NYU Langone Health Joins Lawsuit Challenging Medicare DSH Funding Cuts

NYU Langone Health and nine other medical centers have initiated a lawsuit against the U.S. Department of Health and Human Services (HHS) over recent changes in Medicare Disproportionate Share Hospital (DSH) funding calculations. The suit alleges the agency is unlawfully withholding Medicare funds by altering patient count methodologies and retroactively applying a 2023 rule to payments dating back to 2004. This rule integrates Medicare Part C enrollees into the patient counts used for DSH funding, which reduces the poverty scores of hospitals serving low-income populations and thereby decreases their federal funding allocations. DSH payments support hospitals that serve a significant proportion of low-income and Medicaid patients, helping to cover the cost of care for uninsured or underinsured individuals. NYU Langone's southwest Brooklyn site, which supports a large Medicaid population, is directly impacted by the recalibrated funding formula. The inclusion of Medicare Part C patients, who typically have private insurance and higher income, in the calculation diminishes the apparent need for federal assistance. The lawsuit claims that HHS failed to follow proper administrative rulemaking procedures, including adequate notice and comment periods, and that applying the new rule retroactively violates established legal standards. Several courts have previously blocked similar attempts to modify DSH calculation methodologies in 2003 and 2014. Hospitals receiving lower payments have reported financial strain, raising concerns about the sustainability of services for vulnerable populations. DSH funding plays a critical role in maintaining healthcare access for medically and socially disadvantaged groups, frequently serving as a financial lifeline for hospitals operating on thin margins. Cuts to these funds may jeopardize hospital operations and restrict access to care for low-income individuals, people of color, immigrants, and patients with higher healthcare needs. The legal challenge underscores ongoing debates about federal healthcare funding distribution and regulatory compliance. NYU Langone has not commented on the lawsuit's status or its implications for patient care. The outcome of this case may set important precedents for Medicare funding policies and the financial viability of safety-net hospitals nationwide.