- The U.S. Supreme Court on Monday said HHS violated the Medicare Act when it changed the Medicare reimbursement formula for disproportionate share hospitals without providing them with notice and an opportunity to comment.
- The ruling leaves the status quo in place for now, meaning the planned cuts won't go into effect.
- The opinion, written by Justice Neil Gorsuch, was joined by Chief Justice John Roberts and Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel Alito, Sonia Sotomayor and Elena Kagan. Justice Stephen Breyer dissented and Justice Brett Kavanaugh recused himself from the decision.
Disproportionate share hospital cuts have been delayed several times since first scheduled in 2014, but had been set to take effect in 2020 — beginning with a reduction of $4 billion and increasing to $8 billion by 2025.
Now, the high court has weighed in, in a big win for hospitals pushing back against the cuts.
Gorsuch said Medicare's mammoth size means that "seemingly modest modifications to the program can affect the lives of millions."
"Because affected members of the public received no advance warning and no chance to comment first, and because the government has not identified a lawful excuse for neglecting its statutory notice-and-comment obligations, we agree with the court of appeals that the new policy cannot stand," Gorsuch wrote, delivering the opinion for the court.
"Notice and comment gives affected parties fair warning of potential changes in the law and an opportunity to be heard on those changes — and it affords the agency a chance to avoid errors and make a more informed decision," the opinion said.
The HHS policy changed the way DSH payments were calculated by adding Medicare Advantage enrollees to traditional Medicare participants to come up with how much hospitals were to be paid. In 2014, several hospitals, including lead plaintiff Allina Health Services, sued HHS, arguing the change was both procedurally and substantively invalid.
The American Hospital Association, which filed a third-party brief in the case, applauded the ruling Monday.
"By evading the notice-and-comment process, HHS failed to consider the real-world impact of its changes, leading to policies that may adversely affect patients as well as providers," Melinda Hatton, general counsel for AHA, said in a statement. "[M]ore public participation in policymaking, including by hospitals and health systems, leads to better-thought-out policies with a deeper understanding of their direct impact on health care providers and those they serve."
And Stephanie Kennan, senior vice president for McGuire Woods Consulting told Healthcare Dive, "I think it's an interesting case because it will impact anything relating to payments, benefits and who provides care within Medicare."
For the government, Kennan said, the impact of the ruling may mean "they can't be as nimble as they want to be sometimes." But, she said, "I view this as providing stakeholders a better opportunity to shape policy and it provides some transparency."
The ruling won't mean every policy change will have to go through notice and comment rulemaking but it will affect policy changes that are considered "substantial," Kennan told Healthcare Dive.
And changing who was counted in terms of calculating DSH payments, which was at issue in this case, was a substantial policy change, Kennan said.
Donna Lee Yesner, an attorney with Morgan Lewis & Bockius in Washington agreed. The issue "was whether there was an impact on intended beneficiaries and in this case, there was," she said. Yesner represents clients in transactions, disputes, regulatory compliance, and strategic business planning relating to public healthcare programs and government contracts.
Counsel for Allina Health declined to comment on the decision. HHS did not respond to requests for comment.