Medicare Disproportionate Share Hospital (DSH) payments compensate hospitals for the operating costs associated with the care of low-income patients. Low-income Medicare beneficiaries, on average, are sicker and more costly to treat than other Medicare beneficiaries. The higher costs are due to the need for additional staffing and services. Medicare DSH payments help cover those costs and allow hospitals to ensure access to quality care for Medicare and low-income beneficiaries.
Under existing regulations, Medicare DSH payment amounts are directly tied to a hospital’s inpatient volume. The Affordable Care Act (ACA) changes how Medicare DSH payments will be allocated to hospitals. Starting in fiscal year 2014, hospitals will continue to receive 25 percent of their Medicare DSH allotments according to the current methodology. However, the remaining 75 percent will become a separate DSH payment tied to a hospital’s uncompensated care costs. As nationwide uninsurance rates decrease the amount of this separate Medicare DSH payment will decrease.
America’s Essential Hospitals prepared a detailed summary of the proposed changes to the Medicare disproportionate share hospital program.