Disproportionate share hospital

The United States government provides special funding to hospitals who treat significant populations of indigent patients through the Disproportionate Share Hospital (DSH) programs. There are primarily two DSH programs:

• Medicare Disproportionate Share Hospital program
• Medicaid Disproportionate Share Hospital program

There is also a Disproportionate Share Hospital program for pharmacies known as the 340B program.

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Medicare Disproportionate Share Hospital

The Medicare DSH adjustment provision under Section 1886(d)(5)(F) of the Social Security Act^[1] was enacted by Section 9105 of the Consolidated Omnibus Budget Reconciliation Act of 1985 and became effective for discharges occurring on or after May 1, 1986.

Qualifying for Medicare DSH Adjustment

A hospital can qualify for the Medicare DSH adjustment by using one of the following methods:

Primary Method

The primary method is based on a complex statutory formula that results in the Medicare DSH patient percentage, which is equal to the sum of the percentage of Medicare inpatient days attributable to patients entitled to both Medicare Part A and Supplemental Security Income (SSI) and the percentage of total inpatient days attributable to patients eligible for Medicaid but not eligible for Medicare Part A.

In order to maximize their reimbursement, many hospitals and/or their consultants will use Medicaid Eligibility Vendors to assist in the identification of Medicaid eligible days.

Alternate Special Exemption Method

The alternate special exception method is for urban hospitals with more than 100 hospital beds that can demonstrate that more than 30 percent of their total net inpatient care revenues, other than Medicare or Medicaid, come from state and local government sources for indigent care, such as for Medically indigent adults.

Number of Beds in Hospital Determination

Number of inpatient care bed days attributable to units or wards generally payable under the Inpatient Prospective Payment System excluding beds otherwise countable used for outpatient observation, skilled nursing swing-bed, or ancillary labor/delivery services divided by the number of days in the cost reporting period.

2003 and 2005 legislation

Section 402 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) states that effective for discharges occurring on or after April 1, 2004, the Medicare DSH payment adjustment for rural hospitals with fewer than 500 beds and urban hospitals with fewer than 100 beds has been increased. The cap on the adjustment for these hospitals will be 12 percent, except for hospitals classified as Rural Referral Centers (RRC). Per section 5002 of the Deficit Reduction Act of 2005, as of October 1, 2006 Medicare-Dependent Hospitals (MDH) will also be exempt from the one percent cap. The formulas to establish a hospital’s Medicare DSH payment adjustment are based on the following:

• Hospital’s location
• Number of beds
• Status as a RRC or MDH

References

1. ^ http://www.ssa.gov/OP_Home/ssact/title18/1886.htm