Distribution of Disproportionate Share Hospital Payments to Rural and Critical Access Hospitals

This policy brief provides data assessing effects of Medicaid Disproportionate Share Hospital (DSH) payment on rural hospitals in 47 states. While the allocation of DSH funds to the state is determined by federal legislation utilizing a formula developed by the Centers for Medicare & Medicaid Services (CMS), each state determines distribution to hospitals using an approved State Plan Amendment (SPA) that meets minimum federal requirements. Our findings suggest that distribution to rural hospitals, and critical access hospitals (CAHs) in particular, varies considerably across states. Data presented in this document helps ground any changes to either federal requirements or to SPAs by showing the impact of DSH payment from the most recent data available.

(1) Medicaid DSH payment methodology and distribution to hospitals varies considerably across states. (2) The percentage of rural hospitals in a state receiving any Medicaid DSH payment ranged from 0 percent to 100 percent. (3) For rural hospitals receiving Medicaid DSH payments, the impact on total patient revenue ranged from less than 0.5 percent to 8.8 percent.