HHS sued by hospitals over 'delayed' Medicare DSH payments

About 40 hospitals across five states have filed a lawsuit against HHS Secretary Xavier Becerra, alleging that yearslong delays in correcting Medicare disproportionate share hospital payments have cost them "tens of millions" of dollars.

The safety-net hospitals in California, Arizona, Nevada, Hawaii and Minnesota filed the lawsuit March 14 in a Washington, D.C., district court. 

DSH payments are meant to support hospitals that have a high mix of low-income patients. In 2008, a federal court in Washington, D.C., ruled against how HHS calculates the payments and ordered the government to send payments to its contractors to determine how much was still owed to the hospitals.

"The agency's contractors have not performed the revised determinations required under the ruling and the rule and have not paid the plaintiff hospitals any of the additional amounts due them for the periods at issue," the lawsuit alleges.

In 2010, HHS revised the process it uses to calculate DSH payments and said it would correct identified errors, but the hospitals allege there have been delays in the amended payments.

"The agency's unreasonable delay has cost the plaintiff hospitals tens of millions of dollars in funds that should have been paid to them many years ago for the higher costs that they incurred to treat low-income patients more than a decade ago," the plaintiffs' attorneys wrote. 

In 2020, CMS instructed Medicare contractors to halt efforts to settle cost reports, saying they had not yet completed the appropriate public notification process. Medicare contractors were told not to take further action "until expressly instructed by CMS," according to court documents obtained by Becker's

The plaintiffs are seeking reimbursement from HHS via revised payment determinations — reflecting additional DSH amounts as a result of recalculated SSI fractions — plus interest and legal costs. 

The lawsuit also alleges that HHS is using another lawsuit, Azar v. Allina Health Services, as a reason for "unreasonably" delaying and "unlawfully" withholding payments.

More than 20 of the plaintiffs are affiliated with San Francisco-based Dignity Health. The health system told Becker's it is unable to comment on the lawsuit at this time. 

Becker's has also contacted HHS for comment and will update this article if more information becomes available.

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