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About 30 New Lawsuits Await Supreme Court Input in High-Stakes DSH Payments Case

Analysis  |  By Steven Porter  
   July 06, 2018

In latest filing, HHS argues there's a broader principle at play than the potential reimbursements totaling up to $4 billion.

As the U.S. Supreme Court prepares to consider this fall whether to take up a case implicating potentially billions of dollars in Medicare payments, hospitals that provide high rates of uncompensated care are lining up to ask the federal government for their piece of the pie.

The D.C. Circuit Court ruled less than a year ago that Health and Human Services violated the Medicare statute by failing to conduct a notice-and-comment rulemaking process when it implemented a policy affecting disproportionate-share hospital (DSH) reimbursements. Since then, providers have filed about 30 lawsuits in the D.C. District Court raising similar claims, according to a filing submitted Thursday to the Supreme Court on HHS Secretary Alex Azar's behalf.

Some of the suits include dozens of plaintiffs. Most of them have been stayed pending the Supreme Court's next move.

"The monetary stakes and hospitals' legal sophistication will likely lead to future cases raising similar issues being litigated in the District of Columbia, where the decision below constitutes binding precedent," Solicitor General Noel J. Francisco wrote in the filing, arguing that the Supreme Court should take the case so HHS may argue that the appellate court's decision should be overruled.

The respondents—who argued the Supreme Court should deny the HHS request and let the Circuit Court decision stand—include just nine hospitals, but their claims for a single year total $48.5 million in additional reimbursement. Considering that about 2,700 hospitals receive DSH payments, the financial stakes surrounding this case are clearly quite high.

Although the appellate court sided with the hospitals' claim that HHS broke the law by skipping notice-and-comment rulemaking, the latest HHS filing argues that the ruling was faulty and that there's a broader issue at play.

The respondents both "miss the point and are wrong" about the legal standard, the HHS filing states.

"They miss the point because the logic of the decision below would apply to any context in which the agency gives its contractors interpretive instructions about making initial reimbursement decisions," the filing states, noting that providers have the option to challenge initial cost-reporting determinations.

In other words, if HHS is required to engage in notice-and-comment rulemaking to calculate DSH reimbursements, then it must be required to do the same in other matters that would make running Medicare and other programs unworkable, HHS argues.

The Supreme Court is set to consider in a conference September 24 whether to take up the case.

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.

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