AHA urges Supreme Court to review interpretation of DSH formula

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The American Hospital Association, along with five other national hospital associations, is urging the U.S. Supreme Court to review a case challenging how the Department of Health and Human Services applies Congress' formula for calculating Disproportionate Share Hospital payments.

In a friend-of-the-court brief, the organizations said HHS has adopted the view that a patient is entitled to Supplemental Security Income benefits only if the patient actually received cash SSI payments during a hospital stay. The groups claim this interpretation is inconsistent with the Supreme Court's reasoning in Becerra v. Empire Health Foundation.

In that 2022 decision, according to the brief, it was decided that patients are entitled to Medicare Part A benefits for purposes of the DSH formula if they qualify for the program, even if Medicare is not paying for their hospital stay. 

"That reasoning applies with full force here," the brief stated. "The statute uses the phrase 'entitled to' twice in the same sentence, once to refer to Medicare benefits and once to refer to SSI benefits. … In each case, the meaning should be the same: A patient is 'entitled to' benefits if she qualifies for the relevant category of public assistance."

If SCOTUS follows the reasoning of the brief in its ruling, HHS would be compelled to revise the formula for payment.

WHAT'S THE IMPACT?

HHS, in the hospital groups' view, has not adopted that reading of "entitled to" for the SSI category. They framed it as part of a longer history of the agency "undermining" the DSH program, repeatedly interpreting the statute "in the most restrictive manner possible." This, the groups said, has led to protracted litigation over the DSH formula.

"The correct interpretation of the DSH formula is vitally important to America's hospitals," the brief said. "Although HHS has refused to share the data that would allow hospitals to accurately count the SSI-eligible patients whom the agency's approach excludes, the available estimates suggest that hospitals will lose more than a billion dollars each year in DSH funds. What's more, a hospital's eligibility for DSH payments affects its entitlement to other federal benefits designed to help hospitals 'stretch scarce federal resources,' including the 340B Drug Discount Program. … HHS's error thus has wide-reaching implications for hospitals, patients, and the American healthcare system."

Those harms, according to the brief, may disproportionately affect rural and safety net hospitals, many of which are already experiencing financial distress. Citing hundreds of hospital closures in rural and low-income communities over the past 20 years, the groups claim these closures have harmed patients by denying them access to care and forcing people to travel long distances to receive essential services. 

They also cite broader harms to the healthcare industry, such as eliminating jobs, causing overcrowding and discouraging hospitals from investing in programs that benefit low-income patients.

The groups concluded that a writ of certiorari should be granted. It is a type of writ, meant for rare use, by which an appellate court decides to review a case at its discretion. The word certiorari comes from Law Latin and means "to be more fully informed," according to the Legal Information Institute. A writ of certiorari orders a lower court to deliver its record in a case so that the higher court may review it.

The Association of American Medical Colleges, America's Essential Hospitals, Catholic Health Association, Federation of American Hospitals and National Rural Health Association joined AHA in the brief.

THE LARGER TREND

The DSH program, run by the Centers for Medicare and Medicaid Services, is meant to subsidize care for low-income patients, but is falling short when it comes to supporting hospitals in traditionally disadvantaged Black communities, according to 2022 findings published in JAMA Network Open.

Medicare and Medicaid DSH payment programs allocate $24 billion to hospitals annually to subsidize care and improve outcomes for low-income patients. DSH allocations are based largely on measures of patient characteristics that reflect healthcare use for low-income patients, such as the proportion of inpatients enrolled in Medicaid.

But since racial and ethnic minority groups face sizable structural barriers to healthcare, they often have lower levels of use than non-minoritized racial and ethnic groups, conditional on having the same level of healthcare need.

Because DSH funding is partially allocated based on measures of healthcare use, the hypothesis posed by researchers was that hospitals in disproportionately Black counties received payments that failed to meet their financial needs and the needs of the populations they served.
 

Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.