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FY 2024 IPPS Update Regarding Rural Designation and Capital DSH

Germane Solutions remains committed to providing annual IPPS updates to our valued clients and GME stakeholders to better assist in your strategic GME decisions and development. CMS has recently released the FY 2024 Proposed IPPS Rulings. One of the valuable propositions is discussed below.


42 CFR § 412.103 specifies that if a hospital meets certain requirements and criteria, the Secretary shall treat the hospital as being located in a rural area of the State in which the hospital is located for purposes of section 1886(d) of the Act.

In the FY 2007 IPPS/LTCH PPS final rule, CMS established a rule that hospitals reclassified as rural under § 412.103 also are considered rural under the capital IPPS for purposes of determining eligibility for capital DSH payments. This prevented those hospitals from receiving capital DSH payments.

In response to a court decision from 2021, that was in relation to the lack of capital DSH payments for hospitals reclassified as rural under § 412.103, CMS is proposing to revise the previous rulings of FY 2007.

Specifically, they are proposing that effective for discharges occurring on or after October 1, 2023, hospitals reclassified as rural under § 412.103 will no longer be subject to the loss of capital DSH payments.

Germane Solutions’ Contribution:

Germane Solutions has helped many hospitals reclassify as rural under § 412.103 (often referred to as Rural Designation) as part of an overall strategy to improve funding for GME. Some hospitals have previously decided to not go through with this reclassification, due to the loss that they would have received from capital DSH payments; these hospitals can now reevaluate those previous discussions and analyze the financial impacts of reclassifying as rural under § 412.103, keeping in mind the update from the proposed rulings.

There are also other benefits related to funding for GME when implementing a Rural Designation strategy, so we encourage all teaching hospitals to take a fresh look at the Rural Designation strategy and how implementing this would affect GME funding in their hospital.

Germane Solutions is happy to assist in assessing the value of implementing the Rural Designation strategy at your facility.

The full text of the 2024 IPPS Proposed Ruling can be found here:



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