Supreme Court rules against hospitals in DSH formula case

Dive Brief:

• The Supreme Court ruled against hospitals Tuesday in a case over how disproportionate share hospital payments, or reimbursements for facilities serving a large portion of low-income patients, are calculated. 
• In the lawsuit, more than 200 hospitals argued the HHS had underfunded their operations by including in the DSH calculation only Medicare enrollees who received a Supplemental Security Income cash payment during the month they were hospitalized, instead of any beneficiaries who were enrolled in the SSI system. 
• The court issued a 7-2 decision. “The hospitals have lost at every stage of this litigation,” Justice Amy Coney Barrett wrote in the majority opinion. 

Dive Insight: 

How the HHS pays out DSH reimbursements have become a contested issue in recent years, with some lawsuits going all the way to the nation’s highest court. 

The latest case, Advocate Christ Medical Center v. Kennedy, centers on how the HHS calculates a hospital’s DSH adjustment, based on the proportion of low-income Medicare patients and Medicaid patients the facility serves. 

The Medicare portion of the formula is determined by the number of hospital patient days for those entitled to Medicare Part A and SSI benefits. 

The HHS interpreted the calculation as the number of patients who would receive an SSI payment during the month they were hospitalized, but hospitals said it should apply to all patients who were enrolled in the SSI system when they were admitted.

The hospital plaintiffs argued some people might not be eligible for cash payments in a given month, but they could qualify for other SSI program benefits, like vocational rehabilitation services or Medicare Part D subsidies. They estimated the HHS’ interpretation had cost hospitals across the country $1.5 billion each year. 

But the Supreme Court disagreed, upholding lower court rulings. The noncash benefits don’t fit the description of an income benefit, Barrett wrote in the majority opinion. The statute also says eligibility decisions for SSI are made based on an individual’s income and resources monthly, she wrote. 

“For purposes of the Medicare fraction, an individual is ‘entitled to [SSI] benefits’ when she is eligible to receive an SSI cash payment during the month of her hospitalization. We must respect the formula that Congress prescribed,” Barrett said. 

In a dissenting opinion, Justice Ketanji Brown Jackson argued that Congress was using the SSI cash benefits program to determine how many of the nation’s neediest patients a hospital was serving, not to assess “the wholly irrelevant fact” of whether a patient was receiving cash benefits during a specific month. Incomes for people struggling with poverty can be volatile from month to month, she added.

Safety-net hospitals were also disappointed with the court’s ruling, arguing the decision allows the HHS to underrepresent patients who should count toward hospitals’ DSH payments. 

“DSH payments are key to the financial stability of essential hospitals and help to ensure access and high-quality care for all. We will continue to advocate for adequate payment to support our nation’s essential hospitals,” Beth Feldpush, senior vice president of policy and advocacy at America’s Essential Hospitals, said in a statement Tuesday.