uninsured patients as health coverage is expanded.
  • The ACA reduces Medicare DSH payments by $22.1 billion from fiscal year 2014 through fiscal year 2019.
  • Hospitals initially receive 25 percent of the Medicare DSH funds they would have received under the traditional formula, with the remaining 75 percent flowing into a separate funding pool for Medicare DSH hospitals. This pool will be reduced as the percentage of uninsured declines and will be distributed based on the proportion of total uncompensated care each Medicare DSH hospital provides (using a formula based on inpatient care days for Medicaid and Medicare patients).
  • The 75 percent pool was reduced by about $546 million in 2014, $1.25 billion in 2015 and $1.2 billion in 2016.

Why does it matter?

  • Even before the DSH funding cuts, hospital costs for providing care to Medicaid beneficiaries, low-income Medicare beneficiaries, the uninsured and the underinsured are not fully met. Medicare on average covers only 88 cents of every dollar treating Medicare patients.
  • In 2016, Presence Health provided over $45 million in unreimbursed Medicare services to our communities. In the same year, Presence Health provided over $40 million in financial assistance, helping thousands of people in our communities. Any funding cuts make it more difficult for Presence Health to provide the same amount and level of quality services to all patients regardless of their ability to pay.

What is the AMITA Health perspective?

  • DSH funding helps serve vulnerable populations. AMITA Health supports legislation to mitigate the DSH cuts, to ensure that we can continue to serve vulnerable populations in our communities. This program is vital as community health programs continue to suffer cuts and hospitals become the site of care when social workers, mental health and other services are not available in the community.
  • Changes to DSH payments must be thoughtful. DSH payments should reflect the real economic burden of hospitals that treat a disproportionate share of low-income patients. Any legislation to repeal the Affordable Care Act that does not replace coverage should reverse hospital payment reductions, particularly those for the Medicare and Medicaid DSH programs. It is critical that any changes to DSH funding formulas give states and hospitals sufficient time to make needed adjustments to ensure compliance.

External Resources

Information from third-party organizations that can be resources for you to continue to learn about the issues at hand.

Congressional Delegation Letter Opposing DSH Cuts

May letter from bi-partisan delegation of Congressional Representatives requesting 2 year delay to DSH cuts.

View Resource

Understanding Medicaid Hospital Payments and the Impact of Recent Policy Changes

No data source consistently collects information on Medicaid costs and payment, and different estimates of Medicaid payment as a share of costs use different definitions of Medicaid costs and payments. Thus, estimates of Medicaid payment as a percent of costs are sensitive to the specific data source and definitions used to make the estimates. Learn more.

View Resource

Medicare Disproportionate Share (DSH) Payments

Many Medicare beneficiaries and other patients rely on hospitals for their care, especially teaching hospitals that serve large low-income populations. These hospitals often face substantial financial pressure: they may provide significant amounts of care to the poor and lack the surplus revenue needed to underwrite the costs associated with the provision of services.

View Resource

Featured News

Featured news includes articles and tweets from multiple viewpoints and is designed to keep you abreast of the current debate around issues that are important to AMITA Health. This information should not be construed as our point of view.

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Hospitals Win in Rare Supreme Court Decision Pertaining to Medicare Reimbursement

On June 3, 2019, the Supreme Court of the United States issued its opinion in Azar v. Allina (Case No. 17-1484) and affirmed the provider-friendly ...

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