Hospitals sue HHS to recoup adjusted DSH payments

By Alex Kacik / March 17, 2023

The federal government owes tens of millions of dollars to dozens of safety-net hospitals for alleged delays in correcting  Medicare disproportionate share hospital payments, hospitals alleged in a new lawsuit.

Nearly four dozen hospitals in California, Arizona, Nevada, Hawaii and Minnesota filed the suit Tuesday against the Health and Human Services Department Secretary Xavier Becerra in a Washington, D.C., federal court. While regulators conceded in 2010 the DSH payment calculations were incorrect, HHS has delayed the amended payments, the hospitals allege.

“The agency’s unreasonable delay has cost the plaintiff hospitals tens of millions of dollars in funds that should have been paid to them many years ago for the higher costs that they incurred to treat low-income patients more than a decade ago,” the complaint alleges. 

HHS did not immediately respond to a request for comment.

DSH payments are intended to offset the costs incurred by hospitals that largely serve low-income patients. Following a Washington, D.C., federal court’s 2008 ruling that affirmed a Massachusetts hospital's challenge of the DSH payment methodology, HHS was required to send DSH payment appeals to the agency’s contractors, who were tasked with making the hospitals whole. 

But the agency’s contractors have not made those payment redetermination calculations nor paid any of the hospitals, the complaint alleges.

The hospitals' lawsuit alleges HHS has unjustly used a related suit as justification for delaying the amended payments. Minneapolis-based Allina Health Services filed a lawsuit in 2010 against HHS, focused on using Medicare Advantage patients in DSH payment calculations and the related rulemaking efforts. In 2019, the Supreme Court ruled in favor of hospitals, ordering HHS to vacate the law and perform a more thorough notice-and-comment rulemaking process.

According to the complaint, the Centers for Medicare and Medicaid Services said it has not completed the appropriate public notification process and thus has had to delay the amended payments.