# Plain Language Summary: SAFE Hospitals Act of 2023

This bill changes how states distribute federal Medicaid funding to hospitals that serve large numbers of poor and uninsured patients. Starting in 2026, instead of using the current funding formula, states will base hospital payments on how many poor people live in their state. A state with more poverty gets a larger share of the total funding pool to distribute to hospitals. The bill phases in this change gradually between 2026 and 2035 (or up to 2040), so no state's hospital funding drops by more than 10% in any single year. States also get flexibility to set aside up to 10% of their annual allocation to use in future years when they might need extra funding.

The bill also requires states to prioritize which hospitals get paid first based on how many Medicaid patients they serve and how many low-income patients they treat. Starting in 2025, states must rank hospitals into four tiers, with tier 1 hospitals (those serving the highest proportion of Medicaid and low-income patients) getting priority for payments. Hospitals in higher tiers must receive funding before those in lower tiers. This means hospitals that are financial safety nets for poor communities will get more reliable, predictable funding. The bill allows states some flexibility in how they calculate payments within each tier, considering factors like whether a hospital is losing money or was affected by a disaster.

For states with fewer than 15 hospitals serving Medicaid patients, the federal government will create a simplified payment system rather than requiring states to develop their own. The bill also clarifies that mental health hospitals and rural critical access hospitals can receive payments, and it allows hospitals to count costs from running clinics and physician practices that serve low-income patients when calculating their funding eligibility.

SAFE Hospitals Act of 2023

Bilirakis, Gus M.

State Accountability, Flexibility, and Equity for Hospitals Act of 2023 or the SAFE Hospitals Act of 2023 This bill alters Medicaid requirements relating to payment for inpatient hospital services that are provided by disproportionate share hospitals (DSHs). (DSHs are hospitals that receive additional payment under Medicaid for treating a large share of low-income patients.) Among other changes, the bill requires state Medicaid programs to adopt a payment methodology that meets certain criteria, including by prioritizing payments based on the DSH tier for which the hospital qualifies; tiers are determined based on factors such as the hospital's Medicaid inpatient utilization rate. The bill also incorporates state poverty ratios (i.e., the number of qualifying low-income individuals in a state compared to all states) into the formula for determining state DSH allotments under Medicaid. The bill phases in application of the revised formula over the course of 10 to 15 years.