NRHA urges Supreme Court to correct HHS undercount in DSH formula

On Aug. 14 NRHA joined five other national hospital-related associations to file an amicus brief urging the Supreme Court to correct the Department of Health and Human Services’ misinterpretation of the formula set by Congress to calculate Medicaid Disproportionate Share Hospital (DSH) payments.

NRHA joined the Association of American Medical Colleges, America's Essential Hospitals, the Catholic Health Association, the Federation of American Hospitals, and the American Hospital Association in the filing, voicing concern that HHS is undercounting the number of SSI-eligible Medicare beneficiaries in DSH calculation. The provided formula from HHS currently claims patients are 'entitled to' SSI benefits only if they actually receive SSI benefits, which lowers the numerator in the formula resulting in smaller payments.

The Medicaid DSH program provides essential financial assistance to hospitals that care for our nation’s most vulnerable populations, including rural communities. These hospitals also provide critical community services such as trauma and burn care, maternal and child health, high-risk neonatal care, and disaster preparedness resources.

Medicaid DSH is an especially important source of funding for rural hospitals. The goal of these payments is to prevent hospitals with a large percentage of nonpaying or underpaying patients from closing. Since 2010, more than 170 rural hospitals have closed their doors. When a rural hospital closes, not only does the community lose access to vital health care but a major employer and community lynchpin leaves, affecting the larger community as a whole.

According to MACPAC’s March 2024 report to Congress, almost half of all rural hospitals (46 percent) received more than $2 billion in DSH payments in 2019. DSH funding is vital for rural hospitals to stay afloat and continue to provide life-saving services to rural communities. It is estimated that HHS’s interpretation lowers DSH payments by 15 percent, yielding approximately $1.5 billion in losses annually.

Hospital costs for providing care to vulnerable populations are already not fully met, especially in rural communities. Currently more than 50 percent of rural hospitals are operating on negative margins and rural providers suffer from long-standing challenges including workforce shortages, low patient volumes, higher prevalence of chronic diseases, a lower socio-economic population, and challenging payer mixes.

With many rural hospitals already facing financial hardship, HHS’s formula for smaller DSH payments further exacerbates additional cuts of funding that could be used to support rural health infrastructure and workforce.

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