Dive Brief:
- Over 130 hospitals in 16 states have sued the HHS, claiming the department unlawfully reduced payment to hospitals that treat low-income patients.
- The hospitals claim the HHS overstepped its authority when it adopted policy in 2023 that retroactively changed how the government calculates payment to disproportionate share hospitals, or those that treat a high amount of low-income patients.
- The lawsuit, filed Monday in the district court for the District of Columbia, seeks to vacate the 2023 final rule and recalculate the DSH payments.
Dive Insight:
The hospitals named in the lawsuit, including those owned by HCA Healthcare, claim the HHS is attempting to reinstate a prior policy that has been subject to numerous lawsuits over the past two decades, including one that landed in front of the Supreme Court in 2019.
The policy, originally finalized in 2004, attempted to retroactively change how the department calculated patients with Medicare Advantage plans into the payment formula for disproportionate share hospitals. Hospitals argued in subsequent lawsuits that the policy underpaid DSH hospitals, and that the government did not go through proper regulatory procedure when finalizing the policy.
The 2004 policy was eventually vacated by the court, but the HHS proposed a similar rule again in 2013. Hospitals lost between $3 billion and $4 billion in DSH payments between 2005 and 2013, according to the lawsuit.
In 2023, the HHS released a final rule that attempted to reinstate the calculations that were vacated in the 2004 policy, the hospitals allege. The lawsuit seeks to toss out the rule, arguing that the HHS overstepped its statutory authority in issuing the policy, in addition to it being arbitrary and capricious.
“Now, a full two decades later, the plaintiff hospitals seek, and the law demands, an end to the agency’s unlawful actions,” the lawsuit says.
Disproportionate share hospitals are meant to receive more funds from the government to offset treating a high amount of uninsured, low-income or Medicaid patients. The payments are calculated based on numerous factors, including location and patient days.
How the government calculates payments to disproportionate share hospitals has been contentious and the subject of numerous lawsuits. In addition to those targeting how the government calculates Medicare Advantage patients, hospitals have also sued over how payments from Social Security are factored in.
Last year, the Supreme Court again ruled on the issue of calculating disproportionate share hospital patients. This time, the court ruled against hospitals, saying DSH payments could not count a patient’s supplementary security income if they had not received a cash payment during the month they were hospitalized.
HHS did not respond to a request for comment by press time.
