By Zack Buck
Yet another case that examines the authority of administrative agencies to interpret health care laws will make its way to the Supreme Court next term. And the case could have major implications for hospital financing as well.
In June 2024, the U.S. Supreme Court granted cert in Advocate Christ Medical, et al. v. Becerra, a case that centers on the appropriate calculation of so-called disproportionate share hospital (DSH) payments, which are made to hospitals that treat a high percentage of low-income patients. The Supreme Court will review a 2022 D.C. District Court summary judgment decision for the defendants as affirmed in 2023 by the DC Circuit Court of Appeals.
In short, the conflict hinges on the definition of what it means to be “entitled to supplemental security income (SSI) benefits.” The plaintiffs argue that those enrolled in the SSI program at the time of hospitalization qualify, whereas the Department of Health and Human Services (HHS), which oversees the Centers for Medicare and Medicaid Services, argues that only those entitled to receive SSI cash payments qualify. The district court applied a Chevron analysis, holding that the Secretary’s interpretation was reasonable, whereas the circuit court found that no Chevron analysis was necessary because the Secretary’s interpretation was correct and the statute was clear.
In the case, which is brought by more than 200 hospitals, plaintiffs argue that CMS’ calculation of DSH payments was incorrect from 2006 to 2009. DSH payments are administered as part of the Medicare program. The Secretary of the Department of Health and Human Services calculates the disproportionate patient percentage (DPP) by calculating the Medicaid fraction and the Medicare fraction (also called “SSI fraction”) of patients that a hospital treats, forming the bases of the DSH payment that the hospital ultimately receives.
Specifically, as described in the district court’s opinion, in determining the Medicare fraction, CMS divides the number of inpatient days for patients who receive Medicare Part A coverage care and are also receiving SSI benefits by the number of inpatient days of patients who receive the Medicare Part A benefit. In other words, CMS is trying to figure out what percentage of the Medicare population treated by the hospital includes patients who are Medicare beneficiaries and entitled to SSI benefits; the higher this number, the higher the DPP, and the higher the hospital reimbursement.
HHS interprets the portion of the numerator — the total number of Medicare beneficiaries who are eligible for SSI benefits — as those who are entitled to a cash payment from Social Security during the month in which they receive Medicare Part A care from a hospital. The Social Security Administration shares data showing who qualified for monthly cash payments with HHS so it can calculate the DPP after utilizing its own data showing who was entitled to Part A benefits.
Plaintiffs have argued that the calculation was incorrect; instead, they submit that the appropriate calculus should include “all patients enrolled in the SSI program at the time of hospitalization, even if they did not qualify for the [SSI’s] monthly cash payment.” Hospitals first sought review from the Provider Reimbursement Review Board, which found for defendants; CMS agreed, finding that “because SSI is a cash benefit, only a person who is actually paid these benefits can be considered ‘entitled’ to these benefits.” Plaintiffs then challenged the determination at the district court.
This case is notable, not just because it could have an impact on hundreds of hospitals’ bottom lines, but because it will be the Court’s most recent foray into a battle over statutory interpretation in a post-Chevron world. Unsurprisingly, the American Hospital Association was thrilled with the grant of review, arguing that the harm resulting from the incorrect calculation cost hospitals more than a billion dollars annually.
Beyond the case’s administrative law significance, the DSH payment program has been a locus of important financing for hospitals that treat many individuals who are typically low-income. DSH payments have become a lifeline for many rural and urban hospitals, especially in states that have not expanded their Medicaid programs under the Affordable Care Act. Should the Supreme Court hold for the plaintiffs, a change to the DSH calculation could serve as a windfall for these hospitals while at the same time limiting the regulatory power and interpretive authority of CMS.
Zack Buck is Professor of Law and Associate Dean for Faculty Development at University of Tennessee College of Law.
