NCPA - National Center for Policy Analysis

What is the Disproportionate Share Hospital (DSH) Program?

August 26, 2014

The Disproportionate Share Hospital (DSH) Program was started to provide supplementary income to hospitals that provided care to low-income Americans, explains Brittany La Couture in a new primer from the American Action Forum.

The program began in 1981. States have some leeway in deciding how to distribute the funds to hospitals, but they are required to fund two types of facilities:

  • Hospitals where Medicaid inpatients far outweigh the typical Medicaid patient load for hospitals in the state.
  • Hospitals whose low-income patients constitute at least 5 percent of all patients.

There is a significant amount of variation among the states in terms of DSH use:

  • There are six states that receive almost half of all DSH program funds: New York, California, Louisiana, New Jersey and Pennsylvania.
  • While Oregon distributed DSH payments to just 9 of 58 of the state's hospitals, New Jersey distributed funds to every hospital in the state (110).

The point of the DSH program is to relieve the burden on hospitals that comes from providing care to low-income, uninsured patients who do not pay for the full costs of their care. It is the primary source of funds for hospitals seeking compensation for uncompensated care, but the Affordable Care Act -- intended to reduce the number of uninsured -- includes significant DSH cuts.

According to LaCouture, the DSH funding formula needs work, because funding per hospital is not related to the amount of uncompensated care that the hospital actually provides. And because the formula looks at inpatient, rather than outpatient, care, it does not take into account all aspects of uncompensated care. She suggests that this problem could become even more significant, because the Affordable Care Act's Medicaid expansion could result in more hospitals becoming eligible for DSH funding.

Source: Brittany LaCouture, "Primer: The Disproportionate Share Hospital (DSH) Program," American Action Forum, August 21, 2014.



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