CMS Finalizes $957 Million DSH Cuts

The FY 2024 Hospital Inpatient Prospective Payment System (IPPS) and Long-term Care Hospital Prospective Payment System (LTCH PPS) rule was finalized by the Centers for Medicare and Medicaid Services (CMS) on August 1 and contains a shocking projected cut to disproportionate share hospitals (DSH).

For all hospitals, the rule provides a 3.1% pay increase which CMS estimates will amount to $2.2 billion across the sector, but hospitals were frustrated that the agency’s increase fell far short of what the industry feels it needs, Inside Health Policy reports. From Soumi Saha, senior vice president of government affairs at Premier:

A universal truth in our country is that rising healthcare costs coupled with labor shortages and an aging population demands payment policies that ensure hospitals can focus on providing high-quality, patient-centered care. This inadequate update ensures that hospitals will instead focus on how they are going to keep their doors open. The chasm between a 3.1 percent payment update and reality, coupled with uncomfortably high inflation, is unsustainable and threatens the viability of the American healthcare system.

Disproportionate share hospitals will receive a direct cut, which was estimated in the proposed rule to only be $115 million but grew to $957 million in the final rule. According to STAT News, CMS projected that safety net hospitals would not require as much compensation for underinsured or uninsured patients, according to CMS Office of the Actuary data, but industry advocates note that more people are anticipated to be uninsured due to ongoing Medicaid redeterminations.

As the Medicaid and CHIP Payment and Access Commission (MACPAC) explains, the DSH payments are required to offset hospitals’ uncompensated care and to improve access for Medicaid patients. Allotments are determined in advance by CMS and then distributed per state and calculated according to statutory requirements. Through the Affordable Care Act of 2010, the government can reduce federal DSH allotments to hospitals to account for anticipated decreases in uncompensated care due to health insurance coverage expansion.

Members of Congress, including 51 senators and 230 House members, led by Senators Bob Casey (D-Pa.) and James Lankford (R-Okla.) announced that they would launch an initiative to avert DSH pay cuts. From the Senators’ letter to Senate Leadership:

Congress has acted in a bipartisan manner on multiple occasions over the last eleven years to avert the Medicaid DSH cuts. We ask you to continue this effort and act before these reductions take place. Without legislative action, the Centers for Medicare & Medicaid Services will move forward with the Medicaid DSH reductions and our hospitals will incur an $8 billion cut in payments for FY 2024 and $8 billion for each of the next three years to follow. Cuts of this magnitude could undermine the financial viability of hospitals, threatening access to care for the most vulnerable Americans. It is essential that we continue to protect those who have come to rely on the services provided by Medicaid DSH hospitals.