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AAMC Shares Concerns With CMS About Upcoming Medicare DSH Payment Changes

January 18, 2013—AAMC Jan. 15 submitted comments  to the Centers for Medicare and Medicaid Services (CMS) in response to a request for input to inform the implementation of Section 3133 of the Affordable Care Act (ACA, P.L. 111-148 and P.L. 111-152).  This provision significantly revises the formula for hospitals to receive Medicare disproportionate share hospital (DSH) payments beginning in FY 2014.  The AAMC letter urges CMS to consider two issues of critical importance to teaching hospitals: the inclusion of Medicare graduate medical education (GME) costs in the calculation of cost-to-charge ratios (CCRs) when using hospital cost report data to calculate uncompensated care; and the inclusion of government payment shortfalls in the definition of uncompensated care.

Under Section 3133, hospitals that currently receive DSH funding will continue to receive 25 percent of their estimated Medicare DSH payments.  The remaining 75 percent will be reduced as a result of the estimated decrease in the uninsured and then will be allocated to hospitals based on the proportion of the amount of uncompensated care each hospital provides. 

CMS will issue proposed regulations to implement these changes to Medicare DSH payments in the FY 2014 inpatient prospective payment system (IPPS) proposed rule.  To inform the proposed rule, CMS solicited input regarding definitions and measures of the uninsured and uncompensated care.  AAMC’s comments highlight the need for a thoughtful approach to implementing Section 3133 due to the large financial impact of Medicare DSH payments on major teaching hospitals.  According to AAMC analyses, Medicare DSH payments represent 12 percent of major teaching hospitals’ Medicare IPPS payments and 20 percent of major teaching hospitals’ total base operating revenues.

AAMC’s comment letter also raises concerns about how the DSH provisions of the ACA will be implemented; how key terms (e.g., uninsured, uncompensated care, and charity care) will be defined; what the data sources will be; the years to which those data sources will be applied; and how payments will be made.  The public will have another opportunity to provide more detailed comments when CMS releases the FY 2014 IPPS rule later this spring.


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Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.

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Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806