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Last Modified: 11/25/2021 Location: FL, PR, USVI Business: Part A

Disproportionate share hospital (DSH) adjustment

The Medicare DSH adjustment (42 CFR 412.106) external pdf file for Acute Inpatient Prospective Payment System (IPPS) hospitals is referenced here.
The Medicare DSH adjustment provision under section 1886(d) (5) (F) of the Act was enacted by section 9105 of the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 and became effective for discharges occurring on or after May 1, 1986. According to section 1886(d) (5) (F) of the Act, there are two methods for a hospital to qualify for the Medicare DSH adjustment. The primary method is for a hospital to qualify based on a complex statutory formula that results in the DSH patient percentage. The DSH patient percentage is equal to the sum of the percentage of Medicare inpatient days attributable to patients eligible for both Medicare Part A and Supplemental Security Income (SSI), and the percentage of total inpatient days attributable to patients eligible for Medicaid by not Medicare Part A. The DSH patient’s percentage is defined as:
DSH patient percent = (Medicare SSI days / total Medicare days) + (Medicaid, non-Medicare days / total patient days)
The alternate special exception method is for large urban hospitals that can demonstrate that more than 30 percent of their total net inpatient care revenues come from state and local governments for indigent care (other than Medicare or Medicaid).
Under the primary method to qualify for DSH adjustments, the first computation includes the number of hospital patient days used by patients who, for those days, were entitled to both Medicare Part A and SSI (excluding state supplementation). This number is divided by the number of patient days used by patients under Medicare Part A for that same period. The second computation includes hospital patient days used by patients who, for those days, were eligible for medical assistance under a state plan approved under Title XIX (Medicaid), but who were not entitled to Medicare Part A. This number is divided by the total number of hospital patient days for that same period.
Hospitals whose DSH patient percentage exceeds 15 percent are eligible for a DSH payment adjustment based on another statutory formula. The formula varies for urban hospitals with 100 or more beds and rural hospitals with 500 or more beds, hospitals that qualify as rural referral centers or sole community hospitals, and other hospitals.

Fiscal year (FY) 2006 SSI ratios

May 3, 2010, CMS recently published CMS Ruling "CMS-1498-R" pertaining to three Medicare Disproportionate Share Hospital (DSH) issues. Specifically, the Ruling addresses jurisdictionally proper pending appeals and open cost reports on the issues of Medicare non-covered days (such as exhausted benefit days and Medicare secondary payer days), the data matching process for Supplemental Security Income "SSI" fractions, and "labor and delivery" days. The ruling became effective on April 28, 2010.
CMS is currently in the process of reviewing the FY 2006 SSI ratios. Since the FY 2006 SSI ratios are currently under review, as of May 5, 2008, a hospital may elect to use either its FY 2005 or its FY 2006 SSI ratio from the files published for submission of its cost report that would otherwise be submitted with the FY 2006 SSI ratio. While a hospital has the option of submitting its cost report either using its FY 2005 or FY 2006 SSI ratio, once CMS has completed its review of the FY 2006 SSI ratios, such cost reports will be settled using the appropriate SSI ratios. This option does not affect future cost reporting periods and SSI ratios (i.e., once the FY 2007 SSI ratios are published. A hospital must use its FY 2007 SSI ratio for applicable cost reporting periods. If a hospital has already submitted its cost report using its FY 2006 ratio and would like to use its FY 2005 SSI ratio instead, it should contact its Medicare Administrative Contractor.

FY 2007 SSI Ratios

On June 24, 2009, CMS published the FY 2007 SSI ratios for the Medicare DSH adjustment on the CMS website. At the request of several hospitals, CMS posted additional information on the FY 2007 SSI ratios. The FY 2007 SSI ratios remain unchanged. The additional information CMS provided includes the number of Medicare Part A Fee-for-Service (FFS) patient days and the number of Medicare Advantage (MA) patient days in the numerator and denominator of the SSI ratios. CMS noted that there is no legal or policy distinction between the Medicare FFS and MA patient days in the SSI ratios, and that it has been CMS’s longstanding policy to include both categories of Medicare patient days in the SSI ratios. This additional detail is for informational purposes only so that hospitals can have a better understanding of the data that comprises their SSI ratios.
Under the instructions of change request (CR) 6821 external pdf file, applicable hospitals that have not submitted all of their Medicare Advantage data for FY 2007 have until August 31, 2010, to submit data to be included in the FY 2007 SSI ratios. CMS expects that the FY 2007 SSI ratios will be revised and reposted.

FY 2008 SSI Ratios

As required by CR 6821 external pdf file, applicable hospitals that have not submitted all of their Medicare Advantage data for FY 2008 have until August 31, 2010, to submit data to be included in the FY 2008 SSI ratios. Once CMS has collected the data, the FY 2008 SSI ratios will be calculated, and we expect CMS to post the FY 2008 SSI ratios as soon as they are published.
First Coast Service Options (First Coast) strives to ensure that the information available on our provider website is accurate, detailed, and current. Therefore, this is a dynamic site and its content changes daily. It is best to access the site to ensure you have the most current information rather than printing articles or forms that may become obsolete without notice.