CMS appeals Missouri court decision stopping DSH clawback

The CMS has appealed a Missouri federal court's decision to vacate a final rule that would have allowed the agency to claw back money from Missouri hospitals' disproportionate-share hospital allotments.

The CMS alerted the 8th U.S. Circuit Court of Appeals of its intention to challenge the District Court decision last week. Jane Drummond, general counsel for the Missouri Hospital Association, expects oral arguments to take place in late summer or early fall.

In February, U.S. District Judge Brian Wimes sided with the Missouri Hospital Association and upended the 2017 federal rule that had been in effect since June 1. The rule required hospitals to 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.

Hospital litigation on the issue has been ongoing since 2010, when the CMS first advised hospitals it would require 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 Missouri Hospital Association sued the CMS 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.