The debate
over the methodology to calculate Disproportionate Share Hospital (DSH)
reimbursement to hospitals continues. In June, we updated you on Azar
v. Allina Health Services when the Supreme Court vacated an HHS policy
requiring DSH hospitals to include Medicare Part C enrollees in their Medicare
fraction because HHS did so without going through the notice and comment period
set by the Medicare Act for a substantive legal change.
On August
13, 2019, in Children’s Hospital Association of Texas, et al. v. Azar,
the U.S. Court of Appeals for the District of Columbia Circuit overturned a
district court ruling that CMS’s DSH 2017 final rule (the "2017 final
rule") on the Medicaid DSH program limit calculation violated the Medicaid
Act. The 2017 final rule requires hospitals to exclude Medicare and
private insurers payments they receive from their calculations of DSH payment
caps. DSH hospitals serve a “disproportionate share” of low-income individuals
and receive an upward adjustment to their Medicare rates in their DSH
payments.
As noted
above, the district court initially vacated the 2017 final rule, but the U.S.
Court of Appeals reversed the district court's decision. The end result - this
ruling will lower the cap on DSH payments and cause some hospitals, such as
safety net providers like children’s hospitals, to receive less DSH
payments.
The Court
opined that Congress “did not intend to exclude Medicare and private insurance
payments” from the methodology used and expressed concern over “double dipping”
if hospitals receive DSH payments and reimbursement from Medicare or private
insurers for the dual-eligible patients. “[B]y requiring the inclusion of
payments by Medicare and private insurers, the 2017 Final Rule ensures that DSH
payments will go to hospitals that have been compensated least and are thus
most in need,” the Court wrote. We will continue to update you on this
issue.
We send these Alerts to our clients and friends to share our insights on new developments in the law. Nothing in this Update should be relied upon as legal advice in any particular matter. © 2019 Riker Danzig Scherer Hyland & Perretti LLP.
