Reviews Indicate That an Increase in Medicaid Disproportionate Share Hospital Payments to 175 Percent of Uncompensated Care Cost May Not Be Warranted

Recent legislation increased disproportionate share hospital (DSH) reimbursement from 100 percent to 175 percent of uncompensated care costs. The Centers for Medicare and Medicaid Services (CMS) estimates this will increase Federal spending by $380 million over fiscal years 2003 through 2005. This final report points out that the increase in reimbursement may not be warranted. Recent and ongoing audits have shown that the DSH funds are not always actually going to public hospitals, are not being retained by the public hospitals, are being returned by the hospitals to the State for other uses, and are not always calculated correctly. Among other things, we recommended that CMS seek legislation to at least delay, if not repeal, the implementation of the increase in DSH payments until the need for and use of DSH funds for actual direct care of uninsured patients can be sufficiently reviewed. Further, we recommend CMS consider seeking legislative reform to ensure that DSH funds remain at the hospitals to provide care to vulnerable populations, rather than being returned to the State for other uses. The CMS concurred with our recommendations.