- The CMS on Thursday released a proposed rule that would reduce state Disproportionate Share Hospital payments by $43 billion from 2018 through 2025.
- The Affordable Care Act (ACA) mandated such a reduction in these payments, which help provide compensation for safety net and other providers that care for a high mix of low-income patients.
- Reductions were set to begin in 2014, but were previously delayed until 2018.
The CMS is looking to spread out the reductions to mitigate the effect on states with the greatest financial needs, but the legislation won't be welcomed by providers.
The DSH payments reduction was a trade-off in the ACA for providers, as it was assumed expanded coverage would more than make up for the payment reductions. Uncompensated care did go down since the legislation was implemented, from $46.4 billion in 2013 to $35.7 billion in 2015. However, providers have also been seeing declines in admissions as well as rising expenses.
In addition, safety net and rural providers in states that did not expand Medicaid have found such national trends pressuring them financially without the added influx of Medicaid patients. These trends have caused some rural providers to close. For example, on Monday, the mayor of Fulton, Missouri, LeRoy Benton, said the lack of Medicaid expansion was a significant driver of the coming closure of Fulton Medical Center. The hospital, set to close by late September, pointed to uncompensated care and low patient volume for the decision.
According to the University of North Carolina at Chapel Hill, 81 rural hospitals have closed since January 2010.
CMS' rule proposed $2 billion in reduction in 2018, gradually ramping up to $8 billion in reductions in both 2024 and 2025.
Safety net providers and those with low volumes of cash on hand to weather such a storm are likely to prep cuts or look into budget restructuring. Providers could look to areas such as supply chain or personnel changes to help mitigate the effects of the losses. This year, Memorial Hermann, Summa Health and Hallmark Health all announced that a percentage of their workforce would be eliminated. All of the providers cited similar problems: declining reimbursements, lower admissions and shrinking operating incomes. Brigham and Women’s Hospital offered voluntary buyouts in April to 1,600 workers, with the hospital saying reduced payments by private and government insurers and high labor costs necessitated the belt-tightening move.
Efforts to repeal the ACA — which suffered a very big blow early Friday, when the Senate did not pass GOP-sponsored "skinny repeal" — could roll back this payment reduction. But as long as the ACA is still law, HHS must carry out the legislation.