I 
111TH CONGRESS 
1ST SESSION H. R. 4250 
To direct the Secretary of Health and Human Services to revise regulations 
implementing the statutory reporting and auditing requirements for the 
Medicaid disproportionate share hospital (‘‘DSH’’) payment program to 
be consistent with the scope of the statutory provisions and avoid sub-
stantive changes to preexisting DSH policy. 
IN THE HOUSE OF REPRESENTATIVES 
DECEMBER 9, 2009 
Mr. MELANCON (for himself, Mr. ALEXANDER, Mr. CAO, Mr. CASSIDY, Mr. 
BOUSTANY, and Mr. FLEMING) introduced the following bill; which was 
referred to the Committee on Energy and Commerce 
A BILL 
To direct the Secretary of Health and Human Services to 
revise regulations implementing the statutory reporting 
and auditing requirements for the Medicaid dispropor-
tionate share hospital (‘‘DSH’’) payment program to be 
consistent with the scope of the statutory provisions and 
avoid substantive changes to preexisting DSH policy. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; FINDINGS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Medicaid DSH Integrity Act’’. 
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(b) FINDINGS.—Congress finds the following: 
(1) Medicaid disproportionate share hospital 
(‘‘DSH’’) payments are a critical source of funding 
for many safety net hospitals that provide essential 
access to care for the poor and uninsured. 
(2) The statutory reporting and auditing re-
quirements added by the Medicare Prescription 
Drug Improvement and Modernization Act of 2003 
are important to provide assurances to Congress, the 
Department of Health and Human Services, States 
and the public that DSH funds are being used to 
fulfill their intended statutory purpose of assisting 
hospitals that serve a disproportionate share of low- 
income individuals. 
(3) The Centers for Medicare & Medicaid Serv-
ices issued Medicaid DSH auditing and reporting 
regulations (as defined in section 2(d)) that, in im-
plementing those reporting and auditing require-
ments, also implemented changes to underlying DSH 
policy which have the effect of narrowing the scope 
of DSH payments that may be made for many 
States. 
(4) In adding those reporting and auditing re-
quirements, Congress did not intend to alter the def-
inition of DSH-eligible costs or to narrow the scope 
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of DSH payments that may be made under the ex-
isting DSH program and the substantive standards 
in section 1923(g) of the Social Security Act (42 
U.S.C. 1396r–4(g)). 
(5) The policy changes in such regulations 
would result in DSH payment reductions of millions 
of dollars to critical safety net providers that have 
long participated in the Medicaid DSH program 
under payment methodologies previously approved 
by CMS. 
SEC. 2. REVISION OF MEDICAID DSH AUDITING AND RE-
PORTING REGULATIONS. 
(a) IN GENERAL.—Not later than 60 days after the 
date of enactment of this Act, the Secretary of Health and 
Human Services, in consultation with States and dis-
proportionate share hospitals (as determined for purposes 
of the Medicaid DSH program), shall— 
(1) indicate, in appropriate guidance, that CMS 
does not intend to enforce any changes in policy re-
lated to the calculation of the limits under section 
1923(g)(1)(A) of the Social Security Act that were 
contained in the Medicaid DSH auditing and report-
ing regulations; and 
(2) publish an interim final rule to revise the 
Medicaid DSH auditing and reporting regulations at 
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sections 447.299(c) and 455.304 of title 42, Code of 
Federal Regulations, as necessary— 
(A) to correct policy changes related to the 
calculation 
of 
the 
limits 
under 
section 
1923(g)(1)(A) of the Social Security Act; 
(B) to provide appropriate guidance for 
otherwise implementing the Medicaid DSH au-
diting and reporting regulations; and 
(C) to provide for the regulatory changes 
described in subsection (b). 
(b) REGULATORY CHANGES TO BE INCLUDED IN 
NEW INTERIM FINAL RULE.—The regulatory changes de-
scribed in this subsection are the following: 
(1) In defining the costs of furnishing services 
to individuals with no health insurance (or other 
source of third-party coverage), CMS shall permit 
inclusion of all costs related to services provided to 
patients with no insurance for the service rendered, 
even if the patient has insurance that covers other 
services. The receipt by a hospital of nominal pay-
ments related to a service shall not constitute health 
insurance or a source of third-party coverage. 
(2) Consistent with prior guidance of CMS con-
tained in a letter to State Medicaid directors on Au-
gust 17, 1994, CMS shall permit States to use the 
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definition of allowable costs in its State Medicaid 
plan, or any other definition, in computing such 
costs as long as the costs determined under such a 
definition do not exceed the amounts that would be 
allowable under the Medicare principles of cost reim-
bursement. CMS shall interpret the language of the 
audit requirement at section 1923(j)(2)(C) of the 
Social Security Act describing ‘‘inpatient hospital 
and outpatient hospital services’’ to be consistent 
with the term ‘‘hospital services’’ as used in section 
1923(g)(1)(A) of such Act and not to indicate an in-
tent by Congress for a more restrictive interpreta-
tion of such section 1923(g)(1)(A). 
(3) CMS shall, as appropriate, revise the Gen-
eral DSH Audit and Reporting Protocol referenced 
in the Medicaid DSH auditing and reporting regula-
tions and issued at the same time as those regula-
tions, in particular, to permit the use of either an 
overall cost-to-charge ratio or departmental cost-to- 
charge ratios. 
(4) CMS shall revise section 455.304(d)(2) of 
title 42, Code of Federal Regulations, to permit al-
ternative methodologies for determining actual costs, 
including through trending forward costs from prior 
years. 
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