,,ii  #aagth ,,congress  #ast ,session  
,s4 #bjba  ,,in ,,the ,,senate ,,of     
,,the ,,united ,,states  ,june #aj1     
#bjba,mr4 ,rubio introduced the         
following bill2 which was read twice and
 referred to the ,committee on ,finance 
,a ,,bill  ,to amend title ,,xix of the 
,social ,security ,act to establish a   
methodology for determining ,state      
allotments for ,medicaid                
disproportionate share hospital payments
 that is based on ,state poverty levels1
 to require ,states to prioritize       
disproportionate share hospital payments
 on the basis of ,medicaid inpatient    
utilization and low-income utilization  
rates1 and for other purposes4  #a4     
,short title ,this ,act may be cited as 
the ,state ,accountability1             
,flexibility1 and ,equity for ,hospitals
 ,act of #bjba or the ,,safe ,hospitals 
,act of #bjba4  #b4 ,determination of   
,state ,,dsh allotments based on ,state 
poverty levels ,section #aibc7;f7 of the
 ,social ,security ,act 7#db ,u4,s4,c4  

#acifr-#d7;f77 is amended-- 7#a7 in     
paragraph 7#c7-- 7,a7 in the paragraph  
heading1 by striking year #bjjc and     
thereafter and inserting years #bjjc    
through #bjbc2  7,b7 in subparagraph    
7,a7-- 7i7 by striking 1 7#g71 and 7#h7 
and inserting and 7#g72 and  7ii7 by    
inserting through fiscal year #bjbc     
after each succeeding fiscal year2  7,c7
 in subparagraph 7,c77ii71 by inserting 
through fiscal year #bjbc after each    
succeeding fiscal year2 and  7,d7 in    
subparagraph 7,e77i77,,iii71 by         
inserting or paragraph 7#g71 as         
applicable1 after this paragraph2  7#b7 
in paragraph 7#d77;,c71 by inserting or 
paragraph 7#g71 as applicable1 after    
paragraph 7#c72  7#c7 in paragraph      
7#e77;,b7-- 7,a7 in the subparagraph    
heading1 by striking and subsequent     
fiscal years and inserting through      
fiscal year #bjbc2 and  7,b7 in clause  
7iii71 by inserting through fiscal year 
#bjbc after any subsequent fiscal year2 
7#d7 in paragraph 7#f7-- 7,a7 in clause 

7vi7 of subparagraph 7,a7-- 7i7 in the  
clause heading1 by striking #bjbe and   
inserting #bjbc2 and  7ii7 by striking  
fiscal year #bjbe and inserting fiscal  
year #bjbc2 and  7,b7 in clause 7iii7 of
 subparagraph 7,b7-- 7i7 in the clause  
heading1 by inserting through fiscal    
year #bjbc after succeeding fiscal      
years2 and  7ii7 in subclause 7,,ii7--  
7,i7 in the subclause heading1 by       
inserting through fiscal year #bjbc     
after succeeding fiscal years2 and      
7,,ii7 by inserting through fiscal year 
#bjbc after each fiscal year thereafter2
  7#e7 by striking paragraphs 7#g7 and  
7#h7 and inserting the following3  7#g7 
,state ,,dsh allotments for fiscal years
 after fiscal year #bjbc  7,a7 ,in      
general ,subject to subparagraphs 7,b71 
7,c71 and 7,d71 beginning with fiscal   
year #bjbd1 the ,,dsh allotment for a   
,state and fiscal year shall be the     
amount equal to the product of-- 7i7 the
 ,state poverty ratio 7as determined    
under subparagraph 7,e77ii77 for the    

,state and fiscal year2 and  7ii7 the   
,,dsh allotment cap 7as determined under
 subparagraph 7,e77i77 for the fiscal   
year4  7,b7 ,phase-in of poverty-based  
formula  7i7 ,in general ,during the    
period of fiscal years described in     
clause 7ii71 the ,secretary shall phase 
in the application of the determination 
of ,,dsh allotments under subparagraph  
7,a7 in a manner that ensures that--    
7,i7 in no case is the ,,dsh allotment  
for a ,state for a fiscal year during   
such period less than #ij percent of the
 ,,dsh allotment for the ,state for the 
previous fiscal year 7without regard to 
whether the ,state used the full amount 
of the ,,dsh allotment for the previous 
fiscal year72 and  7,,ii7 the total     
amount of ,,dsh allotments made to all  
,states for any fiscal year during such 
period does not exceed the ,,dsh        
allotment cap determined for the fiscal 
year under subparagraph 7,e77i74  7ii7  
,phase-in period ,the period of fiscal  
years described in this clause is the   

