Disproportionate Share Hospital (DSH)
Definition
Disproportionate Share Hospitals (DSHs) are hospitals that serve a significantly higher proportion of low-income patients than average. They receive additional Medicare reimbursement (the DSH adjustment) to help cover the higher costs associated with serving this population. DSH status is determined by the Medicare DSH adjustment percentage, calculated from Medicare Part A SSI patient days and Medicaid patient days as reported in the Medicare cost report.
For 340B eligibility, DSHs must have a DSH adjustment percentage greater than 11.75%. DSHs are among the original covered entity types in the 340B program and are subject to the GPO Prohibition — meaning they cannot purchase covered outpatient drugs through group purchasing organization arrangements. They are also subject to the orphan drug exclusion.
DSHs are typically large urban safety-net hospitals serving high volumes of Medicaid and uninsured patients. They are often the covered entity type with the highest 340B drug purchasing volumes, making compliance management and audit readiness particularly critical.
Frequently Asked Questions
Why Disproportionate Share Hospital (DSH) Matters
DSHs are the highest-volume 340B participants and face the most complex compliance obligations, including the GPO Prohibition. Annual DSH % monitoring through the Medicare cost report process is essential to maintain eligibility.
How Virtue 340B Uses It
Virtue 340B serves DSH clients and provides independent audits, continuous monitoring, and consulting services tailored to the specific compliance obligations of this high-volume, high-risk entity type.