More Hospitals File Suit Against HHS, CMS Over Disproportionate-Share Hospital Payment Calculation

Eight more hospitals have filed suit against the Secretary of the United States Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services over the continued application of a rule vacated in 2004 and twice ruled against by an appellate court concerning the calculation of the disproportionate-share hospital (DSH) payment covering days of individuals enrolled in Medicare and Medicaid spent as inpatients.

Presence Saint Joseph Hospital-Chicago, Presence Saint Francis Hospital, OSF Sacred Heart Medical Center, OSF Heart of Mary Medical Center, Aurora Sinai Medical Center, Aurora West Allis Medical Center, Aurora Medical Center Oshkosh, and Northwestern Memorial Hospital, in their Friday complaint filed in the District of Columbia district court, challenged the HHS secretary’s handling of whether Medicare Part C enrollees are entitled to benefits under Part A. This is of importance to hospitals serving low-income patients because it determines whether such patients are included in the equation for calculating how much a hospital is reimbursed in DSH payments — and the way the secretary has been calculating DSH payments allegedly has reduced reimbursements to these hospitals.

According to the complainants, the HHS secretary has ignored judgments by the District of Columbia Circuit and the Supreme Court of the United States that found the 2004 rule “procedurally invalid,” continuing to exclude Part C Medicare beneficiaries from the Medicaid fraction used to calculate DSH payments.

The at-issue lawsuit joined a string of similar complaints by different groups of medical providers late last year, as Law Street Media reported. A November 2020 suit by 63 California hospitals also argued that the secretary’s DSH payment calculation has ignored precedent in continuing to apply the 2004 rule’s method of calculation that reduces Medicare reimbursement to hospitals most in need; a similar suit by 15 different hospitals across the country followed closely by in December 2020.

“Although the D.C. Circuit has now twice ruled against the Secretary’s 2004 policy, the Secretary has not acquiesced in either of those decisions,” the most recent complainants alleged. “Instead, the Secretary’s agency has continued to apply the Part C days policy adopted in the now-vacated 2004 rule, including in the payment determinations at issue for the Plaintiffs in this case. Most recently, the Secretary is seeking an end-run around the D.C. Circuit’s rulings through an improper attempt to resurrect the vacated 2004 rule via proposed retroactive rulemaking.”

Each hospital argued that it has been underpaid under the DSH adjustment for either fiscal year ending 2006 or 2007, requesting full reimbursement and that the court declare invalid the secretary’s calculation of DSH payments.

K&L Gates LLP is representing the plaintiffs.