Dive Brief:
- Hospitals that currently depend on Medicaid disproportionate share payments may face financial crises in 2017, when DSH payments are due to begin shrinking, unless they can convince their states to maintain these payments. Their only other alternative may be to drop badly-needed services to low-income patients for which they may be the provider of last resort.
- The ACA included provisions that gradually phase out DSH funding, on the assumption that states would expand Medicaid and that this new coverage would eliminate the need for such funding, but 25 states haven't opted for the expansion. While the phase-out was delayed until 2017 in a Medicare payment law enacted last year, DSH cuts adding up to $35 billion are still planned over the years between 2017 and 2024.
- If states want to rescue hospitals that need funding for low-income patients, they can expand Medicaid, but also have the choice to change the formula for how DSH payments are made. They could adopt a formula that funnels more DSH funding to hospitals that offer the greatest amount of uncompensated care, researchers note.
Dive Insight:
If safety-net hospitals lose DSH payments, it could leave some patients with nowhere to turn for important services. For example, Atlanta's Grady Memorial Hospital—a long-established safety-net provider for low-income and uninsured patients—is considering cuts to OB/GYN and mental health services for low-income populations to cope with to DSH cuts. Considering that the hospital also relies on funding from county budgets, which also face large cuts, the risks to indigent patients are even worse.
And Grady Memorial is just one of countless at-risk facilities that serve the poor. According to research recently published in journal Health Affairs, nearly half of hospitals the study identified as having weak operating margins are "highly reliant" on DSH payments, which contribute more than 2.5% of revenues. It seems likely that they, too will have to look at cutting back on services needed by their communities unless something changes. It seems that hospitals will have to lobby aggressively to get state and federal legislators to back them in this fight.