Medicaid Hospital Reimbursement

DSH Audit and SPA

Hospital Medicaid State Plan Amendment (SPA)

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2011


Disproportionate Share Hospital (DSH) Audit

Section 1923 of the Social Security Act, as amended, requires States to make additional Medicaid disproportionate share hospital (DSH) payments to hospitals that serve disproportionately large numbers of low-income patients. The Omnibus Budget Reconciliation Act of 1993 limits these payments to a hospital's uncompensated care costs, which are the annual costs incurred to provide services to Medicaid and uninsured patients less payments received for these patients. This limit is known as the hospital-specific DSH limit. In addition, a Centers for Medicare and Medicaid Services (CMS) letter to State Medicaid Directors (1994 CMS letter) stated that the cost of services included in a hospital's DSH limit could not exceed the amount that would be allowable under Medicare principles of cost reimbursement.

New reporting and audit requirements (DSH Audit) were implemented in the December 19, 2008 Medicaid Disproportionate Share Hospital final rule (73 Federal Register 77904). The final rule implements Section 1001 of the Medicare Drug Improvement and Modernization Act of 2003, requiring State reports and audits to ensure the appropriate use of Medicaid DSH payments and compliance with the statutorily imposed hospital-specific limits.

On December 3, 2014, CMS issued the final rule that broadened the definition of DSH uncompensated care costs starting with the FFY 2011 audit. CMS ruled that the definition of uninsured care apply to services that may not be covered by individuals who do have insurance. Hospitals can include uncompensated care costs that are service-specific as part of the DSH payments.Federal Regulations of the Definition for DSH Uncompensated Care

DSH Audit Reports