MedPAC has recently proposed a new payment system that would replace disproportionate share hospital (DSH) and uncompensated care (UC) payments in Medicare. In 2024, a proposed new Medicare safety net index (MSNI) would be used to compensate hospitals based on: 1) share of inpatient and outpatient claims filed for beneficiaries receiving the Part D low-income subsidy; 2) UC costs as a share of revenue, and 3) half the Medicare share of a hospital's inpatient days. This method would redistribute DSH and UC payments through the MSNI and would differ from the current system because it would be structured as add-on payments to Medicare payment rates. Providers with more financially challenging patient mixes would receive higher Medicare payment rates.

To help policy makers assess the impact of the new MSNI, our study will compare UC and DSH payments to urban and rural inpatient prospective payment system (IPPS) hospitals during a ten-year period subsequent to the Affordable Care Act.

Using Healthcare Cost Report Information System (HCRIS) data, this project will compare DSH and UC payments among rural and urban acute IPPS hospitals for the years 2013-22. The relative importance of DSH and UC payment will be measured by total dollar amount and percentage of net patient revenue. Results for rural and urban hospitals will be stratified by:

• Hospital characteristics – DSH patient percentage, Medicare payment classification, amount of net patient revenue, profitability, number of acute beds, ownership, system affiliation. Caution will be used in interpreting results during COVID years.
• Community characteristics – race / ethnicity, percent low income, percent >65.
• Location characteristics – Medicaid expansion / non-expansion state, rurality, proximity to other hospital.

Results will increase our understanding of the distribution and magnitude of DSH and UC payments to rural versus urban hospitals, and how DSH and UC payments vary with community characteristics.