Through the Affordable Care Act (ACA), substantial changes were made to the former Medicare Disproportionate Share (DSH) payment methodology and those changes continue to cause a great deal of confusion on many levels. One recurring theme is the notion that hospitals are only getting 25% of what they used to get and of course, that is not true. However, while the former DSH payment methodology only comprises a portion of the new total payment, hospitals should be focused on what the total expected new payment might be both today and in the future.
The new DSH/UC payment methodology is comprised of two components - the so-called empirically justified component and a pro-rata share of a national uncompensated care pool established by CMS via estimates. Without getting into the details (go HERE for those), a hospital's total DSH/UC payment is the sum of 25% of what the hospital would have received under the old DSH formula and a pro-rata share of the remaining 75% pool after an adjustment is made to reflect the change in the number of uninsured individuals nationally.
Using data recently published by CMS for fiscal year 2015, the “75% Pool” was reduced by 23.81% and will comprise of only 69.57% of the total expected payments. Overall for 2015, what would have been a $13,383,462,196 billion program is now a $10,993,510,434 billion program and the difference represents hospitals’ contribution to the cost of the ACA insurance program.