period that begins with fiscal year     
#bjbd and ends with-- 7,i7 fiscal year  
#bjcc2 or  7,,ii7 at the ,secretary's   
discretion1 any of fiscal years #bjcd   
through #bjch4  7iii7 ,development of   
methodology ,the ,secretary shall       
promulgate final regulations that       
establish the methodology for           
determining ,state ,,dsh allotments     
under clause 7i7 not later than ,january
 #a1 #bjbc4  7,c7 ,state allotment      
flexibility option  7i7 ,in general ,a  
,state may elect to increase or reduce  
the amount of the ,,dsh allotment for   
the ,state and a fiscal year 7as        
otherwise determined under this         
paragraph7 for the purpose of providing 
certainty or more consistent ,,dsh      
funding in subsequent fiscal years in   
accordance with this subparagraph4  7ii7
 ,state option to reserve allotment     
amounts ,for any fiscal year after      
fiscal year #bjbc1 a ,state may request 
that the ,,dsh allotment for the ,state 
and fiscal year 7as otherwise determined

 under this paragraph7 be reduced by an 
amount that shall not exceed #aj percent
 of the amount of the allotment as so   
determined4  7iii7 ,state option to     
increase ,,dsh allotment from allotment 
reserve ,for any fiscal year after      
fiscal year #bjbd1 a ,state may request 
that the ,,dsh allotment for the ,state 
and fiscal year 7as otherwise determined
 under this paragraph7 be increased by  
an amount that shall not exceed the     
,,dsh reserve amount for the ,state and 
fiscal year4  7iv7 ,,dsh reserve amount 
7,i7 ,in general ,subject to subclause  
7,,ii71 the ,,dsh reserve amount for a  
,state and fiscal year shall be equal to
 the sum of the amounts1 if any1 of any 
reductions to the ,state's ,,dsh        
allotment 7as otherwise determined under
 this paragraph7 made in each of the    
preceding #e fiscal years pursuant to a 
request under clause 7ii74  7,,ii7      
,subtraction of increases from ,,dsh    
reserve amount ,the amount of any       
increase to a ,state's ,,dsh allotment  

for a fiscal year made pursuant to a    
request under clause 7iii7 shall be     
subtracted from the ,state's ,,dsh      
reserve amount for such year and shall  
not be available to the ,state in       
subsequent fiscal years4  7,,iii7 ,rule 
of application ,in the case of an       
increase to a ,state's ,,dsh allotment  
for a fiscal year that is less than the 
,state's ,,dsh reserve amount for such  
year1 the ,secretary shall apply        
subclause 7,,ii7 in a manner that       
maximizes the ,,dsh reserve amount that 
will remain available to the ,state in  
subsequent fiscal years4  7v7 ,disregard
 of adjustments ,any increase or        
reduction under this subparagraph to the
 ,,dsh allotment of a ,state for a      
fiscal year shall be disregarded when   
otherwise determining ,state ,,dsh      
allotments under this paragraph4  7,d7  
,treatment of waivers  7i7 ,in general  
,subject to clause 7ii71 with respect to
 a ,state and a fiscal year1 if the     
,state has in effect on the date of     

enactment of the ,,safe ,hospitals ,act 
of #bjba a statewide waiver of          
requirements of this title under section
 #aaae or other law and any part of the 
fiscal year occurs during the period of 
the waiver 7as approved as of such      
date71 the ,,dsh allotment determined   
under this paragraph for such ,state and
 fiscal year shall not be less than the 
,,dsh allotment that would have been    
determined for such ,state and fiscal   
year under this section as in effect on 
the day before the date of enactment of 
the ,,safe ,hospitals ,act of #bjba1    
reduced1 in the case of each of fiscal  
years #bjbd through #bjbg1 by the amount
 of the ,state's share of the reductions
 which would have been applicable for   
the fiscal year under paragraph 7#g7 of 
this subsection 7as so in effect71 as   
estimated by the ,secretary4  7ii7      
,total allotments not to exceed ,,dsh   
allotment cap ,the ,secretary shall     
apply this subparagraph in such a manner
 that the total amount of ,,dsh         

