Analysis of the Joint Distribution of Disproportionate Share Hospital Payments. Purpose of Medicare DSH Payments


The Centers for Medicare and Medicaid Services (CMS, formerly the Health Care Financing Administration) has generally maintained that the DSH adjustment is intended to cover only the higher costs associated with the care of Medicare beneficiaries in hospitals serving a disproportionate share of low-income patients. For example, when the prospective payment system for capital costs was implemented in FY1992, the DSH adjustment was established administratively based on the estimated effect of the DPP on total inpatient costs per case and has no minimum threshold. On the other hand, the Medicare Payment Advisory Commission (MedPAC) (and its predecessor the Prospective Payment Assessment Commission (ProPAC)), views the DSH adjustment as a policy adjustment independent of hospital cost that is intended to assure access to care for low-income Medicare beneficiaries and other poor people.

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