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Another court rules against hospitals on DSH payments

Dive Brief:

  • Disproportionate share hospitals’ payments are likely to be lowered after a federal appeal court ruled this week that the payment rule for calculating them can include Medicare and commercial insurance payments.
  • Hospitals had argued the 2017 rule should only use Medicaid and uninsured patient payments toward the DSH cap, and sued HHS over the calculation. A lower court ruled in favor, but the U.S. Court of Appeals for the Fifth Circuit overturned that decision Monday.
  • The ruling follows a similar finding from August by the U.S. Court of Appeals for the District of Columbia, where judges likewise ruled CMS acted within its authority when it issued the payment rule.

Dive Insight:

Safety net hospitals, now more strapped than ever as they face potential influxes of COVID-19 patients, have been fighting DSH cuts in the court system for months.

The August decision ruled against children’s hospitals in Minnesota, Virginia and Washington. They have appealed to the U.S. Supreme Court. The ruling from this week is against eight Mississippi hospitals.

In addition to the court arguments, DSH payments are threatened by a planned reduction from Congress. The $4 billion cut, which represents about a third of the program’s funding, has been postponed three times, most recently in December. Lawmakers have until May 22 to delay or stop the cuts before they would take effect.

Many DSH hospitals are in rural locations and face added burden, including low patient volumes and workforce shortages. A recent analysis found 25% of rural hospitals are at a high risk of closing.

Meanwhile, the Senate on Tuesday passed emergency relief legislation that includes $75 billion for hospitals hit hard by the COVID-19 pandemic and forced to halt revenue-driving elective procedures.

An earlier bill included $100 billion for hospitals, and the first $30 billion was distributed earlier this month. The funding was meant to reach facilities quickly and was broadly applied based on Medicare payments.

CMS Administrator Seema Verma said last week the next tranche would be more targeted to hot spots and safety net providers.

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