allotments determined for all ,states   
for a fiscal year under this paragraph  
does not exceed ,,dsh allotment cap     
determined for the fiscal year under    
subparagraph 7,e77i74  7iii7            
,nonapplication ,clause 7i7 shall not   
apply-- 7,i7 with respect to a ,state   
that has in effect a waiver described in
 such clause if the ,state elects1      
through a revision of such waiver1 that 
such clause will not apply2 or  7,,ii7  
with respect to any part of a fiscal    
year that occurs after the expiration   
7determined without regard to any       
extension approved after the date of the
 enactment of the ,state                
,accountability1 ,flexibility1 and      
,equity for ,hospitals ,act of #bjba7 of
 such a waiver4  7iv7 ,no effect on     
waiver authority ,nothing in this       
subsection shall be construed as        
preventing the ,secretary from approving
 a waiver under section #aaae or other  
law with respect to requirements under  
this title related to a ,state's use of 

its ,,dsh allotment for a fiscal year4  
7,e7 ,definitions ,in this paragraph3   
7i7 ,,dsh allotment cap ,the term ,,dsh 
allotment cap means1 with respect to a  
fiscal year1 the amount equal to the    
total amount of the ,,dsh allotments    
that would have been determined for all 
,states for the fiscal year under this  
section as in effect on the day before  
the date of enactment of the ,,safe     
,hospitals ,act of #bjba1 reduced1 in   
the case of fiscal years #bjbd through  
#bjbg1 by the aggregate amount of the   
reductions which would have been        
applicable for the fiscal year under    
paragraph 7#g7 of this subsection 7as so
 in effect74  7ii7 ,state poverty ratio 
,the term ,state poverty ratio means1   
with respect to a ,state and fiscal     
year1 the ratio of-- 7,i7 the number of 
individuals in the ,state in the most   
recent fiscal year for which census data
 are available whose income 7as         
determined under section #aijb7;e77#ad7 
7relating to modified adjusted gross    

income7 and without regard to whether an
 individual's income eligibility for    
medical assistance is determined under  
such section7 was less than #ajj percent
 of the poverty line 7as defined in     
section #baaj7;c77#e77 applicable to a  
family of the size involved2 to  7,,ii7 
the number of individuals in all ,states
 in the most recent fiscal year for     
which census data are available whose   
income 7as so determined7 was less than 
#ajj percent of the poverty line 7as so 
defined7 applicable to the family of the
 size involved4  2 and  7#f7 by         
redesignating paragraph 7#i7 as         
paragraph 7#h74  #c4 ,prioritizing      
disproportionate share hospital payments
 based on ,medicaid inpatient           
utilization and low-income utilization  
rates  7a7 ,in general ,section #aibc of
 the ,social ,security ,act 7#db        
,u4,s4,c4 #acifr-#d7 is amended-- 7#a7  
in subsection 7a77#b77;,d71 by inserting
 7which1 as of ,october #a1 #bjbc1 shall
 meet the requirements of subsection    

7k77 after methodology2  7#b7 in        
subsection 7c71 by striking and 7g7 and 
inserting 1 7g71 and1 beginning on      
,october #a1 #bjba1 7k72  7#c7 in       
subsection 7d77#b77;,a7-- 7,a7 in clause
 7i71 by striking 2 or and inserting a  
semicolon2  7,b7 in clause 7ii71 by     
striking the period at the end and      
inserting 2 or2 and  7,c7 by adding at  
the end the following new clause3  7iii7
 that is an institution for mental      
diseases4  2 and  7#d7 by adding at the 
end the following new subsection3  7k7  
,state methodology requirements  7#a7   
,in general ,subject to paragraph 7#d71 
a ,state methodology for identifying and
 making payments to disproportionate    
share hospitals meets the requirements  
of this subsection if-- 7,a7 the        
methodology is uniformly applied        
statewide2  7,b7 the methodology        
identifies each hospital in the ,state  
that is described in a disproportionate 
share hospital tier 7as defined in      
paragraph 7#b772 and  7,c7 in making    

payments to disproportionate share      
hospitals1 the methodology meets the    
requirements of paragraph 7#c74  7#b7   
,disproportionate share hospital tiers  
,the term disproportionate share        
hospital tier means each of the         
following3 7,a7 ,tier #a hospitals ,a   
category of hospitals 7referred to in   
this section as tier #a hospitals7 in   
which each hospital satisfies-- 7i7 each
 of the criteria described in clause    
7ii7 of subparagraph 7,b72 and  7ii7 one
 or more of the following criteria3 7,i7
 ,the hospital has a ,medicaid inpatient
 utilization rate 7as defined in        
subsection 7b77#b77 that is not less    
than #b standard deviations above the   
mean ,medicaid inpatient utilization    
rate for hospitals receiving ,medicaid  
payments in the ,state4  7,,ii7 ,the    
hospital has a low-income utilization   
rate 7as defined in subsection 7b77#c77 
of not less than #dj percent4  7,,iii7  
,more than #gj percent of the inpatient 
days for which payments are received by 

