Medicare Payment and Reimbursement

A 5-month delay of the DSH payment cut is among new federal budget provisions

December 20, 2019 4:56 am
  • A $4 billion first-year cut to Disproportionate Share Hospital payments would be delayed to May 2020 in a new federal funding package.
  • Three Affordable Care Act taxes would be eliminated by the legislation.
  • The legislation does not include anticipated deals to bar surprise medical bills or reduce drug costs.

The start of a $4 billion cut to Medicare payments for hospitals serving a large number of low-income patients was delayed to May 23, 2020, as part of an omnibus federal funding package finalized this week.

The $1.4 trillion, two-bill funding package, which passed the House of Representatives and was expected to clear the Senate and be signed into law this week, includes a range of healthcare provisions.

The biggest financial impact on hospitals from the bill focused on healthcare may come from the delay in implementation of the $4 billion cut to participants in the Disproportionate Share Hospital (DSH) program, which is a key funding source for safety-net hospitals. However, the reprieve is temporary, with the cuts scheduled to accelerate to a total of $8 billion in FY21, which starts Oct. 1, 2020.

The DSH cuts have been delayed four times but also inflated each time they were delayed. They are scheduled to total $43 billion by 2025.

The DSH cuts were not the only funding source for the Affordable Care Act affected by the legislation. The legislation permanently repeals:

  • The medical device excise tax
  • The annual health insurance tax
  • The excise tax on high-cost employer-sponsored healthcare coverage, known as the Cadillac tax

The $14.3 billion health insurance tax in 2018 was the largest component driving increased health spending that year, the Actuary for the Centers for Medicare & Medicaid Services (CMS) recently concluded in a report.

The end-of-year legislative package also included the latest extensions for a group of Medicare programs, including:

  • The Work Geographic Practice Cost Index Floor
  • Funding for quality measure endorsement, input and selection
  • Funding for outreach and assistance for low-income programs
  • Funding for the Patient-Centered Outcomes Research Trust Fund
  • Pass-through status for certain drugs under Medicare Part B

Funding for departments and agencies

The legislation would provide $94.9 billion for the U.S. Department of Health and Human Services, which is a $4.4 billion increase from 2019 and $16.8 billion more than requested by President Donald Trump.

The legislation would provide $4 billion for CMS’s administrative expenses, amounting to $396 million more than Trump’s budget request.

The National Institutes of Health would receive $41.7 billion, or $2.6 billion more than in 2019.

Specific initiatives receive additional funding

The more than 11,000 Community Health Centers (CHCs), which serve more than 28 million patients annually, would garner $1.63 billion. .

The legislation would provide $318.3 million for rural health programs, including $29 million for telehealth efforts to connect providers and patients with specialists.

Graduate medical education for children’s hospitals would be funded at $340 million, or $15 million more than in 2019.

The legislation would provide $786 million to target healthcare fraud and abuse.

Congressional requests

The legislation contains a series of orders for federal agencies to provide more information on specific priorities of legislators.

The legislation requires the Health Resources and Services Administration to give critical access hospitals priority when doling out Rural Hospital Flexibility Grants. The program, which the Trump administration had tried to eliminate, aims to help providers focus on quality and performance improvement and to integrate emergency medical services.

The legislation reiterated Congress’s request for a briefing on the efforts of CMS’s Center for Program Integrity (CPI) to reduce waste, fraud and abuse through its work with the Department of Energy’s Oak Ridge National Laboratory. The CPI aimed to bring that facility’s computational and data analytics capabilities to bear on the complex waste, fraud and abuse issues it was addressing.

An internal review of CMS’s Recovery Audit program to identify “inefficiencies in the current system” is requested in the legislation.

The legislation also would encourage CMS to address inconsistency with billing and coding across Medicaid by issuing guidance outlining a recommended, but voluntary, set of billing codes, modifiers and/or place-of-service designations for use in state Medicaid programs.



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