U.S. Supreme Court Will Hear Case Affecting Medicare DSH Payments to Hospitals

Thoughtware Alert Published: Jul 12, 2021
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The U.S. Supreme Court announced on July 2 that it would review CMS’ policy, from the 2005 final rule, of including patients with exhausted Medicare Part A benefits in the denominator of the SSI fraction used in the Medicare disproportionate share hospital (DSH) calculation. This issue has been the subject of ongoing litigation for years. The plaintiffs of Empire Health v. Becerra have argued this policy violates the DSH statute that assigns different meanings to the words “eligible” and “entitled.” Including these exhausted Medicare Part A days results in the dilution of the SSI fraction, which reduces the Medicare DSH reimbursement owed to hospitals.

Previously, two circuit courts agreed with CMS’ interpretation, but more recently, the 9th Circuit ruled against CMS and in favor of the hospitals. These conflicting rulings have prompted the Supreme Court review. Oral arguments are expected to occur this winter with a decision issued by June of next year. A Supreme Court decision in favor of the hospitals would set national policy for all providers, which could result in a significant impact on reimbursement. 

Which hospitals does this apply to? 

Hospitals that have appealed this issue would be entitled to money owed for each cost report year under appeal. In addition, all DSH-eligible hospitals would have the SSI calculated with the exclusion of Medicare exhausted days going forward.

Is there anything else to consider?

Providers should be aware of the years they already have under appeal. Importantly, hospitals should file appeals for this issue on cost reports with upcoming appeal deadlines. Lastly, providers that have appealed this issue may consider if pursuing interest on the amounts owed would be beneficial. 

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