Twelve Hospitals Sue Over DSH Payment

On Friday a case was filed in District of Columbia District Court by twelve hospitals against Xavier Becerra as Secretary of Health and Human Services. The case concerns the calculation of the Medicare Part A disproportionate share hospital (DSH) payment of inpatient hospital days for patients who are enrolled in Medicare Advantage plans under Medicare Part C.

The complaint explained that Medicare Part A is a government program that covers “inpatient hospital services” and pays for these services under a prospective payment system that pays a certain amount for the average cost incurred per particular service provided to the patients. At the end of the year, the hospital then submits a cost report to Medicare that explains the total costs that were actually incurred for further reimbursement. This additional reimbursement includes DSH, which pertains to the number of patients who have state Medicaid, but who were also eligible under the federal Medicare.

Prior to 2004, the agency did not treat patients enrolled in Medicare Part C as a part of the calculation of DSH benefits, which resulted in a higher payment to the hospital facilities. However, in 2003, a new proposed rule was issued that would include the Part C days in the calculation of benefits. This new rule was disputed in three prior lawsuits, but the plaintiff said no affirmative action has been taken as a result of these cases and the claims submitted during this time period remain processed at the lower payment amount.

This case seeks the proper reprocessing and payment of the affected years from 2004-2008 as well as a return of the authority for the Medicare Contractors to properly review appeals and process these payments.

The plaintiffs seek an affirmative judgment that the lower payment rates due to inclusion of the Part C days in the DSH calculation be found invalid and that the authority for the Medicare Contractors to properly review appeals and process these payments be granted. The hospitals are represented by Ropes & Gray