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Cases & Deals

November 13, 2020

K&S Secures Precedent-Setting Victory in Challenge to Medicare DSH Program

On November 13, 2020, the D.C. Circuit issued an opinion ruling in favor of our clients regarding a challenge to Medicare’s payment calculation methodology to hospitals that provide services to a “disproportionate” share of low-income individuals (also known as the Medicare DSH program). See Bethesda Health v. Azar, No. 19-5260 (D.C. Cir. Nov. 13, 2020)). The clients are Florida Hospital Association, Bethesda Health, Ascension Sacred Heart Hospital – Bay, Halifax Health, Indian River Medical Center, Lakeland Regional Medical Center, Martin Memorial Medical Center, South Broward Hospital District, Naples Community Hospital, Parrish Medical Center and Sarasota Memorial Hospital.

This matter is precedent setting for a few reasons. This victory paves the way for Florida hospitals to challenge CMS’s policy to exclude inpatient days attributable to patients whose care is paid out of these pools as Medicaid-eligible days in the Medicare DSH calculation. Florida hospitals each stand to gain millions of dollars in additional Medicare reimbursement by counting these days as Medicaid-eligible. The opinions in this case held in strong and clear terms that if individuals are receiving inpatient hospital care paid from an uncompensated care pool approved in a section 1115 Medicaid waiver, then the Medicare statute and regulations require that these inpatient days be “regarded” as Medicaid days for purposes of calculating a hospital’s DSH adjustment. The D.C. Circuit rejected the government’s longstanding position that these patients cannot be counted because they are not eligible for a traditional Medicaid benefit package, and distinguished a long line of cases the government has relied upon to defeat similar hospital claims over many years.