Hospitals Challenge HHS DSH Payment Modifications in Lawsuit

Over 120 hospitals across the United States have taken legal action against the Secretary of Health and Human Services over modifications to Disproportionate Share Hospital (DSH) payments. These institutions claim that the changes have led to significant financial losses, impacting their ability to provide services. The lawsuit highlights ongoing challenges in the calculation of DSH payments, which are crucial for hospitals serving high volumes of low-income patients.

The hospitals are advocating for a return to pre-2004 DSH payment calculations. They allege that the changes, initiated by HHS in 2004, unfairly impacted their Medicare Part A reimbursements, especially concerning inpatient days for Medicare Advantage plan participants. Despite repeated attempts by the Department to revise these calculations, the Court of Appeals has consistently ruled against these methods, siding with the hospitals' perspective.

The crux of the controversy lies in the 2004 DSH calculation modifications, where HHS included Part C plan days in the Medicare Part A/Supplemental Security Income (SSI) fraction while excluding Medicaid-eligible Part C patient days from the Medicaid fraction. With a 2023 effort to retroactively apply these adjustments, hospitals argue it has resulted in substantial financial strain for safety-net providers. Consequently, they seek invalidation of the 2023 final rule and demand recalculations that adhere to pre-2004 standards, ensuring fair compensation, including interest for any underpayments.