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Hospitals Concerned About Proposed DSH Payment Cuts in Health Reform

Janice Simmons, for HealthLeaders Media, January 19, 2010

Depending on which bill is examined, 18 million to 23 million people could still remain uninsured under the House and Senate reform bill.

Others could still face financial barriers in obtaining needed healthcare or paying premiums or medical bills—which explains the reasons why Congress will continue Medicare and Medicaid disproportionate share hospital (DSH) payments under healthcare reform legislation.

The catch? The payments will be reduced in most instances to hospitals under proposed reform legislation from both the House and Senate. The reasoning is that more individuals will be covered by insurance. But how much the payments are cut and when that would take place depends on the patient populations served by the hospitals—particularly the safety net hospitals—and which bill language is used.

It is an area that has had hospital groups worried. In a letter sent to Congress and in Capitol Hill testimony last spring, hospital groups—including the American Hospital Association, the Federation of American Hospitals, and the National Association of Children's Hospitals—noted that many urban and rural hospitals were still struggling, even with the DSH payments.

With DSH payments included, the total hospital shortfall has rose from $3.8 billion in 2000 to nearly $32 billion in 2007 (with $21.4 billion for Medicare and $10.4 billion for Medicaid). And, including DSH payments, hospitals received payments of only 91 cents for every dollar spent caring for Medicare patients and only 88 cents for every dollar spent caring for Medicaid patients in 2007 on average, the hospitals said.

The hospital groups are asking Congress to reject reductions in federal support for DSH programs until after coverage expansions are fully implemented, and Medicare and Medicaid payment shortfalls are addressed.

John Bluford, president and CEO of Truman Medical Centers in Kansas City, MO, said at a conference in Washington in the spring that DSH funding was a critical source of support for safety-net providers—which serve a disproportionate share of low-income and minority patients.

These patients were often sicker and more costly to treat. "There was a belief that has been disproved with the Massachusetts experience that coverage for everyone would mean no need for special compensation for safety net providers," he said.

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