the hospital are paid for under the     
,medicare program under title ,,xviii1  
the ,medicaid program under this title1 
or the ,children's ,health ,insurance   
,program under title ,,xxi4  7,b7 ,tier 
#b hospitals ,a category of hospitals   
7referred to in this section as tier #b 
hospitals7 in which each hospital-- 7i7 
is not described in the previous        
subparagraph2 and  7ii7 satisfies one or
 more of the following criteria3 7,i7   
,the hospital has a ,medicaid inpatient 
utilization rate 7as defined in         
subsection 7b77#b77 that is not less    
than #a4e standard deviations above the 
mean ,medicaid inpatient utilization    
rate for hospitals receiving ,medicaid  
payments in the ,state4  7,,ii7 ,the    
hospital has a low-income utilization   
rate 7as defined in subsection 7b77#c77 
of not less than #ce percent4  7,,iii7  
,the hospital has the largest number of 
inpatient days attributable to          
individuals entitled to benefits under  
the ,state plan of any hospital in such 

,state for the previous ,state fiscal   
year4  7,c7 ,tier #c hospitals ,a       
category of hospitals 7referred to in   
this section as tier #c hospitals7 in   
which each hospital-- 7i7 is not        
described in a previous subparagraph2   
and  7ii7 satisfies one or more of the  
following criteria3 7,i7 ,the hospital  
has a ,medicaid inpatient utilization   
rate 7as defined in subsection 7b77#b77 
that is not less than the mean ,medicaid
 inpatient utilization rate for         
hospitals receiving ,medicaid payments  
in the ,state4  7,,ii7 ,the hospital has
 a low-income utilization rate 7as      
defined in subsection 7b77#c77 of not   
less than #be percent4  7,d7 ,tier #d   
hospitals ,a category of hospitals      
7referred to in this section as tier #d 
hospitals7 in which each hospital-- 7i7 
is not described in a previous          
subparagraph2 and  7ii7 satisfies the   
requirement described in subsection     
7d77#c74  7#c7 ,payment methodology     
requirements  7,a7 ,prioritization of   

hospitals ,in making disproportionate   
share hospital payments1 a ,state       
methodology shall prioritize hospitals  
in the following order3 7i7 ,tier #a    
hospitals shall receive the highest     
priority4  7ii7 ,tier #b hospitals shall
 receive the second-highest priority4   
7iii7 ,tier #c hospitals shall receive  
the third-highest priority4  7iv7 ,tier 
#d hospitals shall receive the          
fourth-highest priority4  7,b7 ,factors 
,the methodology specifies the factors  
that will be considered in determining  
the amount of a disproportionate share  
hospital payment to be made to a        
hospital1 which may include-- 7i7 the   
hospital's net operating margins        
7including past net operating margins72 
7ii7 past disproportionate share        
hospital payments to the hospital2      
7iii7 whether the hospital was affected 
by a major disaster 7as declared by the 
,president under section #dja of the    
,robert ,t4 ,stafford ,disaster ,relief 
and ,emergency ,assistance ,act7 in the 

#ab months prior to the payment2 and    
7iv7 other relevant factors1 as         
determined by the ,state 7subject to the
 approval of the ,secretary74  7,c7     
,consideration of financial             
circumstances of high tier hospitals    
7i7 ,in general ,the ,state shall       
certify that the ,state methodology     
adequately considers the unique         
financial circumstances of tier #a      
hospitals and tier #b hospitals1 and    
takes necessary steps to mitigate net   
operating losses by such hospitals4     
7ii7 ,guidance  7,i7 ,in general ,not   
later than #ah months after the date of 
enactment of the ,,safe ,hospitals ,act 
of #bjba1 the ,secretary shall issue    
guidance to ,states outlining methods   
that ,states may use to satisfy the     
requirement of this subparagraph4       
7,,ii7 ,state alternatives ,subject to  
the approval of the ,secretary1 a ,state
 may develop an alternative method for  
satisfying the requirement of this      
subparagraph4  7,d7 ,treatment of       

