Supreme Court Rules Against Hospitals in DSH Payment Dispute
In a blow to hospitals that care for indigent patients, the U.S. Supreme Court on April 29 sided with the Department of Health and Human Services over disproportionate-share hospital supplementary payments, commonly referred to as “DSH” payments, in a ruling that will impact several hundred hospitals nationwide.
As Roll Call’s Michael Macagnone reported on Tuesday, “The Supreme Court sided on Tuesday with the Department of Health and Human Services in a dispute over the rate under Medicare the government pays to hospitals that serve low-income patients. The 7-2 decision rejected an attempt from a group of more than 200 hospitals across 30 states to change the formula the government uses to calculate reimbursement for hospitals that serve a disproportionate share of low-income patients. The justices decided that the calculation hinges on how many patients received Social Security Supplemental Security Income program benefits in a given month, rather than the larger group that are enrolled in the program generally.” The case is Advocate Christ Medical Center et al., v. Kennedy.
As Diana Novak Jones wrote for Reuters on Tuesday, “The case focused on how to reimburse hospitals for care provided to low-income patients. The court said Congress' language in the statute governing how to adjust reimbursement rates made clear that the patient has to receive a payment from a certain federal assistance program — not just be eligible for it — to be counted.
The hospitals, which are located in 32 states, had challenged that methodology, saying it shortchanged them on Medicare funding by about $1.5 billion per year between 2006 and 2009 and contributed to the closure of rural hospitals.
A spokesperson for HHS did not immediately respond to a request for comment. Neither did an attorney representing the hospitals.
Constitutional expert Amy Howe wrote in SCOTUSblog on Tuesday that “The Supreme Court on Tuesday ruled for the federal government in its dispute with a group of more than 200 hospitals over the formula used to identify and compensate hospitals that serve a large number of lower-income patients. The vote was 7-2, with Justice Amy Coney Barrett writing for the majority in a case that she described as ‘highly technical.’ Justice Ketanji Brown Jackson dissented, joined by Justice Sonia Sotomayor. She warned that the majority’s interpretation of the law at issue ‘will deprive hospitals serving the neediest among us of critical federal funds that Congress plainly attempted to provide.’”
Howe wrote that “The Medicare program provides health insurance to Americans who are elderly or disabled, and it reimburses hospitals that care for those patients. To provide hospitals with an incentive to treat lower-income patients, who are often more expensive to treat, the Medicare program provides an enhanced payment to hospitals that treat larger numbers of such patients. One part of the formula used to calculate the enhanced payment,” she explained, is known as the ‘Medicare fraction,’ which in turn considers (among other things) the number of patients who were ‘entitled to supplementary security income benefits’ – a federal program that provides a subsistence allowance to lower-income Americans who are elderly, blind, and disabled. The Department of Health and Human Services interpreted the phrase to apply to patients who were entitled to receive SSI benefits during the month in which they were hospitalized, while the hospitals interpreted the phrase more broadly to apply to all patients who were enrolled in the SSI system when they were hospitalized, even if they did not receive a payment during that month.”
As Howe noted, “The majority on Tuesday sided with the federal government. Barrett explained that ‘SSI benefits are cash benefits.’ And the Medicare law also makes clear, she continued, that whether someone is eligible to receive those benefits “is determined on a monthly basis.’ Therefore, she concluded, ‘an individual is considered ‘entitled to [SSI] benefits’ for purposes of the Medicare fraction only if she is eligible for such benefits during the month of her hospitalization.’”
But Howe noted that, “In her dissent, Jackson contended that the majority’s decision was ‘based upon a fundamental misunderstanding of how SSI’s cash-benefit program works.’ When it adopted the enhanced-payment program, Jackson reasoned, Congress’s goal was to ensure that hospitals that serve a disproportionately large number of lower-income patients had access to the funding that they need. The formula’s use of SSI benefits, she stressed, was to ‘draw from that program’s pre-existing pool of individuals that have already been designated as our society’s neediest — not to assess the wholly irrelevant fact of whether any such individual actually received a cash payment under the SSI program during the month of their hospitalization.’”
The American Hospital Association had advocated strongly for the DSH hospitals, writing in an amicus brief filed in August 2024 that “HHS’s approach to SSI eligibility is wrong. Under the plain text of the Medicare Act, patients who are eligible for SSI benefits must be included in the DSH formula, regardless of whether they actually received a cash payment from SSI for the month of their hospital stay. That conclusion follows from the statute’s command to include every patient “entitled to supplementary security income benefits.” And it furthers the purpose of the DSH program by capturing all of the needy patients enrolled in the SSI program. HHS does not interpret the statute that way. Rather than asking whether patients are eligible for any SSI benefits, the agency focuses solely on whether patients actually received cash benefits. That approach significantly undercounts the SSI-eligible population in at least two ways. First,” the amicus brief argues, “it excludes from the DSH formula needy patients who are indisputably eligible for cash benefits but did not receive those benefits for some administrative or programmatic reason. Second, it omits patients who are eligible for, or even receiving, SSI benefits other than cash payments. Neither limitation appears in the statutory text.”
The full text of the ruling can be found here.
