New guidance is available regarding Medicaid DSH audits and reporting required by section 1932(j) of the Social Security Act and implementing regulations. The new guidance, titled Additional Information on the DSH Reporting and Auditing Requirements – Part 2, is available on Medicaid.gov at http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Financing-and-Reimbursement/Medicaid-Disproportionate-Share-Hospital-DSH-Payments.html. We are providing this guidance in advance of the SPRY 2011 DSH audits and reports that are due to CMS by December 31, 2014. These audits and reports are the first that fall outside of the regulatory transition period established at 42 CFR 455.304(e).

To ensure proper oversight and assist states in appropriate implementation, we have conducted desk reviews of all relevant state audits and reports for State Plan Rate Years (SPRY) 2005 through 2009. Additionally, we have conducted in-depth onsite reviews of various states and hospitals throughout the country. The onsite and desk reviews were part of an effort to obtain a nationwide representation of audit implementation and to produce a greater understanding of how states, hospitals, and auditors completed the initial DSH audits and reports. The results of the reviews have informed the development of this guidance, which is designed to ensure proper implementation, consistent practice, and protection for states and hospitals as we approach the end of the regulatory transition period.

The transition period was designed to allow adequate time for CMS, states, auditors, and hospitals to work cooperatively in developing and refining DSH reporting and auditing techniques required by statute and regulation while attempting to mitigate or to eliminate the immediate and future fiscal impact realized by states and hospitals. Beginning for SPRY 2011 DSH audits and reports, CMS will regard audit findings demonstrating DSH payments that exceed the hospital-specific DSH limits as representing discovery of overpayments to providers. Such overpayments, pursuant to 42 CFR Part 433, Subpart F, trigger the return of the federal share of the payment to the Federal government. However, if the excess DSH payments are redistributed by the state to other qualifying hospitals as part of the federally approved Medicaid state plan, the federal share is not required to be returned.

We look forward to continued efforts and commitment in ensuring that the DSH audits and reports comport with section 1923(j) of the Act, implementing regulations, and related guidance. Should you have any questions please contact Rory Howe at 410-786-4878 or by email at Rory.Howe@cms.hhs.gov.