32 hospitals in Medicaid non-expansion states sue HHS for low-income patient supplements

Thirty-two hospitals operating in states that did not pass a Medicaid expansion have filed a lawsuit against Health and Human Services Secretary Xavier Becerra in a bid to have their Medicare disproportionate share of low-income patient adjustments recalculated.

Amidst the repercussions of National Federation of Independent Business v. Sebelius (NFIB), the high-profile 2012 Supreme Court case challenging the Affordable Care Act (ACA), HHS chose not to recognize low-income patients who meet the ACA Medicaid eligibility requirements in non-expansion states when determining compensation payments, the plaintiffs wrote.

This decision was driven by language in the act specifically referring to Medicaid eligibility in the context of a state’s Medicaid expansion when determining Medicare disproportionate share (DSH) adjustments.

As a result, the plaintiffs wrote that non-expansion state hospitals received “far less” compensation under Medicare than providers in expansion states that treated an equivalent proportion of low-income patients.

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“It is arbitrary and capricious to continue to place continued reliance on whether expansion coverage has been memorialized under an approved [state plan amendment] in view of the practical but unanticipated implications of NFIB excusing the filing of mandated [state plan amendments],” the plaintiffs wrote.

HHS’ decision not to include these patients in DSH adjustments is “diametrically opposite” to Congress’ intention when passing the Affordable Care Act, they wrote, and "irrationally discriminates" against hospitals in non-expansion states.

The plaintiffs also wrote that Congress “would consider it even more imperative” that hospitals in states that have opted out of the program still receive matching assistance payments.

Plaintiffs noted in the case that they had petitioned former HHS Secretary Alex Azar on the issue and that “after a long delay” received a letter in December neither granting nor denying their request. They wrote that this stance has since handcuffed appeals to Medicare’s independent Provider Reimbursement Review Board.

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The plaintiffs requested the court order Becerra to recalculate the hospitals’ DSH supplements for fiscal years 2014, 2015 and 2016 so that the agency include the time spent treating previously uncounted low-income patients.

South Carolina-based Conway Medical Center led the list of plaintiff hospitals, all of which are located in Alabama, Florida, Georgia, Texas, South Carolina, North Carolina, Oklahoma, Tennessee and Missouri.

Each of the hospitals had provided healthcare services “to a disproportionate share of low-income patients” during some or all of the years in question, they wrote.

The complaint was filed on May 6 in the District of Columbia District Court. Fierce Healthcare has requested a comment from HHS regarding the suit.