Hospitals still plan to use the courts to push for higher Medicare reimbursement for treating low-income patients despite the Supreme Court’s disproportionate share hospital payment decision.
Hospitals have filed dozens of lawsuits over the last several years against the federal government, alleging the Centers for Medicare and Medicaid Services have underpaid safety-net providers by billions of dollars. The Supreme Court dealt a blow to that argument in a Tuesday ruling on Advocate Christ Medical Center v. Kennedy, which said CMS appropriately limited disproportionate share hospital payments based on a subset of Medicare patients.
Related: Supreme Court rules against hospitals in DSH case
However, the high court ruling was narrow, leaving potential pathways for hospitals to seek higher DSH payments, lawyers said. Attorneys who represent hospitals in these cases do not expect the legal activity involving DSH reimbursement to meaningfully slow, even though the Advocate decision could reduce potential recoveries and some cases may be dropped.
“This decision does not definitely resolve all DSH calculation disputes,” said Emily Cook, a healthcare attorney at law firm McDermott Will & Emery. “There is still a lot of space for many pending cases to continue and there will be new cases going forward.”
Here’s what to know about DSH payments and the Supreme Court ruling.
What did the Supreme Court decide?
Advocate Christ Medical Center's lawsuit argued CMS should include all hospitalized patients who qualify for both Medicare and Supplemental Security Income when calculating DSH payments.
But the Supreme Court earlier this week sided with two lower courts that found SSI should only factor into DSH calculations when Medicare beneficiaries receive cash payments during the same month as their hospital visits. The ruling means the hospital, which is part of Charlotte, North Carolina-based Advocate Health, and more than 200 other hospitals that sued will not recoup $1.5 billion per year in alleged DSH underpayments between 2006 and 2009.
Since that lawsuit was filed in 2017, hundreds of hospitals have filed a growing number of lawsuits featuring similar arguments. Some of those cases were on hold, pending the outcome of the Advocate case.
What happens to the DSH cases on hold?
Each case will be different.
The government could push to dismiss lawsuits that closely resemble the arguments in the Advocate case, or plaintiffs may choose to drop those lawsuits, lawyers said. But many cases have nuanced arguments tied to different portions of the DSH program and could continue.
CMS sets payments based on how many Medicaid patients hospitals treat, hospitals' Medicare Advantage patient population under Medicare Part C and other program elements that aren’t directly addressed by the Supreme Court ruling.
These nuances, combined with the sheer size of CMS' DSH payments, will incentivize hospitals to maintain ongoing lawsuits, lawyers said.
What avenues did the Supreme Court leave open?
The high court's ruling did not look at whether CMS should expand the way it accounts for patients who qualify for SSI cash payments. If providers can successfully argue the agency needs to do so, that would have a significant impact on annual DSH payments, according to lawyers representing hospitals in some of the pending lawsuits.
CMS uses three codes to tally up patients when calculating hospitals' DSH payments — one represents SSI enrollees who receive automatic cash payments and two represent beneficiaries who receive manual cash payments.
Others, including one that involves Medicare patients who should’ve received SSI payments but their addresses weren’t on file, are excluded. The Social Security Administration suspended 223,246 patients' SSI payments in 2022 due to their so-called unknown whereabouts, according to agency data.
The Supreme Court declined to weigh in on whether CMS correctly includes only three codes.
“The decision left open the question of whether or not the narrow set of codes that CMS includes captures the full universe of patients entitled to SSI cash benefits,” said Daniel Hettich, a healthcare lawyer at law firm King & Spalding. “Given the number of DSH hospitals and the impact of those payments going forward, this issue is still worth pursuing even if it is a reduced subset of patients.”
How will the ruling impact systems' legal strategies?
Hospitals and health systems will likely still file new lawsuits challenging alleged DSH underpayments via federal litigation, lawyers said.
Hospitals have a financial incentive to test different arguments in court because they don’t want to miss out on billions of dollars of potential recoupment remedies. If a DSH lawsuit is successful, regulators may only increase payments for hospitals that were part of the lawsuit.
In addition, policy changes that stem from successful litigation could influence future DSH eligibility and other supplemental payments, lawyers said.
"Litigation on DSH is not going away," said Adam Herbst, a healthcare lawyer at law firm Sheppard Mullin.
