Medicaid Disproportionate Share Hospital payment: how does it impact hospitals' provision of uncompensated care?

This study examines the association between hospital uncompensated care and reductions in Medicaid Disproportionate Share Hospital (DSH) payments resulting from the 1997 Balanced Budget Act. We used data on California hospitals from 1996 to 2003 and employed two-stage least squares with a first-differencing model to control for potential feedback effects. Our findings suggest that nonprofit hospitals did reduce provision of uncompensated care in response to reductions in Medicaid DSH, but the response was inelastic in value. Policymakers need to continue to monitor uncompensated care as sources of support for indigent care change with the Patient Protection and Affordable Care Act (ACA).