DC Circuit Issues Latest DSH Decision, Reducing Reimbursements

by King & Spalding

On June 11, 2013, the D.C. Circuit Court issued the latest ruling relating to the proper calculation of hospitals’ disproportionate share hospital (DSH) payment, leading to potentially lower Medicare reimbursements related to admissions of low-income patients.  See Catholic Health Initiatives - Iowa Corp. d/b/a Mercy Medical Center - Des Moines v. Sebelius, Case No. 12-5092, available here. The question in this case was whether the Secretary’s exclusion of dual-eligible (i.e., Medicare and Medicaid-eligible) patient days for which a patient’s Medicare Part A benefits have been exhausted from the Medicaid Fraction component of the DSH calculation was permissible.  In holding that it was permissible, the court overturned a D.C. District Court ruling in favor of Catholic Health Initiatives (CHI).  Catholic Health Initiatives - Iowa Corp. d/b/a Mercy Medical Center - Des Moines v. Sebelius, Case 1:10-cv-00411-RCL (Jan. 30, 2012), available here

The case involved payments related to the hospital’s 1997 fiscal year that were reduced years later.  Among other arguments, the hospital argued that under the DSH statute, which defines the Medicaid Fraction as containing patient days for “patients who (for such days) were eligible for medical assistance under [Medicaid] but who were not entitled to benefits under part A of [Medicare],” dual-eligible Part A exhausted days belong in the Medicaid Fraction.  The theory behind this argument is that “entitlement” to Part A benefits is synonymous with “payment”—if a day is not paid by Part A because the patient’s Part A benefits are exhausted, then the patient was not “entitled to benefits under Part A” for that day.  Under this theory, a hospital’s patients classified as low-income for purposes of the DSH payment would generally increase based on the mathematics involved in the payment calculation, which in turn would lead to a rise in the hospital’s DSH revenue.  Although the D.C. Circuit found CHI’s theory reasonable, the court determined that the district court erred in finding that the HHS Secretary’s denial of Medicare reimbursements for DSH adjustments was impermissible and that a 2004 rule requiring dual-eligible days to be included in the Medicare fraction for the DSH calculation could not be retroactively applied to the 1997 cost-reporting period.  Underpinning the Circuit’s decision was the finding that the language of the mathematical calculation in the DSH statute “is downright byzantine and its meaning not easily discernible.”  The court therefore granted significant deference to the agency’s interpretation, and found that it was not arbitrary.  Moreover, the D.C. Circuit reasoned that even if the policy for excluding dual-eligible exhausted days from the Medicaid fraction was retroactively applied to the 1997 cost-reporting period, “it would not constitute the sort of unfair retroactivity that may render an agency decision arbitrary and capricious.”

The D.C. Circuit’s decision will likely have a significant impact on pending appeals with a similar issue.  A more detailed background about the Catholic Health Initiatives case and the D.C. District Court’s January 30, 2012 decision is available at the February 6, 2012 Health Headline entitled “DC Court Issues Latest DSH Decision,” available here.   

Reporter, Juliet M. McBride, Houston, +1 713 276 7448, jmcbride@kslaw.com.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© King & Spalding | Attorney Advertising

Written by:

King & Spalding

King & Spalding on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.