Hospital groups are beginning to push back on the CMS' plan to cut Medicaid disproportionate-share hospital funds.
DSH funds are meant to help hospitals with uncompensated-care costs, an area that could grow with a recent increase in the uninsured rate.
"Essential hospitals and their communities rely on DSH to advance their mission of providing high-quality care to all," said Beth Feldpush, vice president of policy and advocacy at America's Essential Hospitals, which represents safety-net facilities. In a statement, she urged Congress to pass legislation to repeal DSH cuts in fiscal 2020 and 2021, and subsequently lower the scheduled reduction for fiscal 2022.
The CMS on Monday published a final rule for calculating $4 billion in state Medicaid disproportionate-share hospital cuts for fiscal 2020 and $8 billion for each subsequent year through 2025. DSH funds, which the Affordable Care Act mandated to be cut by $43 billion between fiscal 2018 and 2025, are meant to support hospitals that serve large numbers of Medicaid and uninsured patients.
The CMS' final rule mandates cuts to DSH beginning in fiscal 2020.
Hospital groups had agreed to cuts to DSH under the ACA as one of the trade-offs for policies like Medicaid expansion, but have successfully secured delays ever since.
The House of Representatives on Thursday passed a continuing resolution to fund the government and within that was a provision to delay DSH cuts until Nov. 21. The Senate will likely consider the same bill this week.
The final rule the CMS released Monday outlines the agency's methodology for calculating Medicaid DSH payments for each state, including defining "total hospital cost" and clarifying state data-submission requirements. The methodology involves assessing the rate of uninsured in each state, the number of Medicaid inpatients, the level of uncompensated care in the state and other budget-neutrality factors.
Generally, the rule finalizes provisions that the CMS proposed in 2017.
The final rule defines "total hospital cost" as the total annual costs incurred by each hospital for furnishing inpatient hospital and outpatient hospital services. As part of the DSH reporting requirements, the CMS requires each state to report total hospital costs for all in-state hospitals that receive DSH payments.
The agency will use that information to determine the amount of uncompensated care that a hospital has by dividing its uncompensated-care costs by its total hospital costs. Uncompensated care is a critical factor in calculating DSH allotment reductions.
This measure improves upon the 2013 methodology, which could, in some instances, underestimate the amount of uncompensated care that a hospital incurred. The CMS believes this adjustment will reward states that effectively target DSH payments by imposing smaller annual cuts to their DSH allotments.
The final rule also updates the 2013 methodology by integrating data on states' Medicaid inpatient utilization rate, in addition to the methodology's existing use of information from Medicaid DSH audit and reporting data; the U.S. Census Bureau; and existing state DSH allotments.
Under the rule, states are required to submit the average Medicaid inpatient utilization rate—as well as the value the state calculates as one standard deviation above the average—for all hospitals that receive Medicaid payments in the state. Those calculations, based on data three years prior to the calendar year, will be due to the CMS by June 30 of each year.
The CMS also finalized a cap on annual DSH allotment reductions. Under the final rule, states can't have their DSH payments cut by more than 90% for a given fiscal year.
Earlier this year, eight major provider groups—including America's Essential Hospitals, the American Hospital Association and the Association of American Medical Colleges—penned a letter to Senate and House leaders requesting another delay of Medicaid DSH cuts, arguing that there is a "vital need" for the program, given the high uninsured rate.
"The Affordable Care Act reduced payments to the Medicaid DSH program under the assumption that uncompensated-care costs would decrease as healthcare coverage increased," the February letter read. "Unfortunately, the coverage rates envisioned under the ACA have not been fully realized, and tens of millions of Americans remain uninsured."
The percentage of people in the U.S. without health insurance increased in 2018, largely because of a decline in Medicaid coverage, according to a report the U.S. Census Bureau released earlier this month. That's despite a strong economy and a significant decrease in the number of people with incomes below the poverty line.
Uncompensated care is likely to rise along with the uninsured rate if the trend continues, increasing the need for DSH funding just as the CMS moves to cut it.
