Disproportionate Share Hospital (DSH) payments are the supplemental Medicaid funds that help keep Georgia's safety-net hospitals solvent. No family applies for DSH and no patient's bill turns on it; it is a federal-state financing mechanism, set by Section 1923 of the Social Security Act and run in Georgia by the Department of Community Health. This guide explains who qualifies, what caps a payment, how the state funds its share, and why the program matters to the families those hospitals serve.

What a Disproportionate Share Hospital (DSH) payment is

A Disproportionate Share Hospital payment is a supplemental Medicaid payment, on top of a hospital's regular Medicaid reimbursement, directed to hospitals that serve a disproportionate number of low-income patients. The requirement that state Medicaid programs make these payments dates to 1981 and is codified at Section 1923 of the Social Security Act (42 U.S.C. 1396r-4), which obligates states to take into account the situation of hospitals serving a disproportionate share of low-income patients. For the program structure as a whole, see CMS's overview of Medicaid Disproportionate Share Hospital payments under Section 1923 of the Social Security Act.

The purpose is narrow and specific. Medicaid generally pays hospitals less than the cost of care, and uninsured patients often pay little or nothing. A hospital that treats a high concentration of these patients carries an uncompensated-care burden that ordinary payment rates do not cover. DSH is the federal-state mechanism that offsets part of that burden so the hospital can keep operating. Nationally the program is large: in fiscal year 2021, Medicaid made $18.9 billion in DSH payments, $10.8 billion of it federal funds and $8.1 billion state funds.

Medicaid DSH is not Medicare DSH

Two different programs share the "DSH" name, and searchers routinely land on the wrong one. The table below draws the line.

Medicaid DSH (this guide) Medicare DSH
Authority Section 1923 of the Social Security Act A separate adjustment under Medicare's inpatient hospital payment rules
Who pays State Medicaid program (with federal match) Medicare
Based on The hospital's uncompensated-care cost for Medicaid and uninsured patients The hospital's share of low-income Medicare and Medicaid inpatient days
Reaches families through Safety-net hospital solvency Medicare hospital payment rates

This guide covers Medicaid DSH. A hospital can receive both, because the two adjustments come from different payers and rest on different rules.

How a hospital qualifies for DSH

Federal law deems a hospital a disproportionate share hospital if it meets either of two statistical tests under Section 1923(b):

  • Medicaid inpatient utilization rate test. The hospital's Medicaid inpatient days, as a share of total inpatient days, are at least one standard deviation above the mean Medicaid inpatient utilization rate for hospitals receiving Medicaid payments in the state.
  • Low-income utilization rate test. The hospital's low-income utilization rate, a composite of Medicaid and other public-assistance revenue plus charity care relative to total revenue, exceeds 25 percent.

States may also designate additional DSH hospitals under criteria set in the Medicaid State Plan. There is one more federal gate: with limited exceptions (including children's hospitals and hospitals that did not offer nonemergency obstetric services as of December 22, 1987), a hospital may not be deemed a DSH hospital unless it has at least two obstetricians with staff privileges who have agreed to treat Medicaid patients, under Section 1923(d).

What caps a hospital's DSH payment

The single most important limit on DSH is the hospital-specific limit under Section 1923(g): a hospital's DSH payment may not exceed the cost it incurs during the year furnishing services to Medicaid-eligible and uninsured patients, net of payments received. That net figure is the hospital's uncompensated-care cost, and it has two components:

  • Medicaid shortfall. The hospital's cost of serving Medicaid patients minus the Medicaid payments it received for them.
  • Uninsured cost. The cost of serving uninsured patients minus any payments received from those patients or other non-Medicaid sources.

Both are measured at cost, not at charges, using Medicare cost-report data and supporting documentation. This limit was created by the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993), which capped each hospital's DSH payment at its actual uncompensated-care cost. If a hospital's DSH and other Medicaid payments exceed the limit, the excess must be repaid.

State DSH allotments and the federal cap

Federal DSH funding to a state is capped. Under Section 1923(f), each state receives an annual DSH allotment, the maximum federal share of DSH payments for that state; a state may spend its own funds beyond the allotment but draws no federal match above it. CMS publishes each state's allotment annually. Georgia's specific dollar allotment changes year to year and is published in CMS allotment notices rather than restated here, because relying on a stale figure would mislead.

