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CMS to Cut $43 Billion in Hospital Payments

July 28, 2017

The CMS recently proposed a rule that would cut $43 billion in Disproportionate Share Hospital (DSH) payments to hospitals between 2018 and 2025, according to a recent Federal Register notice.

The DSH payment cuts were established to provide additional Medicaid funding to hospitals that serve a disproportionate amount of low-income patients. The incremental cuts had been built into the ACA with the anticipation that uninsured rates and uncompensated care would decrease significantly between 2014 and 2025; however, legislation had previously pushed DHS cuts to the years 2018 to 2025.

Cuts will begin in 2018, with $2 billion in payments withheld—after which, the payments will decrease by $1 billion every year until 2024. The remaining $8 billion will be cut in 2025.

CMS said in the notice that it anticipates that these funding cuts will have an impact on providers.

“We anticipate that the final rule would affect certain providers through the reduction of state DSH payments,” CMS wrote. “We cannot, however, estimate the impact on individual providers or groups of providers.”

CMS also noted that while cuts are allotted to each state, the states have the power to manage how the cuts are managed throughout the qualifying hospitals.

“Some states may determine that implementing a proportional reduction in DSH payments for all qualifying hospitals is the preferred method to account for the reduced allotment,” CMS wrote. “Alternatively, states could determine that the best action is to propose a methodology that would direct DSH payments reductions to hospitals that do not have high Medicaid volume and do not have high levels of uncompensated care.”

—David Costill

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