Safety net hospitals must feel like there is a target on their chest. Safety net hospitals, also known as disproportionate share hospitals (DSH), treat populations made up of low-income, uninsured, or vulnerable patients. But it seems that DSHs are also vulnerable as certain Affordable Care Act (ACA) programs are negatively affecting their financial viability. Earlier this spring, I wrote about how safety net hospitals are 30% more likely to have 30-day hospital readmission rates above the national average, and are disproportionately impacted by the Hospital Readmissions Reduction Program. Now, DSHs are facing a significant reduction to federal disproportionate share funding, money they rely on to keep their doors open. Under the ACA, the federal government plans to slash disproportionate share funding 50% by 2016. Hospitals agreed to the cuts during negotiations over the ACA, assuming that the expansion of the Medicaid program would greatly reduce the number of uninsured patients, thus reducing DSHs reliance on federal aid. But, The Supreme Court’s ruling that states can opt out of Medicaid expansion means that DSHs located in states that have opted out are in a difficult spot. The percentage of uninsured patients they treat will remain unchanged, but their payments will drop drastically. This combination means that many DSHs in opt-out states would be forced to close, which will cause surrounding hospitals to see an increase in their uncompensated care costs. Bruce Siegel, MD, MPH, president and CEO of the National Association of Public Hospitals and Health Systems, told HealthLeaders Media, “A lot of hospitals maintain their margin because of the safety-net hospitals taking the uninsured, and if that goes away, they will bear the brunt.” Fortunately, On May 13, CMS proposed a revision to the way the federal government will distribute the disproportionate share cuts. CMS will base the reduction on each state’s percent of uninsured patients. States with the lowest percentage of uninsured patients will see the biggest cuts. Rick Pollack, executive vice president of the American Hospital Association, praised the proposal saying, “…since some states have yet to decide whether to expand Medicaid, this proposed rule will not discourage expansion, nor will it penalize hospitals in those states that have yet to make a decision.” The legislation is encouraging, but it is not a permanent fix. CMS said it will revisit the DSH funding cut formula after 2015.