Disproportionate Share, IME, and Uncompensated Care Payment Calculations
DSH, IME, and the uncompensated care pool
Medicare DSH has two pieces. The empirically justified portion is 25% of the DSH pool and is computed from the hospital's DSH adjustment percentage, which blends the SSI fraction, drawn from SSA data rather than the cost report, and the Medicaid fraction, meaning Medicaid inpatient days divided by total inpatient days. The remaining 75% is the uncompensated care pool, distributed by each hospital's share of aggregate uncompensated care reported on Worksheet S-10. Only inpatient days belong in the Medicaid fraction; outpatient Medicaid visits and Medicare Advantage days do not.
The IME adjustment uses the resident-to-bed ratio: FTE residents divided by available beds, capped, and applied through a teaching adjustment factor to the DRG payment. It is not a cost-report calculation of actual resident salaries, although those salaries appear in Worksheet A.
Uncompensated care on S-10 is charity care plus the Medicaid shortfall plus non-Medicare bad debts, subject to definitional limits. Medicare bad debts and Medicare shortfalls are excluded to avoid duplication.
Traps: counting outpatient Medicaid services in the DSH fraction; double-counting charity care later written off as bad debt; assuming the SSI percentage comes from the cost report; and treating the 75% pool as a cost-based payment. Rule of thumb: 25% follows the formula, while 75% follows S-10 data quality, so an inaccurate S-10 directly shrinks the hospital's pool share.