NAPH noted that DSH now doesn't cover all uncompensated care costs and Medicaid payment shortfalls and hasn't kept pace with the growth in the uninsured population and the cost of caring for them.
A NAPH survey of 87 safety net hospitals for 2010 found that they had incurred more than $8.4 billion in uncompensated care costs but received only $4 billion in Medicaid DSH payments.
The DSH payment cuts go into effect in federal fiscal year 2014, which starts on Oct. 1, 2013.
"Our reason for putting this out now is that Congress is going to be having a lot of tough discussions around making some considerations for the budget and we expect healthcare issues to be on the table during those discussions," Feldpush says.
"We want to remind folks that we have another issue that is coming down the pike pretty quickly that was not anticipated when the Affordable Care Act was written into law."
The PPACA gives the secretary of the Department of Health and Human Services discretion in how the DSH cuts are distributed across states.
"Given this discretion, it is crucial for regulatory decisions to address the uncertainties created by the imbalance between anticipated uncompensated care needs and the level of federal support to hospitals that shoulder the majority of this work," NAPH said in the report.