HHS petitions Supreme Court to review ruling on uncompensated care payments

View of the Supreme Court building
HHS wants SCOTUS to review an appeals court decision that "threatens to undermine HHS’s ability to administer the Medicare program in a workable manner.” (sframephoto/iStock/Getty Images Plus/Getty Images)

The Department of Health and Human Services (HHS) has asked the Supreme Court to review a case that could affect as much as $4 billion in payments to hospitals for uncompensated care and alter the way the agency administers the Medicare program.

The petition (PDF), filed by the solicitor general on behalf of HHS Secretary Alex Azar, challenges a July 2017 ruling from the U.S. Court of Appeals for the District of Columbia. In a win for hospitals, that decision invalidated a Medicare rule that restructured the way the Centers for Medicare & Medicaid Services (CMS) calculates payments for hospitals that serve a large number of low-income patients, known as disproportionate share hospital (DSH) payments.

Allina Health Services, along with several other systems, including Mount Sinai Medical Center and New York Presbyterian Hospital, were among the providers challenging the rule-making in a case that dates back to 2014.

It’s one of several cases that providers have brought against the agency regarding DSH payments, including one that ended in an undisclosed settlement in 2016.  

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While the details of the case focused on whether Medicare Advantage beneficiaries should be factored into the DSH payment calculations, HHS has asked the high court to weigh in on a far broader issue: whether the Medicare Act allows HHS to issue interpretive rule-making without a notice-and-comment period.

That was a key feature of the decision issued by the three judges in the D.C. appeals court, which ruled the “text of the Medicare Act does not exempt interpretive rules from notice-and-comment rule-making.”

HHS is asking the high court to review that particular part of the ruling, specifically when it comes to “instructions that rest on a non-legally binding administrative interpretation of a relevant statutory provision.” The agency argues that the court’s decision would “significantly impair HHS’s ability to administer annual Medicare reimbursements," noting that the decision impacts between $3 billion and $4 billion in reimbursement over a nine-year span.

“Even in D.C., that isn’t an insignificant amount of money,” James Segroves, a partner with Reed Smith in Washington D.C., told FierceHealthcare.

Segroves estimates the odds of the Supreme Court taking on the case are “greater than 70%,” noting that a split at the circuit court level, the amount of money at stake and the fact that the Medicare Act allows any provider to file suit in D.C., where there is now a favorable ruling, makes it an appealing case. 

At the same time, the petition is bumping up against the Supreme Court’s recess, making it likely that the high court will decide whether to take the case when it returns in late September.

The impact of the case, however, could be far-reaching, a concern HHS appeared to acknowledge. In the petition, the agency argued the decision “threatens to undermine HHS’s ability to administer the Medicare program in a workable manner," well beyond DSH payments. 

“There’s a lot of stuff out there that was never subjected to notice-and-comment rule-making, which raises an opportunity for providers to challenge established wisdom about de facto rules,” Segroves said.