A federal appeals court ruled Monday that the CMS can include Medicare and commercial payments in a hospital's disproportionate-share payment limit calculation, a move that would lower supplemental payments to hospitals that care for low-income and uninsured people.
The three-judge panel for the U.S. Court of Appeals for the Fifth Circuit found that the CMS acted within its rights when it created the 2017 rule, overturning a lower-court decision.
Hospitals had argued that the agency should only count "other Medicaid payments and payments made by uninsured patients," according to the opinion. But the panel decided that the agency had the right to interpret the law because Congress didn't address the issue directly or make its intentions clear. Congress also included language in the Medicaid Act that gave HHS the ability to interpret the law to fill in gaps in the legislation.
"As the Supreme Court recognized, the word 'cost' is 'a chameleon,' a 'virtually meaningless term' with a 'protean' nature,'" Judge Patrick Higginbotham wrote. "Agencies therefore 'have broad methodological leeway' to interpret the word, and courts have repeatedly upheld the secretary's authority to account for offsetting payments when construing 'costs' or 'costs incurred.'"
The ruling mirrors last year's decision by the U.S. Court of Appeals for the District of Columbia Circuit. Earlier this month, children's hospitals requested that the Supreme Court overturn the ruling.
Congress allowed states to make supplemental payments to so-called "disproportionate share hospitals" in 1981 to protect them from losing money when they care for Medicaid and uninsured patients. But it created a "hospital-specific limit" on supplemental payments in 1993 because some states were paying hospitals more in DSH payments than the hospitals had spent on uninsured patients and patients covered by Medicaid.
Lawmakers didn't want hospitals to get paid twice for providing the same care.