II 

116TH CONGRESS 

1ST SESSION S. 18 

To amend title XIX of the Social Security Act to establish a methodology 

for determining State allotments for Medicaid disproportionate share 

hospital payments that is based on State poverty levels, to require States 

to prioritize disproportionate share hospital payments on the basis of 

Medicaid inpatient utilization and low-income utilization rates, and for 

other purposes. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 3, 2019 

Mr. RUBIO introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To amend title XIX of the Social Security Act to establish 

a methodology for determining State allotments for Medicaid disproportionate share hospital payments that is 

based on State poverty levels, to require States to 

prioritize disproportionate share hospital payments on 

the basis of Medicaid inpatient utilization and low-income 

utilization rates, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘State Accountability, 

3 Flexibility, and Equity for Hospitals Act of 2019’’, or the 

4 ‘‘SAFE Hospitals Act of 2019’’. 

5 SEC. 2. DETERMINATION OF STATE DSH ALLOTMENTS 

6 BASED ON STATE POVERTY LEVELS. 

7 Section 1923(f) of the Social Security Act (42 U.S.C. 

8 1396r–4(f)) is amended— 

9 (1) in paragraph (3)— 

10 (A) in the paragraph heading, by striking 

11 ‘‘YEAR 2003 AND THEREAFTER’’ and inserting 

12 ‘‘YEARS 2003 THROUGH 2021’’; 

13 (B) in subparagraph (A)— 

14 (i) by striking ‘‘, (7), and (8)’’ and in15 serting ‘‘and (7)’’; and 

16 (ii) by inserting ‘‘through fiscal year 

17 2021’’ after ‘‘each succeeding fiscal year’’; 

18 (C) in subparagraph (C)(ii), by inserting 

19 ‘‘through fiscal year 2021’’ after ‘‘each suc20 ceeding fiscal year’’; and 

21 (D) in subparagraph (E)(i)(III), by insert22 ing ‘‘or paragraph (7), as applicable,’’ after 

23 ‘‘this paragraph’’; 

24 (2) in paragraph (4)(C), by inserting ‘‘or para25 graph (7), as applicable,’’ after ‘‘paragraph (3)’’; 

26 (3) in paragraph (5)(B)— 


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1 (A) in the subparagraph heading, by strik2 ing ‘‘AND SUBSEQUENT FISCAL YEARS’’ and in3 serting ‘‘THROUGH FISCAL YEAR 2021’’; and 

4 (B) in clause (iii), by inserting ‘‘through 

5 fiscal year 2021’’ after ‘‘any subsequent fiscal 

6 year’’; 

7 (4) in paragraph (6)— 

8 (A) in clause (vi) of subparagraph (A)— 

9 (i) in the clause heading, by striking 

10 ‘‘2025’’ and inserting ‘‘2021’’; and 

11 (ii) by striking ‘‘fiscal year 2025’’ and 

12 inserting ‘‘fiscal year 2021’’; and 

13 (B) in clause (iii) of subparagraph (B)— 

14 (i) in the clause heading, by inserting 

15 ‘‘THROUGH FISCAL YEAR 2021’’ after ‘‘SUC16 CEEDING FISCAL YEARS’’; and 

17 (ii) in subclause (II)— 

18 (I) in the subclause heading, by 

19 inserting ‘‘THROUGH FISCAL YEAR

20 2021’’ after ‘‘SUCCEEDING FISCAL

21 YEARS’’; and 

22 (II) by inserting ‘‘through fiscal 

23 year 2021’’ after ‘‘each fiscal year 

24 thereafter’’; 


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1 (5) by striking paragraphs (7) and (8) and in2 serting the following: 

3 ‘‘(7) STATE DSH ALLOTMENTS FOR FISCAL

4 YEARS AFTER FISCAL YEAR 2021.— 

5 ‘‘(A) IN GENERAL.—Subject to subpara6 graphs (B), (C), and (D), beginning with fiscal 

7 year 2022, the DSH allotment for a State and 

8 fiscal year shall be the amount equal to the 

9 product of— 

10 ‘‘(i) the State poverty ratio (as deter11 mined under subparagraph (E)(ii)) for the 

12 State and fiscal year; and 

13 ‘‘(ii) the DSH allotment cap (as de14 termined under subparagraph (E)(i)) for 

15 the fiscal year. 

