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Hospitals Sue HHS over Medicare Billing

Analysis  |  By Jay Asser  
   April 29, 2022

The lawsuit disputes HHS' current policy regarding Medicare Part A and its disproportionate share hospital (DSH) payment adjustment.

Cleveland Clinic and dozens of other hospitals are suing the Department of Health and Human Services (HHS) over the calculation of payments owed under Medicare Part A and the DSH payment adjustment.

The lawsuit was filed in the U.S. District Court of the Central District of California against HHS and HHS secretary Xavier Becerra, who are alleged of using different definitions for "entitled" in the "days entitled to benefits under part A"—one of the factors included in the DSH payment adjustment calculation.

According to the lawsuit, this results in lower payments to the hospitals, and "is the epitome of arbitrary and capricious agency action and must be reversed."

The disproportionate patient percentage is calculated as the sum of two fractions, the social security income (SSI) fraction and the Medicaid fraction, according to the lawsuit.

The numerator of the Medicaid fraction consists of days of patients who were both eligible for medical assistance or Medicaid, and not entitled to benefits under Part A or Medicare. The denominator for the Medicaid fraction is the hospital's total patient days for the period.

The SSI fraction consists of the days for patients who were entitled to benefits under Part A of Medicare. The denominator includes all Part A days, and the numerator includes only those Part A days for patients who are also entitled to SSI benefits.

The hospitals allege HHS used different definitions of "entitled" depending on which side of the fraction was being considered.

Along with invalidating HHS' policy, the hospitals want the department to recalculate the DSH and make prompt payment of any additional amount owed, plus interest.

The lawsuit concludes that "because the purpose of the DSH adjustment is to provide additional payment to hospitals that incur higher costs in treating low-income patients, an agency interpretation that does not take into account SSI payment status codes associated with eligible SSI individuals is also unreasonably and impermissibly inconsistent with the legislative history and purpose of the Medicare DSH Statute."

Jay Asser is an associate editor for HealthLeaders.

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