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  • Washington Highlights

    CMS Issues Medicaid Third-Party Payer Final Rule


    Shahid Zaman, Director, Hospital Payment Policy
    For Media Inquiries

    On Feb. 20, the Centers for Medicare & Medicaid Services (CMS) issued a final a rule outlining its methodology for implementing section 203 of the Consolidated Appropriations Act, 2021 (P.L. 116-260) [refer to Washington Highlights, Feb. 24, 2023].  

    The final rule codifies into the Medicaid regulations the new calculation of the Medicaid disproportionate share hospital (DSH) hospital-specific limit to exclude costs and revenues associated with Medicaid patients that have third-party sources of coverage (e.g., commercial insurance or Medicare). Hospitals that are at or above the 97th percentile of all hospitals with respect to their number of Medicare supplemental security income (SSI) days or percentage of SSI days to total inpatient days will receive an exception from this calculation. These hospitals will calculate their hospital-specific limit using the pre-section 203 methodology as well as the new methodology and use the higher of the two limits.  

    In the final rule, the CMS addresses the data sources it will use to identify the hospitals meeting the 97th percentile exception, as well as its process for publishing this data. Between March 31 and Oct. 1 of each year, the CMS will publish two lists of hospitals: one list of hospitals meeting the exception based on the number of Medicare SSI days and another list of hospitals meeting the exception based on the percentage of SSI days to total inpatient days.