When DSH allotments shrink, hospitals in high-need areas feel it first, because their payments are closest to the uncompensated-care ceiling. That is the live policy question covered next.

The ACA DSH reductions

The Affordable Care Act (ACA) scheduled reductions to states' federal DSH allotments, on the theory that expanded coverage would shrink uncompensated care and reduce the need for DSH. Congress then delayed those reductions repeatedly. The Consolidated Appropriations Act, 2021 pushed implementation to fiscal year 2024, and as scheduled in MACPAC's 2023 summary the reductions were set at $8.0 billion per year for fiscal years 2024 through 2027.

The status of these reductions has moved with each appropriations and reconciliation cycle, and whether a given year's cut is in effect or again deferred is genuinely unsettled. Confirm the current-year status with CMS or MACPAC before relying on it; do not assume the reductions are still indefinitely postponed.

Audits and overpayment recovery

DSH payments are audited. Federal regulations at 42 CFR 447.299 require states to report DSH payments and to obtain an annual independent certified audit. DSH payments found in that audit to exceed a hospital's specific cost limit are treated as provider overpayments that must be returned to the federal government. The HHS Office of Inspector General has also examined state DSH programs over many years, and its findings drove the move to mandatory independent audits.

How Georgia Medicaid runs DSH

Georgia administers DSH through the Georgia Department of Community Health (DCH), the state Medicaid agency, in coordination with several state financing structures. The methodology is set in Georgia's Medicaid State Plan and the details are documented in DCH provider materials.

  • Indigent Care Trust Fund. A Georgia statutory fund that collects state revenue and pays out for indigent care at Georgia hospitals; it is one of the vehicles that supports the state share of DSH, drawing federal match at the state's matching rate.
  • Hospital provider assessment. A state assessment on hospital revenue, deposited in a state fund and used as the non-federal share for Medicaid matching, including DSH and Upper Payment Limit payments. Provider assessments must comply with federal Medicaid rules that constrain how states tax providers to generate the state share.
  • Upper Payment Limit (UPL) supplemental payments. A separate Medicaid payment authority, not DSH and not subject to the DSH allotment, that lets states pay up to roughly what Medicare would have paid for the same services. DSH and UPL together substantially supplement regular Medicaid hospital payments.

Together these are the channels through which federal matching funds reach Georgia's safety-net hospitals. Because the state share comes largely from provider assessments and the trust fund rather than general revenue, the financing is durable but technical, and the specific pool methodology has changed over time.

Separately, Georgia's Rural Hospital Tax Credit (formally the Qualified Rural Hospital Organization Expense Tax Credit) became effective January 1, 2017 and lets Georgia taxpayers claim a state income-tax credit for a donation to a qualified rural hospital organization. Two agencies split the work: DCH handles hospital eligibility, posting an updated eligible listing each year by financial need and in alphabetical order, while the Georgia Department of Revenue administers the credit itself (credit code 136), which requires taxpayer preapproval, is allowed first-come, first-served, and is capped in the aggregate for all taxpayers at $100 million per tax year for tax years beginning on or after January 1, 2025, up from $75 million for tax years beginning on or after January 1, 2023. It is a parallel, tax-incentivized revenue stream for rural hospitals and is distinct from DSH, but it targets the same rural-hospital-solvency problem.

Georgia's safety-net hospitals

DSH in Georgia flows to a mix of large urban public hospitals, an academic medical center, a children's hospital, and many rural and critical access hospitals. Among Georgia's safety-net and regional referral hospitals are Grady Memorial Hospital in Atlanta, a public hospital and Level I trauma center; Children's Healthcare of Atlanta, the state's major pediatric center; Memorial Health in Savannah and Atrium Health Navicent in Macon, both regional trauma and referral centers; Phoebe Putney in Albany and Augusta University Medical Center in Augusta; and Northeast Georgia Medical Center in Gainesville. Which hospitals actually receive DSH, and how much, appears in DCH and CMS DSH documents, so check a hospital's current status there rather than assuming it.

Rural hospitals are the most exposed. A critical access hospital is a Medicare designation for a small rural hospital with no more than 25 inpatient beds that is generally located more than a 35-mile drive from another hospital. Many Georgia counties have one hospital, often a critical access hospital serving a heavily Medicaid and uninsured population, and Georgia has seen multiple rural hospital closures over the past two decades. For those hospitals, DSH and related supplemental payments are central to staying open.

