Hospitals Weigh in on Medicare DSH Payment Supreme Court Case

January 03, 2019 - Major hospitals and medical colleges recently urged the Supreme Court to affirm a DC Circuit Court decision that HHS violated the Medicare Act when the department altered the reimbursement adjustment formula for Medicare disproportionate shared hospitals (DSH) payments without a notice-and-comment period.

The American Hospital Association (AHA), Federation of American Hospitals (FAH), and Association of American Medical Colleges (AAMC) filed an amicus brief, or friend of the court document, to support the decision that HHS and CMS should not have altered the Medicare reimbursement methodology to include Part C days when calculating DSH payments.

In 2014, HHS counted Part C days in the Medicare or Medicaid fraction used to determine supplemental payments to hospitals treating greater proportions of low-income and uninsured patients.

“The question presented here is of tremendous importance to amici’s members,” the amicus brief stated. “The federal Medicare program enables amici’s members to provide the wide range of critical healthcare services on which their patients and communities rely. And the patients and communities for whom this issue of Medicare administration matters most are among the country’s most vulnerable.”

Without a notice-and-comment process, HHS and CMS “were allowed to impose their own substantive policy views without understanding their direct impact on healthcare providers and those they serve,” the associations wrote. “That procedural shortcut leads to policies that harm those affected by them, as well as inconsistency and uncertainty in how providers’ Medicare reimbursements may be determined from year to year.”

Notice-and-comment periods are required by Title 42 of the US Code for public health, social welfare, and civil rights. Policymakers intend for the periods to provide a “critical procedural protection” that allows stakeholders most likely to be impacted by a policy or rule to inform federal agencies of the policy’s or rule’s effect.

Changes to Medicare reimbursement governance should have a notice-and-comment because of the size and scope of the large public healthcare program, the associations explained.

“Even seemingly minor changes carry the potential for enormous consequences,” the amicus brief stated. “The extensive history of this litigation, including CMS’s repeated attempts to evade the specific payments due Respondents, reflects the stakes for agency action, even if the agency tries to underplay the significance of those actions.”

The altered Medicare reimbursement adjustment formula for DSH payments is a prime example, the associations added.

“Whether Part C days are included in the Medicare or Medicaid fraction may seem like a minor issue. But it has far-reaching effects,” the amicus brief stated. “As Petitioner stressed in its bid for this Court’s review, the status of Part C days implicates $3 to $4 billion in Medicare spending that supports the work of hospitals that disproportionately serve vulnerable populations.”

The loss of DSH funding also impacts the critical services provided to low-income patients, the associations added.

HHS and CMS have argued in previous court cases that altering the Medicare reimbursement adjustment formula for DSH hospitals without a notice-and-comment period was legal because the updated formula was an interpretation of an existing policy.

The federal agencies also avoided red tape by issuing the interpretation without a notice-and-comment opportunity, the petitioners stated in prior court cases.

However, the concern about red tape is “overblown,” the associations countered. “Petitioner’s true motive instead is to seek a special rule that allows CMS to avoid the DSH-adjustment payments due by changing a substantive legal standard governing the payment calculation without advance notice and comment.”

Therefore, the Supreme Court should uphold the decision issued by current Supreme Court Justice Brett Kavanaugh in July 2017, the associations advised.

According to the Supreme Court’s website, the high court will only consider where federal laws and regulations required HHS to issue a notice-and-comment period prior to providing new instructions to Medicare Administration Contractors on making initial Medicare reimbursement determinations.

The high court has not set a court date for the case. The court also recused Justice Kavanaugh in this case in October 2018.