The DSH adjustment has been criticized for its bias against small and rural hospitals. Analyses have shown that 95 percent of DSH payments go to urban hospitals and that only 20 percent of rural hospitals, compared to 50 percent of urban hospitals, qualify to receive DSH payments. The Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) established a uniform DSH qualifying threshold and increased the add-on amount for small and rural hospitals. This study uses data from the 1998 Medicare Cost Report and Impact Files to examine the effect of these DSH revisions on rural hospitals. Estimates of the rural providers that would have qualified to receive DSH and the associated payments that these hospitals would have received if BIPA regulations had been in effect were calculated to determine the financial impact of this legislation. Additionally, the effect of DSH revisions on hospitals' financial performance, as measured by operating and total margins, was examined.

Publications

• Achieving Equity in Medicare Disproportionate Share Payments to Rural Hospitals: An Assessment of the Financial Impact of Recent and Proposed Changes to the Disproportionate Share Hospital Payment Formula
  Journal Article
  NORC Walsh Center for Rural Health Analysis
  Date: 09/2002
  Examines how Benefits Improvement and Protection Act revisions to the Medicare disproportionate share hospital (DSH) program are likely to affect rural hospital financial performance. The study shows that paying rural hospitals based on the rules used for urban hospitals could improve access to care in rural communities.
• Are Fundamental Changes to Medicare's Disproportionate Share Methodology Needed?
  NORC Walsh Center for Rural Health Analysis
  Date: 06/2002
  This study examines whether the Medicare disproportionate share percentage is a useful predictor of Medicare costs per adjusted discharge and whether it is a good predictor of uncompensated care burdens.