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Supreme Court Issues Decision on Medicare DSH Case

June 7, 2019

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PRESS CONTACTS
Ivy Baer, Senior Director and Regulatory Counsel

The U.S. Supreme Court June 3 issued a decision in Azar v. Allina Health Services, ruling that the Medicare Act — Title VII of the Social Security Act — required the Department of Health and Human Services (HHS) to use notice and comment rulemaking when it included Medicare Part C enrollees in the determination of the “Disproportionate Share Hospitals (DSH) Medicare fraction” for fiscal year (FY) 2012.

In administering the Medicare Act’s requirement that Medicare make supplemental payments to hospitals that serve a disproportionate share of low-income and uninsured patients, the Center for Medicare and Medicaid Services (CMS) calculates each hospital’s DSH Medicare fraction to determine the amount of the hospital’s DSH payment. Allina Health is a not-for-profit health care system that includes12 hospitals, based in Minneapolis, Minnesota.

The Court found that including Medicare Part C enrollees would cause the fraction to be smaller and thus reduce Medicare DSH payments to hospitals. The AAMC, along with the American Hospital Association, America’s Essential Hospitals, and the Federation of American Hospitals, submitted an amicus brief to the Court in support of the hospitals’ contention that the decision violated Medicare law.

In 2014, HHS posted hospitals’ Medicare fractions on its website for FY 2012. Although CMS used notice and comment rulemaking to finalize a rule that included Medicare Part C enrollees in the Medicare fraction in 2013, the rule was prospective only and therefore would not apply to FY 2012.

The Supreme Court concluded that a change that affects a hospitals’ right to payment is substantive; therefore, the Medicare Act requires the use of notice and comment rulemaking. The Supreme Court affirmed the Court of Appeals decision and vacates the HHS policy for FY 2012. It is unclear how CMS will implement this decision for FY 2012.

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