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Medicare Disproportionate Share Hospital Adjustment (DSH)


The second largest Medicare subsidy is the Disproportionate Share Hospital (DSH) payment which is an extra payment made to hospitals that treat large numbers of low-income patients.  The DSH adjustment is an add-on to the Diagnosis Related Group (DRG) based payments of the inpatient acute care hospital prospective payment system (PPS). 


The most prevalent method in which a hospital qualifies for the Medicare DSH adjustment and the amount of that reimbursement is based upon the hospital’s disproportionate percentage, which is the sum of two fractions – the “Medicare fraction” and the “Medicaid fraction.”  The two components of DSH adjustment are commonly know as the Supplemental Security Income (SSI) Percentage (or Medicare Percentage) and the Medicaid Percentage.


Hall Consulting Services (HCS) has been continuously involved in DSH auditing and review since the enactment of the Consolidated Omnibus Budget Reconciliation of 1985 (COBRA).  Since our staff has worked as both a fiscal intermediary and consultant since the inception of the Medicare DSH provision was put into effect, we have a very detailed background on the evolution of the numerous polices, interpretations,  Centers for Medicare and Medicaid Services (CMS) instructions, PRRB case issue positions, CMS Administrator Decisions and legal court Decisions.


HCS has directly filed a number of DSH Medicare reopenings and appeals for a wide range of hospital clients in sizes ranging from 125 to 1,500 patient beds.  Over the years, HCS has developed a detailed, systematic approach which can be customized to any particular hospital size or complexity.




Medicaid Day Fraction


Medicaid Eligible Days – In calculating the number of Medicaid days, the hospital must determine whether the patient was eligible for Medicaid under a State plan approved under Title XIX on the day of service.  If the patient was eligible, the day is included in the Medicare DSH adjustment calculation.


Medicaid days, for purposes of the Medicare DSH adjustment calculation, include all days during which a patient is eligible, under a State program approved under Title XIX, for Medicaid benefits even if Medicaid did not make payments (e.g. Unpaid Patient Days) for any services.



The usual day components reported by the hospital are the following:

  • Medicaid Eligible Days

  • Medicaid HMO Days

  • Home & Community Based Service (1915(c) Eligible Patient)

  • Medicaid Out-of-State Patient Days

  • Medicaid Waiver Days


    However, Medicaid days also include, but are not limited to:

  • Days that are determined to be medically necessary but for which payment is denied by Medicaid because the provider did not bill timely

  • Days that are beyond the number of days for which a State will pay

  • Days that are utilized by a Medicaid beneficiary prior to an admission approval but for which a valid enrollment is determined within the prescribed period

  • Days for which payment is made by a third party


    Medicare Day Fraction


    The Medicare fraction is computed by dividing the number of patient days for patients who were entitled to both Medicare Part A benefits and SSI benefits by the total number of patient days for patients entitled to benefits under Medicare Part A.


    Our services include a full analysis of the Medicare fraction and related SSI percentage components. This analysis would include the audit, verification, and identification of total patient days with both SSI and Medicare Part A coverage (the fraction numerator) and Total Medicare Days (the fraction denominator).


    In order to calculate the numerator of the Medicare fraction, HCS obtains a data file from CMS which is based on information obtained from the Social Security Administration (SSA) that includes a list of eligible SSI recipients.  HCS then matches information from this CMS’s SSI file against CMS’s Medicare Part A entitlement information contained in the Medicare Provider Analysis and Review (MEDPAR) file to determine the number of Medicare/SSI days for a particular hospital in a particular federal fiscal year.  The fraction denominator of the fraction is calculated by CMS based on Medicare claims data.


    Examples of Medicare/SSI days include but are not limited to the following patient day components:

  • Medicare/SSI patient days

  • Medicare HMO/SSI patient days

  • Detail testing and identification of SSI and SSA patient database information

  • SSI patient database omissions

  • Multiple identifiers to identify SSI recipients and to match MEDPAR data


    Hospital Database Analysis


    In order to fully account for all hospital DSH patient day information, a number of large databases will have to be analyzed, comparatively matched with other hospital database information sources, and interfaced with a number of governmental databases for  Medicare, Medicaid and Social Security Administration information.


    HCS has developed a number of computer-based programs which are used to integrate the numerous sources of hospital and government information and patient databases.


    Database Computer-Based Programs Included the following:

  • State plan Medicaid eligibility information programs

  • CMS Medicare eligibility information programs

  • Hospital information systems database programs

  • SSA and SSI database programs

  • MEDPAR database programs




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