HHS Secretary Alex Azar wants the high court to weigh in after lower courts side with hospitals over a 2017 CMS rule and FAQ guidance on Disproportionate Share Hospital Payments (DSH).
Azar is pushing back against a slew of court rulings that argued the federal agency skirted its responsibilities when it didn’t follow notice and comment procedures and instead published a set of FAQs that substantively changed the rules for DSH.
Federal law requires that state Medicaid programs make DSH payments to qualifying hospitals that serve a large number of Medicaid and uninsured individuals. Fiscal intermediaries called Medicare Administrative Contractors (MACs) determine the amount of payments made. Two percentages comprise DSH payments, a Medicare fraction, which is the number of patient days attributed to patients with Medicare Part A or Supplementary Social Security income and patient days assigned to patients with no Medicare Part A.
DSH payments are scheduled to be made to private hospitals each fall. Under the Medicare Access and CHIP Reauthorization Act of 2015, nationwide DSH payment reductions of $2.0 billion are scheduled to begin in FY 2018 and would gradually increase to $8.0 billion by FY 2024
CMS FAQs, published in 2010, required states to count the payments DSH hospitals received from third party commercial payments on behalf of Medicaid-eligible beneficiaries as well as payments from MA plans provided to for dual-eligible (Medicaid and Medicare) when calculating Medicaid DSH payments.
In March 2017, a suit brought in New Hampshire by the state’s hospitals and the New Hampshire Hospital Association, concluded when CMS was permanently enjoined from enforcing the policy announced in FAQs 33 and 34. On April 4, 2018, the United States Court of Appeals for the First Circuit affirmed the district court ruling.
“Ruling in favor of the plaintiff hospitals and their association, the district court found that the set-off rule announced in the FAQs represented a substantive policy decision that could not be adopted without notice and comment,” wrote Circuit Judge William Joseph Kayatta Jr. in the decision.
In response to the federal appellate court’s ruling last month, and a collection of court losses – seven since 2014 that have neutered the agency’s FAQs on DSH by ruling them unenforceable, Azar wants SCOTUS to answer a billion dollar question.
In the petition brought by Azar against Allina Health Services, et al, the government wants the court to determine, whether the agency is required to conduct notice-and-comment rulemaking before providing instructions to a MAC when those instructions rest on a non legally-binding administrative interpretation of a relevant statutory provision.
“The D.C. Circuit’s contrary decision would significantly impair HHS’s ability to administer annual Medicare reimbursements through the MACs that act on its behalf. It would also impose significant costs on the government,” states the petition. “Just with respect to the Medicare-fraction issue in this case, the decision below affects between $3 and $4 billion in Medicare funding. This Court’s review is therefore warranted.”
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Check out Medicaid & The Law for a quick history lesson on DSH and the First Circuit ruling