How DSH payments might mislead the financial assessment of government-owned hospitals

Hospitals are eligible for and receive Medicaid disproportionate share hospital (DSH) payments for caring for the indigent/uninsured; however, county hospitals may also be obligated to transfer these funds to the state. These transfers occur in order for state governments to utilize these funds to receive federal matching funds. Thus, not only do gross DSH payments overstate how much county-owned hospitals have available to cover their financial obligations, they may also overstate the hospital's financial condition. Using detailed California Office of Statewide Health Planning and Development (OSHPD) financial data, this study demonstrates how hospital revenue, profit, and credit measures are overvalued because they do not include the outflow of DSH funds through the intergovernmental transfers (IGTs).