DSH payments are back at the Supreme Court: 3 things to know

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Source: Modern Healthcare
Author: Bridget Early
Date: November 5, 2024

A hospital industry challenge to how the Centers for Medicare and Medicaid Services computes Medicare disproportionate share hospital payments is up for consideration at the highest court in the land Tuesday.

The Supreme Court will hear oral arguments on Advocate Christ Medical Center v. Becerra, which is the third DSH payments lawsuit the justices have considered since 2019. While a decision in the multibillion dollar case is months away, the outcome will have ramifications for other pending cases involving DSH, a program to compensate hospitals that treat disproportionate shares of low-income patients.

Advocate Christ Medical Center in Oak Lawn, Illinois, and other facilities owned by Charlotte, North Carolina-based Advocate Health are among the more than 200 plaintiffs in the case, which began in 2017. Hospitals belonging to Nashville, Tennessee-based HCA Healthcare, Dallas-based Tenet Healthcare, St. Louis-based Ascension, New York-based Mount Sinai Health System, Rochester, Minnesota-based Mayo Clinic and New York-based Apollo Global Management are also complainants.

Xavier Becerra is the defendant in his capacity as secretary of Health and Human Services, the Cabinet department that houses CMS.

The hospitals assert CMS should include patients enrolled in Social Security Supplemental Security Income, known as SSI, and Medicare when tallying the number of low-income people they treat. Doing so would increase the DSH payments eligible hospitals receive.

CMS only includes Medicare patients who received SSI cash assistance during the time they were under hospital care — not anyone merely eligible for or enrolled in SSI — when calculating DSH payments.

The plaintiffs lost two years ago at the U.S. District Court for the District of Columbia and again before the U.S. Court of Appeals for the District of Columbia Circuit last year. The Supreme Court agreed to take up the case in June.

Here are three key things to know ahead of the Supreme Court hearing on Advocate Christ Medical Center v. Becerra:

The arguments

The plaintiffs claim that CMS is interpreting statute too narrowly and costing hospitals more than $1.5 billion a year in DSH payments they should be receiving.

The decision will come down to the reading of the clause “entitled to benefits” in the law that governs DSH, said Samantha Chaifetz, co-chair of the law firm DLA Piper’s appellate advocacy practice. “There is a lot of willingness to litigate where a single word’s interpretation potentially implicates billions of dollars,” she said.

“When you have a lot of money on the line, there's a real reason on both sides — for hospitals, for providers, for the government — to want to make sure that the reading of the statute is the one that they think is best serving the set of interests that they're advocating for,” Chaifetz said.

The Justice Department argues that SSI is only a factor when the Medicare patients in question actually received payments during the same months as their hospital stays. SSI beneficiaries do not necessarily get cash payments each month because eligibility is tied to income and assets, which can fluctuate.

"An individual is 'entitled” to 'Supplementary Security Income benefits' under Title XVI — i.e., a monetary payment that supplements their income — only for those months in which the individual is entitled to receive such a payment, not (as petitioners argue) for months in which the individual remains enrolled in the SSI program but is not entitled to any payment," the Justice Department wrote in a brief to the high court in April.

The government's interpretation is narrower than what Congress intended, the American Hospital Association, the Federation of American Hospitals, America’s Essential Hospitals, the Catholic Health Association, the Association of American Medical Colleges and the National Rural Health Association argue in an amicus curiae brief they filed to the high court in February.

“Although Congress established DSH payments to address the critical needs of hospitals serving poor communities, HHS has repeatedly interpreted the statute in the most restrictive manner possible,” the hospital groups wrote. “The agency’s approach has led to protracted litigation over the DSH formula, with HHS contorting its position from one case to the next to drive down payments.”

Justices to watch

Unlike many cases before the Supreme Court under Chief Justice John Roberts and his 6-3 conservative majority, this one doesn't necessarily involve ideological issues that make the decision predictable.

In 2022, conservative Justices Clarence Thomas and Amy Coney Barrett joined with liberal Justices Sonia Sotomayor, Elena Kagan and then-Justice Stephen Breyer and sided with HHS in another DSH case, Becerra v. Empire Health Foundation. Roberts and conservative Justices Brett Kavanaugh, Samuel Alito and Neil Gorsuch dissented.

Kavanaugh and Justice Ketanji Brown Jackson are ones to watch, said Dan Hettrich, a partner in the law firm King & Spalding’s healthcare practice.

Kavanaugh's dissent in Becerra v. Empire Health Foundation suggests he favors broadening the DSH methodology, Hettrich said. And Brown, a liberal, is a wild card because she didn't join the high court until after the 2022 ruling, he said.

Broader repercussions

The consequences of this case extend beyond the Medicare DSH formula itself because the payments are used to cover the costs for certain 340B payments. A ruling for the plaintiffs could increase the number of hospitals are eligible for the 340B Drug Pricing Program for safety-net providers, Hettrich said.