16 ‘‘(B) PHASE-IN OF POVERTY-BASED FOR17 MULA.— 

18 ‘‘(i) IN GENERAL.—During the period 

19 of fiscal years described in clause (ii), the 

20 Secretary shall phase in the application of 

21 the determination of DSH allotments 

22 under subparagraph (A) in a manner that 

23 ensures that— 

24 ‘‘(I) in no case is the DSH allot25 ment for a State for a fiscal year durVerDate Sep 11 2014 04:29 Jan 05, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S18.IS S18

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1 ing such period less than 90 percent 

2 of the DSH allotment for the State 

3 for the previous fiscal year (without 

4 regard to whether the State used the 

5 full amount of the DSH allotment for 

6 the previous fiscal year); and 

7 ‘‘(II) the total amount of DSH 

8 allotments made to all States for any 

9 fiscal year during such period does 

10 not exceed the DSH allotment cap de11 termined for the fiscal year under 

12 subparagraph (E)(i). 

13 ‘‘(ii) PHASE-IN PERIOD.—The period 

14 of fiscal years described in this clause is 

15 the period that begins with fiscal year 

16 2022 and ends with— 

17 ‘‘(I) fiscal year 2031; or 

18 ‘‘(II) at the Secretary’s discre19 tion, any of fiscal years 2032 through 

20 2036. 

21 ‘‘(iii) DEVELOPMENT OF METHOD22 OLOGY.—The Secretary shall promulgate 

23 final regulations that establish the method24 ology for determining State DSH allotVerDate Sep 11 2014 04:29 Jan 05, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S18.IS S18

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1 ments under clause (i) not later than Jan2 uary 1, 2021. 

3 ‘‘(C) STATE ALLOTMENT FLEXIBILITY OP4 TION.— 

5 ‘‘(i) IN GENERAL.—A State may elect 

6 to increase or reduce the amount of the 

7 DSH allotment for the State and a fiscal 

8 year (as otherwise determined under this 

9 paragraph) for the purpose of providing 

10 certainty or more consistent DSH funding 

11 in subsequent fiscal years in accordance 

12 with this subparagraph. 

13 ‘‘(ii) STATE OPTION TO RESERVE AL14 LOTMENT AMOUNTS.—For any fiscal year 

15 after fiscal year 2021, a State may request 

16 that the DSH allotment for the State and 

17 fiscal year (as otherwise determined under 

18 this paragraph) be reduced by an amount 

19 that shall not exceed 10 percent of the 

20 amount of the allotment as so determined. 

21 ‘‘(iii) STATE OPTION TO INCREASE

22 DSH ALLOTMENT FROM ALLOTMENT RE23 SERVE.—For any fiscal year after fiscal 

24 year 2022, a State may request that the 

25 DSH allotment for the State and fiscal 


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1 year (as otherwise determined under this 

2 paragraph) be increased by an amount 

3 that shall not exceed the DSH reserve 

4 amount for the State and fiscal year. 

5 ‘‘(iv) DSH RESERVE AMOUNT.— 

6 ‘‘(I) IN GENERAL.—Subject to 

7 subclause (II), the DSH reserve 

8 amount for a State and fiscal year 

9 shall be equal to the sum of the 

10 amounts, if any, of any reductions to 

11 the State’s DSH allotment (as other12 wise determined under this para13 graph) made in each of the preceding 

14 5 fiscal years pursuant to a request 

15 under clause (ii). 

16 ‘‘(II) SUBTRACTION OF IN17 CREASES FROM DSH RESERVE

18 AMOUNT.—The amount of any in19 crease to a State’s DSH allotment for 

20 a fiscal year made pursuant to a re21 quest under clause (iii) shall be sub22 tracted from the State’s DSH reserve 

23 amount for such year and shall not be 

24 available to the State in subsequent 

25 fiscal years. 


