Safety Nets Cheer DSH Cuts Delay

The budget deal passed by Congress delays for two years $2 billion in cuts to disproportionate share payments. Safety net providers say that the additional time can be used to fashion a long-term solution for uncompensated care costs. 

The two-year delay in disproportionate share payments is a credit positive for the nation's safety net hospitals, Moody's Investors Service said.

The $2 billion in cuts representing 17% of the federal Medicaid DSH budget were mandated in the Affordable Care Act, and were supposed to take effect on Oct. 1, 2017, the start of federal fiscal year 2018. But Congress on Friday passed a budget that extends the life of the payments for another two years.

"This development restoring DSH payments is credit positive for safety net hospitals that treat large numbers of indigent patients and often rely on various supplemental payments or direct government subsidies," Moody's said. "It is also credit positive for states and local governments that own safety-net hospitals or that provide significant funding to local safety nets, including local governments in New York State, California and Texas."

Related: Money Cut from 340B Will be Redistributed to Most Hospitals, Report Finds

About 2,700 hospitals across the nation get DSH money, although payments vary significantly. Safety-net hospitals that have high volumes of Medicaid and uninsured patients generally receive the bulk of DSH payments.

Medicaid and the Children’s Health Insurance Program Payment and Access Commission report that 37% of the hospitals most reliant on DSH funding are publicly owned and receive 80% of all DSH payments, improving margins by an average 6.4 percentage points.

Bruce Siegel, MD, president and CEO of America’s Essential Hospitals, said Congress "made the right choice" in delaying the DSH cuts. The additional time, he said, "gives hospitals and policymakers time to find a long-term solution to uncompensated care costs, which threaten access to care in communities nationwide."

"Essential hospitals provide high-quality care for all people, regardless of their health needs and financial and social status. To continue meeting this mission, these hospitals need stable, sustainable federal support," Siegel said.