Final Rule Issued on Medicaid DSH Third-Party Payments

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Stethoscope with financial statement

The Centers for Medicare & Medicaid Services (CMS) has issued the final rule that addresses how third-party payments are treated in calculating the hospital-specific limitation on Medicaid disproportionate share hospital (DSH) payments. Specifically, the rule defines uncompensated care costs as net of third-party payments, including payments by Medicare and private insurance.

In comments submitted last year, SDAHO urged CMS to withdraw the proposed rule and instead await the outcome of several pending court cases on the same issue. A federal court recently barred CMS from using subregulatory guidance to calculate Medicaid DSH payments, in a New Hampshire case where enforcement of the proposed calculation as implemented via subregulatory guidance was challenged. However, CMS is expected to appeal the decision and argue that the issuance of this final rule appropriately notifies hospitals of the policy change.