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1 ‘‘(III) RULE OF APPLICATION.— 

2 In the case of an increase to a State’s 

3 DSH allotment for a fiscal year that 

4 is less than the State’s DSH reserve 

5 amount for such year, the Secretary 

6 shall apply subclause (II) in a manner 

7 that maximizes the DSH reserve 

8 amount that will remain available to 

9 the State in subsequent fiscal years. 

10 ‘‘(v) DISREGARD OF ADJUSTMENTS.— 

11 Any increase or reduction under this sub12 paragraph to the DSH allotment of a 

13 State for a fiscal year shall be disregarded 

14 when otherwise determining State DSH al15 lotments under this paragraph. 

16 ‘‘(D) TREATMENT OF WAIVERS.— 

17 ‘‘(i) IN GENERAL.—Subject to clause 

18 (ii), with respect to a State and a fiscal 

19 year, if the State has in effect on the date 

20 of enactment of the SAFE Hospitals Act 

21 of 2019 a statewide waiver of requirements 

22 of this title under section 1115 or other 

23 law and any part of the fiscal year occurs 

24 during the period of the waiver (as ap25 proved as of such date), the DSH allotVerDate Sep 11 2014 04:29 Jan 05, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S18.IS S18

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1 ment determined under this paragraph for 

2 such State and fiscal year shall not be less 

3 than the DSH allotment that would have 

4 been determined for such State and fiscal 

5 year under this section as in effect on the 

6 day before the date of enactment of the 

7 SAFE Hospitals Act of 2019, reduced, in 

8 the case of each of fiscal years 2022 

9 through 2025, by the amount of the 

10 State’s share of the reductions which 

11 would have been applicable for the fiscal 

12 year under paragraph (7) of this sub13 section (as so in effect), as estimated by 

14 the Secretary. 

15 ‘‘(ii) TOTAL ALLOTMENTS NOT TO EX16 CEED DSH ALLOTMENT CAP.—The Sec17 retary shall apply this subparagraph in 

18 such a manner that the total amount of 

19 DSH allotments determined for all States 

20 for a fiscal year under this paragraph does 

21 not exceed DSH allotment cap determined 

22 for the fiscal year under subparagraph 

23 (E)(i). 

24 ‘‘(iii) NONAPPLICATION.—Clause (i) 

25 shall not apply— 


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1 ‘‘(I) with respect to a State that 

2 has in effect a waiver described in 

3 such clause if the State elects, 

4 through a revision of such waiver, 

5 that such clause will not apply; or 

6 ‘‘(II) with respect to any part of 

7 a fiscal year that occurs after the ex8 piration (determined without regard 

9 to any extension approved after the 

10 date of the enactment of the State Ac11 countability, Flexibility, and Equity 

12 for Hospitals Act of 2019) of such a 

13 waiver. 

14 ‘‘(iv) NO EFFECT ON WAIVER AU15 THORITY.—Nothing in this subsection shall 

16 be construed as preventing the Secretary 

17 from approving a waiver under section 

18 1115 or other law with respect to require19 ments under this title related to a State’s 

20 use of its DSH allotment for a fiscal year. 

21 ‘‘(E) DEFINITIONS.—In this paragraph: 

22 ‘‘(i) DSH ALLOTMENT CAP.—The 

23 term ‘DSH allotment cap’ means, with re24 spect to a fiscal year, the amount equal to 

25 the total amount of the DSH allotments 


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1 that would have been determined for all 

2 States for the fiscal year under this section 

3 as in effect on the day before the date of 

4 enactment of the SAFE Hospitals Act of 

5 2019, reduced, in the case of fiscal years 

6 2022 through 2025, by the aggregate 

7 amount of the reductions which would have 

8 been applicable for the fiscal year under 

9 paragraph (7) of this subsection (as so in 

10 effect). 

11 ‘‘(ii) STATE POVERTY RATIO.—The 

12 term ‘State poverty ratio’ means, with re13 spect to a State and fiscal year, the ratio 

14 of— 

15 ‘‘(I) the number of individuals in 

16 the State in the most recent fiscal 

17 year for which census data are avail18 able whose income (as determined 

19 under section 1902(e)(14) (relating to 

20 modified adjusted gross income) and 

21 without regard to whether an individ22 ual’s income eligibility for medical as23 sistance is determined under such sec24 tion) was less than 100 percent of the 

25 poverty line (as defined in section 


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1 2110(c)(5)) applicable to a family of 

2 the size involved; to 

3 ‘‘(II) the number of individuals 

4 in all States in the most recent fiscal 

5 year for which census data are avail6 able whose income (as so determined) 

7 was less than 100 percent of the pov8 erty line (as so defined) applicable to 

9 the family of the size involved.’’; and 

10 (6) by redesignating paragraph (9) as para11 graph (8). 

