Hospitals Challenge CMS Over Medicare Payment Reductions
A coalition of 131 hospitals has initiated legal proceedings against the Department of Health and Human Services (HHS) over a policy by the Centers for Medicare & Medicaid Services (CMS) that purportedly reduces Medicare disproportionate share hospital (DSH) payments. This case adds to the ongoing disputes regarding CMS's method of calculating payments for facilities serving significant numbers of Medicare patients.
The hospitals have filed their complaint in the U.S. District Court for the District of Columbia, challenging the recent CMS policy, which they claim unlawfully reduces payments critical for hospitals providing care to underserved patient populations. The hospitals allege that the CMS policy violates federal law, adversely impacting hospitals that manage substantial caseloads of low-income patients.
DSH payments are designed to assist hospitals that treat a high volume of uninsured and low-income patients, helping these institutions manage uncompensated care costs and maintain financial viability to ensure continued access to medical services.
The legal action centers on a CMS rule finalized in 2024, which differentiates the treatment of Medicare Advantage patients within the DSH payment calculations. The policy includes these patients in the Medicare component of the DSH formula but excludes them from the Medicaid portion. This approach, the hospitals argue, inaccurately lowers their DSH payments by diminishing the perception of their low-income patient caseloads.
The plaintiffs assert that the policy results in reduced financial support meant to alleviate the burdens associated with caring for vulnerable populations. The lawsuit aims to recover the payments they argue were unjustly withheld and seeks a revision of the policy to more accurately reflect the patient demographics these hospitals serve. HHS has not issued a response to requests for comment regarding the lawsuit.
This legal battle is part of a broader history of legal challenges concerning the CMS's DSH payment calculations, which have been contested by hospitals for more than a decade. Previous disputes have often focused on the changes in methodology for counting patient days, which hospitals argue have unfavorable impacts on the funding of safety net providers.
Recent legal actions include a 2024 lawsuit over retrospective adjustments to DSH payments, where facilities contested CMS’s method of counting Medicare Advantage days. In another case, a substantial group of hospitals reached the U.S. Supreme Court, which supported HHS's interpretation of the DSH formula. This ongoing litigation underscores the persistent friction between hospitals and CMS over the administration of DSH payments, with healthcare providers continuing to voice concerns about regulations they perceive as undermining essential financial support.