Hospitals warn Medicaid DSH cuts could lead to reduced access for low-income patients

The CMS' plan to cut billions in federal funds meant to help hospitals with uncompensated-care costs could cause hospitals to scale back the number of Medicaid enrollees they see and scrap initiatives aimed at improving care for those patients.

The agency is following through on an Affordable Care Act requirement to cut Medicaid disproportionate-share hospital payments by $43 billion from fiscal 2018 through 2025. According to a CMS rulemaking released last month, the cuts will start on Oct. 1.

In finalized, Texas could lose 14% or $148 million of its DSH funds next year alone. That could be a deal breaker for Doctors Hospital at Renaissance, a 500-bed facility in Edinburg, Texas, where 44% of its patient population is covered by Medicaid.

"Any proposed decrease in Medicaid DSH payments will severely jeopardize the viability of DHR to continue serving such a high proportion of Medicaid and Medicare patients," Dr. Carlos Cardenas, co-founder of the hospital, said in a comment letter sent Monday to the CMS.

The reimbursement cuts could also affect providers' efforts to curb drug abuse among Medicaid beneficiaries, according to staff at Upstate Universal Hospital, one of the few facilities in northern New York that offers addiction treatment.

"Cuts to DSH funds will result in a reduction of and an unnecessary delay in patients receiving essential substance-recovery and mental health services," Raymond Muldoon, a psychiatric-mental health nurse practitioner at Upstate, said in a comment letter.

Upstate is part of the State University of New York system, which has three public hospitals. The system estimates it will lose $320 million from 2018 through 2025 should the cuts be finalized, according to a SUNY system spokesman.

System staffers worry that the DSH cuts could lead to layoffs.

"A cut in federal DSH Medicaid dollars would hurt our hospital, and cause many people in upstate New York to lose jobs," Dr. Daniel Zaccarini, a resident at Upstate Universal Hospital, said in a Aug. 21 comment letter to the CMS. "By cutting these DSH payments you are secondarily hurting our economy."

States with low uninsured rates such as Hawaii, Kentucky and Minnesota are receiving the biggest DSH cuts under the formula outlined in the proposed rule released last month. Residents in these and other states with similar low uninsured rates have made coverage gains thanks to subsidized individual market coverage and Medicaid expansion.

However, the CMS' new DSH formula doesn't take into account the shortfall between Medicaid payment rates and actual costs of care, hospitals say. Medicaid pays 60% of Medicare rates for the same service on average.

"Despite Medicaid expansion, Kentucky hospitals continue to experience millions of dollars in uncompensated care due to growing Medicaid shortfalls," said Nancy Galvagni, senior vice president at the Kentucky Hospital Association.

Her group is pushing the CMS to include this calculation in their formula. Kentucky's federal DSH allotment would be reduced by $120 million by 2024 under the agency's current calculations, leaving only $41 million in federal dollars to help hospitals in the state offset an estimated $135 million in uncompensated-care losses.

If an outright repeal of the rule isn't possible, hospital executives would at least like to see a delay, as it's unclear what data the CMS will use to determine how much a state's hospital population is uninsured, according to the American Hospital Association.

"This lack of transparency significantly hampers state governments' and stakeholder's ability to assess how the (cut) will affect their state DSH allotment," the trade association said.

But the CMS may find its hands largely tied, as the cuts must start on Oct. 1.

America's Essential Hospitals has suggested that Congress could delay the DSH cuts in its legislation to reauthorize the Children's Health Insurance Program. Federal funding for CHIP is set to expire on Sept. 30, and the legislation has wide bipartisan support to pass.

"We continue to work with Congress to further delay or completely eliminate these reductions, which pose a dire threat to the stability of essential hospitals and access to care for their patients," said Dr. Bruce Siegel, CEO of the association, in a comment letter.