12 SEC. 3. PRIORITIZING DISPROPORTIONATE SHARE HOS13 PITAL PAYMENTS BASED ON MEDICAID INPA14 TIENT UTILIZATION AND LOW-INCOME UTILI15 ZATION RATES. 

16 (a) IN GENERAL.—Section 1923 of the Social Secu17 rity Act (42 U.S.C. 1396r–4) is amended— 

18 (1) in subsection (a)(2)(D), by inserting 

19 ‘‘(which, as of October 1, 2021, shall meet the re20 quirements of subsection (k))’’ after ‘‘methodology’’; 

21 (2) in subsection (c), by striking ‘‘and (g)’’ and 

22 inserting ‘‘, (g), and, beginning on October 1, 2021, 

23 (k)’’; 

24 (3) in subsection (d)(2)(A)— 


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1 (A) in clause (i), by striking ‘‘; or’’ and in2 serting a semicolon; 

3 (B) in clause (ii), by striking the period at 

4 the end and inserting ‘‘; or’’; and 

5 (C) by adding at the end the following new 

6 clause: 

7 ‘‘(iii) that is an institution for mental 

8 diseases.’’; and 

9 (4) by adding at the end the following new sub10 section: 

11 ‘‘(k) STATE METHODOLOGY REQUIREMENTS.— 

12 ‘‘(1) IN GENERAL.—Subject to paragraph (4), a 

13 State methodology for identifying and making pay14 ments to disproportionate share hospitals meets the 

15 requirements of this subsection if— 

16 ‘‘(A) the methodology is uniformly applied 

17 statewide; 

18 ‘‘(B) the methodology identifies each hos19 pital in the State that is described in a dis20 proportionate share hospital tier (as defined in 

21 paragraph (2)); and 

22 ‘‘(C) in making payments to dispropor23 tionate share hospitals, the methodology meets 

24 the requirements of paragraph (3). 


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1 ‘‘(2) DISPROPORTIONATE SHARE HOSPITAL

2 TIERS.—The term ‘disproportionate share hospital 

3 tier’ means each of the following: 

4 ‘‘(A) TIER 1 HOSPITALS.—A category of 

5 hospitals (referred to in this section as ‘tier 1 

6 hospitals’) in which each hospital satisfies— 

7 ‘‘(i) each of the criteria described in 

8 clause (ii) of subparagraph (B); and 

9 ‘‘(ii) one or more of the following cri10 teria: 

11 ‘‘(I) The hospital has a Medicaid 

12 inpatient utilization rate (as defined 

13 in subsection (b)(2)) that is not less 

14 than 2 standard deviations above the 

15 mean Medicaid inpatient utilization 

16 rate for hospitals receiving Medicaid 

17 payments in the State. 

18 ‘‘(II) The hospital has a low-in19 come utilization rate (as defined in 

20 subsection (b)(3)) of not less than 40 

21 percent. 

22 ‘‘(III) More than 70 percent of 

23 the inpatient days for which payments 

24 are received by the hospital are paid 

25 for under the Medicare program 


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1 under title XVIII, the Medicaid pro2 gram under this title, or the Chil3 dren’s Health Insurance Program 

4 under title XXI. 

5 ‘‘(B) TIER 2 HOSPITALS.—A category of 

6 hospitals (referred to in this section as ‘tier 2 

7 hospitals’) in which each hospital— 

8 ‘‘(i) is not described in the previous 

9 subparagraph; and 

10 ‘‘(ii) satisfies one or more of the fol11 lowing criteria: 

12 ‘‘(I) The hospital has a Medicaid 

13 inpatient utilization rate (as defined 

14 in subsection (b)(2)) that is not less 

15 than 1.5 standard deviations above 

16 the mean Medicaid inpatient utiliza17 tion rate for hospitals receiving Med18 icaid payments in the State. 

