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Medicaid Disproportionate Share Hospital (DSH) Payments

Federal law requires that state Medicaid programs make Disproportionate Share Hospital (DSH) payments to qualifying hospitals that serve a large number of Medicaid and uninsured individuals.

Federal law establishes an annual DSH allotment for each state that limits Federal Financial Participation (FFP) for total statewide DSH payments made to hospitals. Federal law also limits FFP for DSH payments through the hospital-specific DSH limit. Under the hospital-specific DSH limit, FFP is not available for state DSH payments that are more than the hospital's eligible uncompensated care cost, which is the cost of providing inpatient hospital and outpatient hospital services to Medicaid patients and the uninsured, minus payments received by the hospital on or on the behalf of those patients.

DSH Audit and Reporting Requirements

For states to receive FFP for DSH payments, federal law requires states to submit an independent certified audit and an annual report to the Secretary describing DSH payments made to each DSH hospital.

The report must identify each disproportionate share hospital that got a DSH payment adjustment, and provide any other information the Secretary needs to ensure the appropriateness of the payment amount. The annual certified independent audit includes specific verifications to make sure all DSH payments are appropriate.

Final Rule on DSH Audit and Reporting Requirements

On December 19, 2008, CMS published a final rule to implement federal law, specifying the elements for the required DSH report and the verifications required for the audit. CMS also developed additional guidance, including the General DSH Audit and Reporting Protocol and the DSH Report Format to help states meet statutory and regulatory requirements.

State-specific Annual DSH Reports and Independent Certified Audits

State-specific annual DSH reports are available in the "Annual DSH Reports" section of this webpage. The reports are posted as submitted by states based on their availability and are arranged alphabetically by state under the corresponding State Plan RateYear (SPRY) heading.

Due to the size of the files and issues associated with electronic formatting, state-specific independent certified audits will be available only upon request. Interested parties should contact Ella Winkler (Ella.Winkler@cms.hhs.gov) to request copies. In order to facilitate requests, the subject line should read "DSH Independent Certified Audit Request". In the body of the email, please provide specifics regarding the state and SPRY that you are requesting. Please be advised that the provision of the audits is subject to availability and does not constitute approval of their contents.

Additional Information on the DSH Reporting and Audit Requirements - Part 2

This guidance is designed to ensure proper implementation, consistent practice, and protection for states and hospitals as we approach the end of the regulatory transition period established at 42 CFR 455.304(e).  The transition period was designed to allow adequate time for CMS, states, auditors, and hospitals to work cooperatively in developing and refining DSH reporting and auditing techniques required by statute and regulation while attempting to mitigate or to eliminate the immediate and future fiscal impact realized by states and hospitals.  CMS wants states to be aware that beginning for State Plan Rate Year 2011 DSH audits and reports, CMS will regard audit findings demonstrating DSH payments that exceed the hospital-specific DSH limits as representing discovery of overpayments to providers.

Click here for Additional Information on the DSH Reporting and Auditing Requirements