Legal, Hospitals, Policy

32 hospitals in non-Medicaid expansion states sue HHS over payments for low-income patients

The hospitals are pushing HHS to recognize patients eligible for Medicaid under the ACA as “low-income” when calculating Medicare disproportionate share hospital payments in states that did not expand Medicaid. The agency’s refusal to do so resulted in the hospitals receiving lower reimbursements for three years, the lawsuit claims.

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A large group of hospitals, located in states that did not expand Medicaid, are suing the Department of Health and Human Services to recalculate the payments they received through Medicare for treating a disproportionate share of low-income patients.

The group includes 32 hospitals in Alabama, Florida, Georgia, Texas, South Carolina, North Carolina, Oklahoma, Tennessee and Missouri, all states that did not expand Medicaid through the Affordable Care Act. Expansion extended Medicaid eligibility to 65-year-olds with incomes not exceeding 133% of the federal poverty level.

But the plaintiffs — which include facilities like Baylor University Medical Center in Dallas, Integris Baptist Medical Center in Oklahoma City and Conway Medical Center in Conway, South Carolina — aren’t seeking Medicaid reimbursements.

Instead, they want the HHS to recognize patients made “eligible for Medicaid” under the ACA, based on their low incomes, as “low-income patients” for the purposes of determining Medicare disproportionate share hospital adjustments. The adjustments, made possible through the Social Security Act, provide additional Medicare payments to hospitals serving a significantly disproportionate number of low-income patients.

HHS did not respond to MedCity News’ request for comment.

The issue stems from National Federation of Independent Businesses v Sebelius, decided in 2012, in which the Supreme Court broadly upheld the ACA, but said that HHS could not force states to expand Medicaid.

Since then, the HHS secretary has refused to “recognize statutorily Medicaid-expansion populations as being ‘eligible for Medicaid’ in states that chose not to amend their state plans to extend Medicaid coverage based on a technicality,” the lawsuit states.

The technicality is that the HHS secretary only recognizes Medicaid-eligible patients as those made “eligible for medical assistance under a state plan.” But National Federation of Independent Businesses v Sebelius excuses states from amending their plans for medical assistance, the hospitals claim.

“The secretary’s post-[National Federation of Independent Businesses v Sebelius] approach is arbitrary and capricious and contrary to law based on the simple and obvious fact that it results in patients who are ‘eligible for Medicaid’ under mandate of Congress being treated by a federal agency as though they are not patients eligible for Medicaid for Medicare DSH purposes,” the lawsuit states.

As a result, the plaintiffs say they received lower reimbursement for three years though they treated similar numbers of low-income patients as hospitals in states that expanded Medicaid.

Now, the hospitals are asking the court to require HHS Secretary Xavier Becerra to recalculate their Medicare disproportionate share hospital payments — for fiscal years 2014, 2015 and 2016 — to take inpatient care for Medicaid-eligible patients in non-expansion states into account.

The plaintiffs are also seeking interest on the payments.

Photo: Gearstd, Getty Images