19 ‘‘(II) The hospital has a low-in20 come utilization rate (as defined in 

21 subsection (b)(3)) of not less than 35 

22 percent. 

23 ‘‘(III) The hospital has the larg24 est number of inpatient days attrib25 utable to individuals entitled to beneVerDate Sep 11 2014 04:29 Jan 05, 2019 Jkt 089200 PO 00000 Frm 00015 Fmt 6652 Sfmt 6201 E:\BILLS\S18.IS S18

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1 fits under the State plan of any hos2 pital in such State for the previous 

3 State fiscal year. 

4 ‘‘(C) TIER 3 HOSPITALS.—A category of 

5 hospitals (referred to in this section as ‘tier 3 

6 hospitals’) in which each hospital— 

7 ‘‘(i) is not described in a previous sub8 paragraph; and 

9 ‘‘(ii) satisfies one or more of the fol10 lowing criteria: 

11 ‘‘(I) The hospital has a Medicaid 

12 inpatient utilization rate (as defined 

13 in subsection (b)(2)) that is not less 

14 than the mean Medicaid inpatient uti15 lization rate for hospitals receiving 

16 Medicaid payments in the State. 

17 ‘‘(II) The hospital has a low-in18 come utilization rate (as defined in 

19 subsection (b)(3)) of not less than 25 

20 percent. 

21 ‘‘(D) TIER 4 HOSPITALS.—A category of 

22 hospitals (referred to in this section as ‘tier 4 

23 hospitals’) in which each hospital— 

24 ‘‘(i) is not described in a previous sub25 paragraph; and 


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1 ‘‘(ii) satisfies the requirement de2 scribed in subsection (d)(3). 

3 ‘‘(3) PAYMENT METHODOLOGY REQUIRE4 MENTS.— 

5 ‘‘(A) PRIORITIZATION OF HOSPITALS.—In 

6 making disproportionate share hospital pay7 ments, a State methodology shall prioritize hos8 pitals in the following order: 

9 ‘‘(i) Tier 1 hospitals shall receive the 

10 highest priority. 

11 ‘‘(ii) Tier 2 hospitals shall receive the 

12 second-highest priority. 

13 ‘‘(iii) Tier 3 hospitals shall receive the 

14 third-highest priority. 

15 ‘‘(iv) Tier 4 hospitals shall receive the 

16 fourth-highest priority. 

17 ‘‘(B) FACTORS.—The methodology speci18 fies the factors that will be considered in deter19 mining the amount of a disproportionate share 

20 hospital payment to be made to a hospital, 

21 which may include— 

22 ‘‘(i) the hospital’s net operating mar23 gins (including past net operating mar24 gins); 


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1 ‘‘(ii) past disproportionate share hos2 pital payments to the hospital; 

3 ‘‘(iii) whether the hospital was af4 fected by a major disaster (as declared by 

5 the President under section 401 of the 

6 Robert T. Stafford Disaster Relief and 

7 Emergency Assistance Act) in the 12 

8 months prior to the payment; and 

9 ‘‘(iv) other relevant factors, as deter10 mined by the State (subject to the ap11 proval of the Secretary). 

12 ‘‘(C) CONSIDERATION OF FINANCIAL CIR13 CUMSTANCES OF HIGH TIER HOSPITALS.— 

14 ‘‘(i) IN GENERAL.—The State shall 

15 certify that the State methodology ade16 quately considers the unique financial cir17 cumstances of tier 1 hospitals and tier 2 

18 hospitals, and takes necessary steps to 

19 mitigate net operating losses by such hos20 pitals. 

21 ‘‘(ii) GUIDANCE.— 

22 ‘‘(I) IN GENERAL.—Not later 

23 than 18 months after the date of en24 actment of the SAFE Hospitals Act 

25 of 2019, the Secretary shall issue 


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1 guidance to States outlining methods 

2 that States may use to satisfy the re3 quirement of this subparagraph. 

