This policy brief provides information about the potential impact of scheduled changes in Medicaid Disproportionate Share Hospital (DSH) payment on rural hospitals in 47 states. We found variation across states because of difference in state policies distributing DSH payments to hospitals. For rural hospitals in particular, including critical access hospitals (CAHs), we found variation in the number receiving any DSH payments and in the amount among those who received payment.

Using data from the 2011 Medicaid DSH audits, CMS Provider of Service files, and Medicare Hospital Cost Reports, we found that the percentage of rural hospitals receiving any Medicaid DSH payment ranged among states from 0 percent to 100 percent. In some cases, rural and CAHs realized significant percentages of net patient revenue from DSH payments, which ranged from 0.5 percent to 8.8 percent. States already showing evidence of rural hospitals at greater financial risk are the same states where this analysis shows that rural hospitals are more dependent on Medicaid DSH payments. Changes to Medicaid DSH payment policy, especially if not combined with increased revenue from other sources, should consider the effect on vulnerable rural hospitals.