Hospitals can't challenge Medicare payment methodology, court rules

The Medicare statute bars challenges to the methodology underlying estimates used to calculate disproportionate share payments owed to hospitals, according to a June 4 opinion from the U.S. Court of Appeals for the D.C. Circuit.

Congress revised the DSH adjustment through the Affordable Care Act effective for fiscal year 2014. Under the revised adjustment, a hospital's payment is based on the traditional DSH adjustment — calculated by adding the hospital's so-called "Medicare fraction" and "Medicaid fraction" — and a prospective estimate of each hospital's amount of uncompensated care. To provide an estimate of uncompensated care, CMS multiples three factors, one of which was at the center of a lawsuit Tuscaloosa, Ala.-based DCH Regional Medical Center filed in 2016 against HHS.

DCH Regional Medical Center alleged the calculation used by Medicare to determine DSH payments shortchanged hospitals involved in mergers. The district court held that the Medicare statute barred judicial review of the hospital's claims and dismissed the case. DCH Regional filed an appeal.

The Medicare statute precludes judicial review of estimates used to make DSH payments, and the appeals court examined whether the statute also barred challenges to the methodology used to make the estimates. In affirming the district court's ruling, the appeals court held that it could not review the method of estimation without also reviewing the estimate. Therefore, the two are intertwined and the Medicare statute bars judicial review of both.

"In this statutory scheme, a challenge to the methodology for estimating uncompensated care is unavoidably a challenge to the estimates themselves. The statute draws no distinction between the two," states the D.C. Circuit's opinion. "There is also no way to review the secretary's method of estimation without reviewing the estimate itself."

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