Why Georgia Medicaid DSH matters for families

No family applies for DSH, and no Medicaid beneficiary's out-of-pocket cost turns on it. Its relevance is indirect but real: DSH supports the financial viability of the hospitals families turn to in a crisis.

  • Where you can get care depends on which hospitals survive. Trauma centers, high-risk obstetric and neonatal units, and comprehensive stroke and burn centers concentrate at safety-net and academic hospitals. When those hospitals lose financial footing, services close.
  • Rural access is fragile. When a rural hospital closes, families can lose the nearest emergency, obstetric, and acute care, with the closest alternative often many miles away.
  • Uninsured and emergency-only care leans on the safety net. The uncompensated-care population DSH offsets is exactly the group that relies on safety-net hospitals.

The practical takeaway for a Georgia family is not to act on DSH directly, but to understand that a financing change in this program can change which hospitals stay open in their community.

Frequently Asked Questions

What does DSH stand for?

DSH stands for Disproportionate Share Hospital. It refers to hospitals that serve a disproportionate share of low-income patients, meaning Medicaid enrollees and uninsured individuals, and to the supplemental Medicaid payments those hospitals receive.

Is DSH the same as regular Medicaid hospital payment?

No. DSH is a supplemental payment in addition to a hospital's regular Medicaid reimbursement (paid through diagnosis-related groups, per-diem rates, or other State Plan methods). It is targeted specifically to hospitals serving many low-income patients.

Is Medicaid DSH the same as Medicare DSH?

No. They are separate programs that share a name. Medicaid DSH is paid by state Medicaid programs under Section 1923 of the Social Security Act. Medicare DSH is a distinct adjustment paid by Medicare under its own hospital payment rules. A hospital can receive both.

How does a Georgia hospital qualify for DSH?

A hospital is deemed a DSH hospital if its Medicaid inpatient utilization rate is at least one standard deviation above the state mean, or its low-income utilization rate exceeds 25 percent; states may also designate additional qualifying hospitals in the State Plan.

How much can a hospital receive?

Each hospital's DSH payment is capped at its uncompensated-care cost, the sum of its Medicaid shortfall and its uninsured cost, under the Section 1923(g) hospital-specific limit.

Where does Georgia's state share of DSH come from?

Largely from the hospital provider assessment and the Indigent Care Trust Fund rather than general revenue. Those state funds draw federal matching, which then flows to qualifying hospitals as DSH payments.

Are the ACA DSH cuts in effect?

The ACA scheduled federal DSH allotment reductions of $8.0 billion per year for fiscal years 2024 through 2027, after repeated congressional delays. Whether a given year's reduction is in effect or again deferred changes with each budget cycle, so confirm the current status with CMS or MACPAC.

What happens if a hospital is overpaid?

If the required independent audit under 42 CFR 447.299 finds DSH payments above a hospital's specific cost limit, the excess is a provider overpayment that must be returned to the federal government.

How can I find which hospitals receive DSH and how much?

DSH payments are publicly reported. Specific amounts appear in CMS DSH audit reports, in DCH public documents, and in nonprofit hospitals' audited financial statements and Form 990 filings.

Learn More

MedicaidGeorgia Medicaid: Start HereGeorgia Medicaid 2026: income and asset limits, the EDWP waiver (CCSP and SOURCE), Pathways to Coverage, Miller Trusts, estate recovery, and how to apply. MedicaidGeorgia Medicaid Supplemental Payments and UPLGeorgia Medicaid UPL and supplemental payments explained: the federal Upper Payment Limit, the 1.45% hospital assessment, $4.5B in 2026 directed payments. MedicaidGeorgia Medicaid Hospital Cost Reporting and DRG PaymentGeorgia Medicaid APR-DRG sets inpatient hospital pay and EAPG sets outpatient pay, both anchored in the annual Medicare cost report. Here is how it works. MedicaidGeorgia Medicaid Rural Hospital NetworkGeorgia rural hospital access for Medicaid families: what your plan covers, your ER and transfer rights, rides to care, and what if a hospital closes. MedicaidGeorgia Emergency MedicaidGeorgia Emergency Medicaid pays for emergency care, including labor and delivery, for non-citizens who meet every Medicaid rule except immigration status.

Find personalized help navigating Georgia Medicaid and safety-net hospital programs at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.

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