Despite some resistance, Medicaid disproportionate share hospital (DSH) payment cuts take effect on Tuesday, as mandated under the Affordable Care Act (ACA).
The DSH payment cuts will affect hospitals across the nation, even those in states that opted not to expand Medicaid—a major sticking point for some organizations.
From the Daily Briefing blog: For states not expanding Medicaid, DSH cuts will deal a tough blow
How the cuts will affect your hospital
CMS is mandated by the ACA to reduce DSH payments by $500 million in FY 2014 and $600 million in FY 2015. The ACA outlines five key factors to determine the impact of DSH payment cuts on each state. According to the final rule, CMS will:
•Implement minor reductions in "low-DSH states" (i.e. the 16 states for which the DSH allotment in FY 2000 was less than 3% of their federal and state Medicaid spending);
•Implement greater reductions in states with the lowest percentage of uninsured individuals during the most recent year with available data;
•Implement greater reductions in states that do not send most DSH payments to hospitals with high Medicaid volumes;
•Implement greater reductions in states that do not send most DSH payments to hospitals with high levels of uncompensated care; and
•Evaluate the extent to which DSH was included in budget-neutrality calculations for coverage expansion.
Although the Medicaid expansion will not begin until Jan. 1, 2014, the first year of cuts will not account for lower rates of uninsured residents in states that expanded Medicaid in 2014. However, future cuts likely will account for expansion in some way, meaning states that expanded Medicaid could eventually bear the brunt of the DSH cuts.
Some states expanding Medicaid will benefit from protections as "low DSH states." The DSH reduction for the country's 16 low DSH states is much less significant: Overall, their DSH payments would be cut by 1.20% in FY 2014, while "regular DSH states" would lose 4.42% of their payments