Industry News

Final Rule Implementing Reductions to DSH Released.

Jennifer Kirchner | September 2013

On September 13, 2013, the Centers for Medicare & Medicaid Services (CMS) released a final rule implementing reductions to state Medicaid Disproportionate Share Hospital (DSH) allotments required under the Affordable Care Act (ACA).  According to a CMS Fact Sheet, the reductions were implemented because expanded coverage through the ACA “is expected to significantly reduce uncompensated care borne by hospitals and other providers.”

The rule finalizes the methodology CMS will use for the annual reductions to state-wide DSH allotments for all states.  In FY 2014, the reductions will be $500 million, increasing to $600 million in 2015.  According to the ACA, the methodology used must take into account:

  1. Low DSH states receive smaller reductions.
  2. States with lowest percentages of uninsured individuals receive larger reductions.
  3. States that do not target their DSH payments to hospitals with high volumes of Medicaid beneficiaries receive larger reductions.
  4. States that do not target their DSH payments on hospitals with high levels of uncompensated care receive larger reductions.
  5. States that have increased coverage under 1115 demonstrations as of July 31, 2009, and adjusted their DSH allotments will have these adjustments taken into account.

CMS will revisit the methodology and promulgate new rules to implement DSH reductions in FY 2016 and beyond.  The rule establishes an annual reduction methodology for the first two years, effective for FY 2014 and 2015 FSH allotments. 

 The Final Rule is available at:

 The CMS Fact Sheet is available at:

 Medicaid Program; State Disproportionate Share Hospital Allotment Reductions; Final Rule, 78 Fed. Reg. 181, 57293, 57293 (Sep. 18, 2013).

Centers for Medicare & Medicaid Services.  “Medicaid State Disproportionate Share Hospital Allotment Reductions Final Rule.”  Fact Sheet.  13 Sept. 2013.

About the Author

Jennifer Kirchner is a licensed attorney in Illinois and Wisconsin. Ms. Kirchner has expertise in assessing provider compliance with the Anti-Kickback Statute, Stark Law, the False Claims Act, HIPAA Privacy and Security Rules and clinical research laws and regulations.