Disproportionate Hospital Share (DSH) Payment Change

 The Affordable Care Act (ACA) changed the method used to compensate hospitals for disproportionate share, sometimes referred to as “DSH”.  This new method applies to charges “effective on or after fiscal year (FY) 2014.  Under the new method, eligible hospitals receive 25% of the former “DSH” amount, and additional funds as follows: 

The remainder, equal to 75 percent of what otherwise would have been paid as Medicare DSH will become available for an uncompensated care payments after the amount is reduced for changes in the percentage of individuals that are uninsured. Each Medicare DSH hospital will receive an uncompensated care payment based on its share of insured low income days (that is, the sum of Medicaid days and Medicare/Social Security days) reported by Medicare DSH hospitals. 

Each hospital’s uncompensated care payment is the product of three factors. These three factors are:

1.      75 percent of the estimated DSH payments that would otherwise be made under the old DSH methodology (section (d)(5)(F) of the Social Security Act);

2.      1 minus the percent change in the percent of individuals under the age of 65 who are uninsured (minus 0.1 percentage points for FY 2014, and minus 0.2 percentage points for FY 2015 through FY 2017); and

3.      A hospital’s amount of uncompensated care relative to the amount of uncompensated care for all DSH hospitals expressed as a percentage.

For FY 2014 and FY 2015, a hospital’s amount of uncompensated care is determined based on Medicare DSH hospital’s share of insured low income days, or the sum of a hospital’s Medicare/Social Security days and Medicaid days. 

Source: Centers for Medicare and Medicaid Services (CMS)