,i,m,ds and ,c,a,hs ,the ,state shall   
specify how the methodology prioritizes 
institutions for mental diseases and    
critical access hospitals 7as defined in
 section #ahfa7mm77#a771 but in no case 
shall institutions for mental diseases  
or critical access hospitals receive a  
higher priority than tier #a hospitals4 
7,e7 ,state authority to reclassify     
hospitals ,subject to the approval of   
the ,secretary1 for purposes of         
prioritizing disproportionate share     
payments under a ,state methodology     
under this subsection1 a ,state may     
treat up to #ae percent of all          
disproportionate share hospitals in the 
,state1 excluding institutions for      
mental diseases1 as belonging to a      
different disproportionate share        
hospital tier than the tier in which the
 hospitals are described under paragraph
 7#b74  7,f7 ,rule of construction      
,nothing in this subsection shall be    
construed as requiring a ,state to apply
 a uniform payment methodology to all   

hospitals within a disproportionate     
share hospital tier4  7#d7 ,methodology 
for ,states with fewer than #ae         
disproportionate share hospitals  7,a7  
,in general ,in the case of a ,state    
that has fewer than #ae disproportionate
 share hospitals1 the ,state shall use  
the methodology for identifying and     
making payments to disproportionate     
share hospitals that is developed by the
 ,secretary under subparagraph 7,b74    
7,b7 ,development of methodology ,not   
later than #ah months after the date of 
enactment of the ,,safe ,hospitals ,act 
of #bjba1 the ,secretary shall develop a
 methodology for identifying and making 
payments to disproportionate share      
hospitals for ,states that have fewer   
than #ae disproportionate share         
hospitals that prioritizes ,,dsh        
payments to hospitals with              
disproportionately high volumes of      
,medicaid patients and low-income       
patients4  7#e7 ,no effect on waiver    
authority ,nothing in this subsection   

shall be construed as preventing the    
,secretary from approving a waiver under
 section #aaae or other law with respect
 to requirements under this subsection  
related to the methodology used by      
,states to identify and make payments to
 disproportionate share hospitals4  4   
7b7 ,modification of cap on individual  
,,dsh payments  7#a7 ,in general        
,subparagraph 7,a77i7 of section        
#aibc7;g77#a7 of the ,social ,security  
,act 7#db ,u4,s4,c4 #acifr-#d7;g77#a771 
as amended by section #bjc7;a7 of the   
,consolidated ,appropriations ,act1     
#bjba 7,public ,law #aaf-bfj71 is       
amended by inserting 7including any     
costs incurred by the hospital during   
the year that are associated with       
subsidizing a physician or a clinic or  
other health center that is owned and   
operated by1 controlled by1 or in common
 control with the hospital for the      
purpose of providing care to such       
individuals7 after individuals described
 in subparagraph 7,b74  7#b7 ,conforming

 amendment ,section                     
#aibc7;g77#b77;,a77ii7 of the ,social   
,security ,act 7#db ,u4,s4,c4           
#acifr-#d7;g77#b771 as amended by       
section #bjc7;a7 of the ,consolidated   
,appropriations ,act1 #bjba 7,public    
,law #aaf-bfj71 is amended by inserting 
7except that1 for purposes of this      
clause1 such paragraph as in effect on  
such date shall be applied by inserting 
1 including any costs incurred by the   
hospital during the year that are       
associated with subsidizing a physician 
or a clinic or other health center that 
is owned and operated by1 controlled by1
 or in common control with the hospital 
for the purpose of providing care to    
such individuals at the end of the first
 sentence7 before the period4  7#c7     
,effective date ,the amendments made by 
this subsection shall take effect on    
,october #a1 #bjba4  7c7 ,modification  
of ,,dsh qualification requirements     
7#a7 ,in general ,section #aibc7;d77#c7 
of the ,social ,security ,act 7#db      

,u4,s4,c4 #acifr-#d7;d77#c77 is amended 
by striking unless the hospital and all 
that follows through the period and     
inserting the following3 8unless the    
hospital--  7,a7 has a ,medicaid        
inpatient utilization rate 7as defined  
in subsection 7b77#b77 that is not more 
than #a standard deviation below the    
mean ,medicaid inpatient utilization    
rate for hospitals receiving ,medicaid  
payments in the ,state2  7,b7 has a     
low-income utilization rate 7as defined 
in subsection 7b77#c77 that is not less 
than #aj percent2 or  7,c7 is a critical
 access hospital 7as defined in section 
#ahfa7mm77#a774  4  7#b7 ,effective date
 ,the amendments made by this subsection
 shall take effect on ,october #a1      
#bjbc4