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CMS Finalizes Inclusion of MA Days in Medicare DSH Calculation

The Centers for Medicare & Medicaid Services (CMS) on June 7 finalized a policy retroactively affecting the calculation of Medicare disproportionate share hospital (DSH) payments from fiscal years (FYs) 2005 to 2013.

CMS proposed the policy in 2020, following the Supreme Court’s 2019 ruling in Azar v. Allina Health Services that CMS acted unlawfully when deciding to count Medicare Advantage (MA) days in the Medicare calculation for FY 2012 without providing notice and opportunity for public comment.

The final rule determines that Medicare Part C enrollee days, otherwise known as MA days, will be included in the calculation of the Medicare fraction used to determine Medicare DSH payments for years prior to FY 2014. Since CMS is reaffirming its standing policy through retroactive rulemaking, its decision will not change what most hospitals already have been paid for years prior to FY 2014. The rule will affect hospitals for which pre-FY 2014 DSH payments are still open or have not yet been finally settled due to hospitals contesting the DSH calculation for those years. Counting MA days in the calculation substantially reduces Medicare DSH payments for hospitals in the aggregate, since fewer MA beneficiaries tend to be dually eligible for Medicaid compared with Medicare fee-for-service beneficiaries.

The regulation is effective Aug. 8.

Contact Senior Director of Policy Erin O’Malley at or 202.585.0127 with questions.


About the Author

Faridat Animashaun is a policy associate at America's Essential Hospitals.

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