Hospitals push for Congress to squeeze DSH cut delays into spending package

Hospitals have begun tallying their expected losses from lower disproportionate-share hospital payments as they grow increasingly nervous Congress won't stop the cuts.

In Colorado, at least a dozen hospitals eye a $30 million, or 15%, funding cut in their federal DSH payments.

In Missouri that number climbs to about $141 million.

Although the DSH cuts have technically gone into effect, hospitals haven't started to feel the pain yet because states haven't started disbursing the funds.

Lawmakers must vote on a spending bill by Friday to avert a potential government shutdown, and affected hospitals hope Congress will include a DSH-cut delay and other healthcare provisions to prevent states from losing billions of dollars for the DSH program.

The two previous short-term continuing budget resolutions that kept the federal government open left out funding for children's health insurance and other expired healthcare programs that hospitals rely on as lawmakers used them for political leverage.

That could happen again, and hospitals are running the numbers.

"We haven't gotten Medicaid expansion, so it's a double whammy for us," said Dave Dillon of the Missouri Hospital Association on the potential $141 million cut. "We have no increased revenue on the patient care side, so on the DSH side the cuts for us could be absolutely debilitating."

When and how hospitals will start to feel the cuts depends on their state budget cycles and when states distribute the payments.

Cuts would hit Missouri hospitals in July, when the state begins its disbursements, and Dillon said they will be felt statewide.

"Virtually every traditional acute-care hospital will be affected," he told Modern Healthcare, although he noted it isn't clear which hospitals will see the deepest cuts, as calculations will depend on the final CMS formula.

But the cuts will be severe, as most Missouri hospitals get some DSH money and the state sees such a large share of the federal allotment, he said.

The CMS' existing DSH guidance shows that the agency is trying to skew the cuts in favor of states like Missouri, which didn't expand Medicaid and therefore tend to see a heavier load of uncompensated-care costs.

States and providers hope Congress will make sure the cuts—which technically took effect Oct. 1—won't happen as the CMS so far hasn't moved on its proposals to implement them.

The agency didn't respond to an inquiry on the specifics of how it planned to manage the cuts, and instead referred Modern Healthcare to its proposed rule from late July.

This proposed rule—not yet finalized and not even sent to the Office of Management and Budget for review—says the CMS will impose higher cuts on states with higher insured rates and states that don't pass on most of their DSH allotments to hospitals with high volumes of Medicaid patients or uncompensated care.

Washington-based hospital lobbying groups are mounting campaigns in Congress on the issue because lawmakers still have time to delay the cuts yet again. In the years since the Affordable Care Act was implemented, lawmakers have always ordered the CMS to delay the cuts.

"Without a further delay of the Medicaid DSH payment reductions, hospitals face a financial shortfall of $2 billion in (fiscal) 2018," the board of directors of America's Essential Hospitals said in a letter to House and Senate leadership last week. "These cuts grow annually to $8 billion by (fiscal) 2024. Our nation's hospitals cannot sustain losses of this magnitude."