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CMS Finalizes Hospital-Specific DSH Calculation Rule

Julie Kozminski
February 21, 2024

The Centers for Medicare & Medicaid Services (CMS) has published a final rule for Section 203 of the Consolidated Appropriations Act, 2021 (CAA 2021), which changes how the calculation for Medicaid’s disproportionate share hospital (DSH) limit accounts for costs and payments associated with Medicare and commercial dually eligible patients.

The CAA 2021 requires hospitals to include 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, and who have Medicaid as a secondary payer will not be counted toward 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 final rule:

  • Defines “97th percentile hospital.”
  • States CMS will publish the list of 97th percentile hospitals annually.
  • Identifies the sources of data to calculate the 97th percentile to include the Healthcare Cost Report Information System, the Medicare Provider Analysis Review files, and SSI eligibility data from the Social Security Administration.
  • Describes how CMS will calculate the percentage of Medicare SSI inpatient days and the number of Medicare SSI days.
  • States when CMS will collect the data and the timeline to correct errors in the calculation.

There were no significant changes to the final rule, and CMS has yet to publish a list of the 97th percentile hospitals for any state plan rate year.

The final rule will be published in the Federal Register Feb. 23. The association will publish an Action Update in the upcoming days.

Contact Director of Policy Rob Nelb, MPH, at or 202.585.0127 with questions.

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