- The CMS issued a final rule Thursday stating the hospital-specific limits on Medicaid disproportionate share hospital (DSH) payments should be calculated after taking into account third-party payments for uncompensated care costs.
- The American Hospital Association (AHA) opposes the final rule, saying it represents new policy — instead of clarification on existing policy — and that the DSH payments under it would not “reflect the real economic burden of hospitals."
- The rule comes the same month as a federal court ruling in New Hampshire that found the CMS incorrectly used FAQs on its website rather than notice-and-comment rulemaking to calculate the DSH payments.
Medicaid makes DSH payments to hospitals that serve a large population of people who are insured through Medicaid or uninsured. The payments are meant to support hospitals who treat vulnerable populations and provide critical community services such as disaster preparedness resources.
Statewide payments to hospitals are limited by federal law to hospitals’ uncompensated care costs, and the CMS states those costs are specified as the cost of providing inpatient hospital and outpatient hospital services “minus payments received by the hospital on or on the behalf of those patients.”
The CMS says the rule that dropped Thursday clarifies that third-party payments on behalf of patients includes private insurance payments and Medicare payments for those who are dually eligible for Medicare and Medicaid.
The AHA states this does not accurately reflect a hospital’s real economic burden, partly because it does not include the uncompensated costs of services provided by a hospital’s salaried physicians when determining the DSH limitation. "The AHA is deeply disappointed in CMS’s action to finalize its rule regarding how third-party payments are treated when calculating the hospital-specific limitation on Medicaid disproportionate share hospital payments," the organization's Executive Vice President of Government Relations and Public Policy Tom Nickels said in a statement released on Friday.
The AHA also alleges that the CMS is putting forward the rule to avoid potentially unfavorable court rulings such as the recent outcome of a case in New Hampshire. The AHA says the CMS is using sub-regulatory guidance instead of statute and regulation.
It’s unclear how new leadership at the CMS may affect its interpretation of the hospital-specific limits to DSH payments, but CMS Administrator Seema Verma generally supports more state control over Medicaid programs.