Amendment to Tennessee's Medicaid Plan could result in DSH winners and losers

Category: Medicaid, DSH, CMS, TennCare

Amendment to Tennessee's Medicaid Plan could result in DSH winners and losers


The Commissioner of the Tennessee Department of Finance & Administration is seeking an amendment to the state's Medicaid Plan with the Centers for Medicare and Medicaid Services (CMS) to alter the method by which certain Medicaid Disproportionate Share Hospital (DSH) payments are distributed to hospitals.

Tennessee receives approximately $53 million in Medicaid DSH funds each year. If approved, some hospitals are likely to see a reduction in total DSH payments. TennCare is accepting written comments concerning the amendment and its potential impact on hospitals.

Currently, when TennCare discovers that excess DSH funds have been paid to a hospital, that money is recovered and redistributed to other hospitals within the same DSH funding group. Examples of DSH funding groups are “Essential Service Safety Net Hospitals,” “Children’s Safety Net Hospitals,” “Free Standing Psychiatric Hospitals,” “Other Essential Acute Care Hospitals,” and “All Other DSH Hospitals.”

Under the proposed amendment, “excess funds” (as determined by TennCare) could be recouped and redistributed to any DSH-eligible hospital regardless of its DSH funding group classification, thus reducing the chance for some hospitals of receiving the reclaimed DSH funding. It seems clear that the State would not go through this exercise if it did not intend to adjust the DSH payments as permitted by the proposed amendment. If adopted, the amendment is likely to result in an increase in DSH payments for some hospitals but a reduction for others. It is important for both rural and urban hospitals to engage in the comment process and communicate with their legislators. Many hospitals – and the legislators who represent them – are likely already providing their perspective to the relevant policymakers.

If approved by CMS, the proposed amendment would apply retroactively to DSH payments made on or after July 1, 2018.

A draft version of the amendment to Tennessee’s Medicaid State Plan can be found HERE.

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