Methodist Hospitals Northlake Campus in Gary. A change in how states calculate Disproportionate Share Hospital payments has cost Indiana hospitals such as Methodist Hospitals in Gary and Merrillville millions in operating losses, leaving them struggling — especially safety-net hospitals, which serve a large portion of Medicaid patients. Photo from Methodist Hospitals Northlake Campus, Google Maps.

News Release

INDIANAPOLIS — Indiana hospitals say they are losing more than $100 million annually after a COVID-19 relief bill altered the formula for federal Medicare reimbursements, and they are urging Congress to act before losses deepen.

The 2021 law, signed during Pres. Donald Trump’s first term, changed how states calculate Disproportionate Share Hospital payments, which support hospitals serving large numbers of low-income patients.

Starting in 2023, states could no longer count “dual-eligible” patients, those covered by both Medicare and Medicaid, in their DSH funding formula. In Indiana, that affects nearly 13% of Medicaid enrollees.

Hospital leaders say the change has hit safety-net providers the hardest.

Legislation introduced this month by Sens. Jim Banks, and Kirsten Gillibrand, D-N.Y., would restore the earlier formula and allow states to use unspent DSH dollars from past years. The measure has bipartisan support and could make reimbursements for 2024 payments if passed before year’s end.

Hospital groups warn the clock is ticking.

While the bill would not create new funding, advocates say restoring access to existing allocations is critical as Indiana hospitals brace for additional billions in Medicaid cuts under a separate federal budget measure set to phase in by 2032.