Supreme Court sides with HHS in hospital payment dispute

In a 7-2 decision released Tuesday, the U.S. Supreme Court sided with the Department of Health and Human Services (HHS) in a case challenging the formula used to calculate Disproportionate Share Hospital (DSH) payments. 

The lawsuit was filed by more than 200 hospitals—many in low-income areas—that argued the government failed to pay additional reimbursement for especially needy patients, as required by law. 

Plaintiffs maintained that, between 2006 and 2009, they were underpaid by the federal government—which offers additional funds to hospitals who treat a large number of patients on assistance programs, many of whom have chronic conditions that can be expensive for hospitals to manage. 

In short, federal law requires Medicaid and Medicare pay hospitals more if they see a large number of patients covered under these plans—or uninsured altogether—in an attempt to balance costs and boost revenue that would usually be gained through providing services to patients with private insurance.

A major point of contention was a boost to DSH payments to hospitals that care for a large number of individuals who receive Supplemental Security Income (SSI), a stipend typically given to those with very low income, or persons who are blind or suffer from a disability.

The plaintiffs claimed HHS undercounted this patient cohort, as many of the underinsured populations the hospitals treat are eligible for SSI but not receiving it. Thus, the hospitals argued, they are entitled to the additional DSH payments through federal insurance programs, since these eligible patients are no less expensive to treat than those actually receiving SSI. 

However, the Supreme Court disagreed, arguing that eligibility is irrelevant. Under the intent of the law passed by Congress, patients must be receiving SSI to factor into the threshold for additional DSH payments, the majority of justices said. Further, the court affirmed that the calculation used by HHS to determine when and how much money a hospital receives is consistent with the requirements of the law.

Only Justices Ketanji Brown Jackson and Sonia Sotomayor dissented from the decision, essentially siding with the hospitals in asserting that the reimbursement calculation should count everyone who is eligible for SSI. 

Justice Amy Coney Barrett wrote the decision for the majority.