4 ‘‘(II) STATE ALTERNATIVES.— 

5 Subject to the approval of the Sec6 retary, a State may develop an alter7 native method for satisfying the re8 quirement of this subparagraph. 

9 ‘‘(D) TREATMENT OF IMDS AND CAHS.— 

10 The State shall specify how the methodology 

11 prioritizes institutions for mental diseases and 

12 critical access hospitals (as defined in section 

13 1861(mm)(1)), but in no case shall institutions 

14 for mental diseases or critical access hospitals 

15 receive a higher priority than tier 1 hospitals. 

16 ‘‘(E) STATE AUTHORITY TO RECLASSIFY

17 HOSPITALS.—Subject to the approval of the 

18 Secretary, for purposes of prioritizing dis19 proportionate share payments under a State 

20 methodology under this subsection, a State may 

21 treat up to 15 percent of all disproportionate 

22 share hospitals in the State, excluding institu23 tions for mental diseases, as belonging to a dif24 ferent disproportionate share hospital tier than 


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1 the tier in which the hospitals are described 

2 under paragraph (2). 

3 ‘‘(F) RULE OF CONSTRUCTION.—Nothing 

4 in this subsection shall be construed as requir5 ing a State to apply a uniform payment meth6 odology to all hospitals within a dispropor7 tionate share hospital tier. 

8 ‘‘(4) METHODOLOGY FOR STATES WITH FEWER

9 THAN 15 DISPROPORTIONATE SHARE HOSPITALS.— 

10 ‘‘(A) IN GENERAL.—In the case of a State 

11 that has fewer than 15 disproportionate share 

12 hospitals, the State shall use the methodology 

13 for identifying and making payments to dis14 proportionate share hospitals that is developed 

15 by the Secretary under subparagraph (B). 

16 ‘‘(B) DEVELOPMENT OF METHODOLOGY.— 

17 Not later than 18 months after the date of en18 actment of the SAFE Hospitals Act of 2019, 

19 the Secretary shall develop a methodology for 

20 identifying and making payments to dispropor21 tionate share hospitals for States that have 

22 fewer than 15 disproportionate share hospitals 

23 that prioritizes DSH payments to hospitals with 

24 disproportionately high volumes of Medicaid pa25 tients and low-income patients. 


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1 ‘‘(5) NO EFFECT ON WAIVER AUTHORITY.— 

2 Nothing in this subsection shall be construed as pre3 venting the Secretary from approving a waiver under 

4 section 1115 or other law with respect to require5 ments under this subsection related to the method6 ology used by States to identify and make payments 

7 to disproportionate share hospitals.’’. 

8 (b) MODIFICATION OF CAP ON INDIVIDUAL DSH 

9 PAYMENTS.—Section 1923(g)(1)(A) of the Social Security 

10 Act (42 U.S.C. 1396r–4(g)(1)(A)) is amended, in the first 

11 sentence, by inserting ‘‘, including any costs incurred by 

12 the hospital during the year that are associated with sub13 sidizing a physician or a clinic or other health center that 

14 is owned and operated by, controlled by, or in common 

15 control with the hospital for the purpose of providing care 

16 to indigent patients’’ before the period. 

17 (c) MODIFICATION OF DSH QUALIFICATION RE18 QUIREMENTS.— 

19 (1) IN GENERAL.—Section 1923(d)(3) of the 

20 Social Security Act (42 U.S.C. 1396r–4(d)(3)) is 

21 amended by striking ‘‘unless the hospital’’ and all 

22 that follows through the period and inserting the fol23 lowing: ‘‘unless the hospital— 

24 ‘‘(A) has a Medicaid inpatient utilization 

25 rate (as defined in subsection (b)(2)) that is not 


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1 more than 1 standard deviation below the mean 

2 Medicaid inpatient utilization rate for hospitals 

3 receiving Medicaid payments in the State; 

4 ‘‘(B) has a low-income utilization rate (as 

5 defined in subsection (b)(3)) that is not less 

6 than 10 percent; or 

7 ‘‘(C) is a critical access hospital (as de8 fined in section 1861(mm)(1)).’’. 

9 (2) EFFECTIVE DATE.—The amendments made 

10 by this subsection shall take effect on October 1, 

11 2021. 

Æ 


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