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Association Comments on Section 203 Proposed Rule

Julie Kozminski
April 25, 2023

In a letter to the Centers for Medicare & Medicaid Services (CMS), America’s Essential Hospitals commented on the proposed implementation of Section 203 of the Consolidated Appropriations Act of 2021, (CAA, 2021). This provision would alter the rules for considering the costs and payments associated with Medicare and commercial dually eligible patients when calculating a hospital’s Medicaid disproportionate share hospital (DSH) uncompensated care limit.

The CAA, 2021 requires hospitals to include in the calculation only the costs and payments for patients for whom Medicaid is the primary payer or who are uninsured. Costs for hospital services to patients with other primary coverage, such as commercial insurance or Medicare, who have Medicaid as a secondary payer will not be counted towards a hospital’s DSH cap.

The CAA, 2021 made an exception for hospitals that are:

  • Above the 97th percentile of hospitals for Medicare supplemental security income (SSI) inpatient days, based on the percentage of a hospital’s total inpatient days for Medicare SSI patients.
  • At or above the 97th percentile for all hospitals with respect to the number of Medicare SSI days.

The exclusion of costs for dual-eligible beneficiaries will result in significant hardship and substantial DSH cuts for some hospitals, particularly those with many dual-eligible patients for whom Medicare is the primary payer.

The association urged CMS to work with Congress to avoid the unintended cuts to some hospitals’ Medicaid DSH payments imposed by Section 203, without harming hospitals that fall into the Section 203 exception pool.

In its implementation of the rule, America’s Essential Hospitals asked CMS to include all hospitals in the 97th percentile calculation, expeditiously release the 97th percentile lists, and to withdraw its proposal to require auditors to estimate DSH overpayments.

Contact Director of Policy Rob Nelb, MPH, at rnelb@essentialhospitals.org or 202.585.0127 with questions.

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