Tennessee Hospitals Lock in Permanent Federal Funding Based on 2015 Levels, Adjusted for Inflation

The “Delivering Support for Hospitals in Tennessee Act,” or the “DSH in Tennessee Act,” is a straightforward piece of legislation designed to give Tennessee hospitals a major dose of financial stability. Put simply, this bill permanently sets the amount of federal Medicaid Disproportionate Share Hospital (DSH) funding Tennessee will receive starting in fiscal year 2026.

The Security Blanket for Hospitals

So, what is DSH funding? It’s federal money sent to hospitals that serve a significantly high number of low-income patients—folks on Medicaid or who are uninsured. This funding is critical for keeping the doors open at hospitals that act as the safety net in their communities. The bill locks in Tennessee’s DSH allotment for fiscal year 2026 at the exact level the state received back in 2015. After that initial reset, the amount will increase every year based on the percentage change in the Consumer Price Index for all urban consumers (CPI).

This is a big deal for financial planning. Think of it like a guaranteed line of credit that keeps pace with rising costs. For a hospital administrator, this means they can finally budget for the long term, knowing that a core piece of their funding won’t suddenly disappear or be subject to the same year-to-year federal political battles. This stability directly impacts the quality and availability of care for low-income patients, ensuring that the hospital’s emergency room and specialized units can remain operational even if they aren't turning a profit on every patient.

Official Low DSH Status: What It Means

Starting in 2027 and beyond, the bill officially classifies Tennessee as a “low DSH state.” This is a technical designation, but it’s important because it means Tennessee’s DSH funding will be treated like that of other states with historically lower allotments. The funding will continue to increase annually, following the same formula used for other low DSH states. The goal here is predictability and ensuring that the funding maintains its real-world value over time, thanks to the annual inflation adjustment.

While this is clearly a win for Tennessee hospitals and the patients they serve, it does raise a few questions about the bigger picture. When one state locks in a fixed federal funding stream, it potentially affects the pool of money available for other states, though the direct impact is hard to calculate. Also, while fixing the base amount to 2015 levels and adjusting for CPI is smart, it relies on the CPI accurately reflecting the true, often much higher, rate of healthcare inflation. If the cost of medical supplies and hospital operations rockets past general inflation, the real value of this fixed funding could slowly erode over many years. But for now, this bill delivers a rare commodity in healthcare funding: certainty.