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CMS Proposes Reduced Hospital DSH Cuts

Cheryl Clark, for HealthLeaders Media, May 14, 2013

Some acute care hospitals would see a $1.1 billion reduction in cuts to Medicaid disproportionate share hospital (DSH) funds for two years under a Centers for Medicare & Medicaid Services proposal.

Some 2,000 acute care hospitals that treat large numbers of the uninsured would see a $1.1 billion reduction in federal subsidies, called Medicaid disproportionate share funds, over the next two years under a proposed rule released Monday by the Centers for Medicare & Medicaid Services.

The reduction methodology to accommodate "data refinement and methodology improvement before larger reductions begin in FY 2017" is being proposed just for FY 2014 and 2015, rather than the full $18.1 billion specified through 2020. The federal funds go to states, which distribute them to hospitals under federal and state eligibility requirements.

Hospital trade groups said they appreciated that the full cuts through 2020 weren't set forth in the proposed rule, but said all DSH cuts should be postponed two years because the premise for the rule, which is spelled out in the Patient Protection and Affordable Care Act, is no longer valid.

The idea is that since starting in FY 2014, or Oct. 1, 2013, hospitals wouldn't need such large DSH subsidies because they would have far fewer uninsured patients to care for. That's because health insurance exchanges are expected to cover more of the uninsured, and because PPACA authorizes states to expand their Medicaid programs to adults under age 65 with incomes up to 133% of the federal poverty level.

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