A U.S. District Court in Missouri has invalidated the CMS' final rule that would allow the agency to claw back money from Missouri hospitals' disproportionate-share hospital allotments.
The ruling by U.S. District Judge Brian Wimes in favor of the Missouri Hospital Association upends the 2017 federal rule in effect since June 1 that demands hospitals deduct any Medicare or commercial insurance reimbursements from their total DSH allotment. The hospitals argued that the agency exceeded its authority and in essence rewrote the provision of the Medicaid statute that set the parameters of calculating DSH payments.
Missouri hospitals would have had to pay almost $96 million back to the federal government from the 2011 and 2012 DSH allotments alone.
The ruling does not specify whether the rule is invalidated for all states, but the Missouri Hospital Association has asked the judge to clarify and expects to hear back within a couple of weeks.
Hospital litigation on the issue has been ongoing since 2010 when the CMS first advised hospitals it would require the states to deduct income received from other payers from their Medicaid allotments. Hospitals first learned of the change in methodology when the agency released a "frequently asked questions" sheet based on a final rule on DSH payments from 2008.
The guidance took hospitals by surprise and providers in states that were most affected immediately sued, starting with children's hospitals in Texas and Washington state.
Some cases are still undecided. Those in which the judges ruled that the CMS guidance was going too far and actually altered the statute instead of just making clarifications continue to face appeals from the federal government.
However, amid all the litigious pushback against the guidance, the CMS proposed a rule changing the methodology of calculating DSH payments.
The Missouri Hospital Association first filed a suit early last year to fight the methodology in the proposed rule, and it amended the claim after the rule was finalized. The association amended the claim to fight the audits from 2011 and 2012 through which they would have to pay back Medicare and commercial insurance reimbursements retroactively.
Jane Drummond, general counsel of the Missouri Hospital Association, expects the litigation won't end now.
"CMS will likely appeal, and the issue will be stayed as long as it's on appeal," Drummond said.