www.banko Brief No. 2017- 6 NOVEMBER 2017 http://www.public-health.uiowa.edu/rupri/ Distribution of Disproportionate Share Hospital Payments to Rural and Critical Access Hospitals Erin M. Mobley, MPH; Fred Ullrich, BA; Keith J. Mueller, PhD Purpose This policy brief provides data assessing effects of Medicaid Disproportionate Share Hospital (DSH) payment on rural hospitals in 47 states. While the allocation of DSH funds to the state is determined by federal legislation utilizing a formula developed by the Centers for Medicare & Medicaid Services (CMS), each state determines distribution to hospitals using an approved State Plan Amendment (SPA) that meets minimum federal requirements. Our findings suggest that distribution to rural hospitals, and critical access hospitals (CAHs) in particular, varies considerably across states. Data presented in this document helps ground any changes to either federal requirements or to SPAs by showing the impact of DSH payment from the most recent data available. Key Findings • Medicaid DSH payment methodology and distribution to hospitals varies considerably across states. • The percentage of rural hospitals in a state receiving any Medicaid DSH payment ranged from 0 percent to 100 percent. • For rural hospitals receiving Medicaid DSH payments, the impact on total patient revenue ranged from less than 0.5 percent to 8.8 percent* . Background In 1981 the Social Security Act was amended to allot funds to states for distribution to hospitals serving a disproportionate volume of individuals covered by Medicaid with payments that would take into consideration the cost of “low-income patients with special needs” (§ 1902(a)(13)(A)(iv) of the Act). 1 A 1987 amendment required additional payments to be made to those hospitals that served a disproportionately large share of low-income patients, known as “deemed-DSH” (low-income inpatient utilization rate that exceeds 25 percent, or Medicaid inpatient utilization one standard deviation or greater above the mean of hospitals in the state receiving Medicaid payment). 2 As a result of the DSH and deemed-DSH designations, DSH spending increased quickly in the early 1990s; however Congress passed state-specific limits on Federal funds used to make DSH payments in 1992. 2 Additionally, Congress placed a limit on the amount of DSH payments an individual hospital could receive, based on the actual cost of uncompensated care provided. 2 * Because of individual state rules, the impact of DSH Medicaid payments in urban hospitals is much more variable than in rural hospitals. Impact in urban hospitals ranges from 0.0 percent to 62.4 percent where that higher number reflects the payment to the single urban hospital in Indiana that receives DSH payment. This project was supported by the Health Resources and Services Administration (HRSA) of the U.S. Department of Health and Human Services (HHS) under grant number U1C RH20149, Rural Health Research Center Cooperative Agreement to the RUPRI Center for Rural Health Policy Analysis. This study was 100% funded from governmental sources. This information or content and conclusions are those of the authors and should not be construed as the official position or policy of, nor should any endorsements be inferred by, HRSA, HHS, or the U.S. Government. RUPRI Center for Rural Health Policy Analysis Rural Policy Brief RUPRI Center for Rural Health Policy Analysis, University of Iowa College of Public Health, Department of Health Management and Policy 145 Riverside Dr., Iowa City, IA 52242 (319) 384-3830 E-mail: cph-rupri-inquiries@uiowa.edu