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Bill introduced to delay DSH cuts for two years

May 17, 2013

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Rep. John Lewis, D-GA, advanced a major AHA advocacy plank for 2013 with his introduction last week of legislation to delay for two years – until fiscal year (FY) 2016 – cuts to the Medicare and Medicaid Disproportionate Share Hospital (DSH) programs mandated under the “Patient Protection and Affordable Care Act” (ACA).

Delaying the DSH payment cuts is a key priority for the AHA and hospital leaders as the field weighs the impact of the ACA’s lower coverage estimates resulting from the Supreme Court’s 2012 decision that allows states to opt out of the law’s Medicaid expansion. The ACA assumed some 32 million people would get health care coverage under the law.

“In a time of increased financial pressures and uncertainty,
maintaining vital DSH payments will help ensure that hospitals will be able to provide care for their patients and communities,” AHA Executive Vice President Rick Pollack said in a statement supporting the “DSH Reduction Relief Act,” (H.R. 1920). “We look forward to working with Congress to advance this important legislation.”

Under the ACA, Medicaid DSH payments would be reduced by $14.1 billion from FY 2014 through 2019,
and Medicare DSH payments would be reduced by $22.1 billion from FY 2014 to 2019. The Centers for Medicare & Medicaid Services (CMS) last month proposed reducing Medicare DSH spending by $1 billion in FY 2014, as part of its inpatient prospective payment system regulation for FY 2014. On Monday, the agency proposed a methodology for reducing federal Medicaid DSH allotments to states by the ACA-mandated levels of $500 million in FY 2014 and $600 million in FY 2015.

The Medicaid and Medicare DSH programs have provided vital financial support to hospitals that serve the most vulnerable populations – Medicaid beneficiaries, low-income Medicare beneficiaries, the
uninsured and the underinsured – since their inception in the early 1980s.

Safety-net hospital leaders welcomed introduction of H.R. 1920.

“If there is not a delay, the DSH reductions could lead to less care for the uninsured, rather than more,” says Matthew Hicks, vice president of government relations for Grady Health System in Atlanta.

The health system, which is one of the largest public health systems in the U.S., estimates it would lose $45 million annually in Medicaid payments if the cuts go into effect.

“Grady Health System relies on DSH funding to break even and will be faced with cutting services if the lost funds are not replaced in some way,” says Hicks.

“Grady is not expected to achieve the increase in insured patients on the timeline originally envisioned by the ACA.”

José Sanchez, president and CEO of Norwegian American Hospital in Chicago, also voiced support for the legislation. The 200-bed hospital treats 53% Medicaid patients and 35% Medicare patients, and it depends on the DSH funding to provide services to vulnerable patients.

“If the DSH cuts go into place as outlined, I think it will have a detrimental effect,” Sanchez says. “I think I would have to really downsize the services in the hospital and even close some services that are very much needed in the community.”

Sanchez says the two-year delay in the DSH cuts would allow “a transition period” for the hospital to determine the effects of coverage expansions under the ACA.

Proposed Medicaid DSH rule.

Meanwhile, CMS’ Medicaid DSH proposal would establish separate DSH reduction pools for “low-DSH” states and other states. It then creates a formula for distributing the reductions in each pool based on five factors outlined in the law.

CMS’ proposed methodology gives one-third weight to the uninsured percentage factor and one-third weight to each of the two DSH payment targeting factors: high Medicaid volume hospitals and hospitals with high levels of uncompensated care.

The rule also contains a procedure for giving special consideration to states that had existing Section 1115 waivers that expanded coverage.

AHA members received a Special Bulletin on May 14 on the proposal. Visit

http://tinyurl.com/bttw3qt for more information.

By Pete Davis