Supreme Court to Review Medicare Payments to Hospitals

Hospitals that serve the poor are asking the court to clarify a previous ruling that reduced payments.
Supreme Court to Review Medicare Payments to Hospitals
Supreme Court Backs GOP’s New South Carolina Congressional Map
Matthew Vadum

The Supreme Court decided on June 10 to hear an appeal that seeks to clarify a 2022 ruling that set out how Medicare calculates payments for hospitals that serve the poor.

An unsigned order granted the petition for certiorari, or review, in Advocate Christ Medical Center v. Becerra. No justices dissented and the court didn’t explain its decision. At least four of the nine justices must vote to grant the petition for it to advance to the oral argument stage.

Lead petitioner Advocate Christ Medical Center is in Oak Lawn, Illinois, and HHS Secretary Xavier Becerra is the respondent.

In the 2022 decision in Becerra v. Empire Health Foundation, the court voted 5-4 to reject a challenge from a hospital system that serves low-income people and upheld the government reimbursement formula.

At issue was how the U.S. Department of Health and Human Services (HHS) figures out special Medicare payments to “disproportionate share hospitals,” sometimes called “DSH hospitals,” which largely serve low-income persons.

The elderly and disabled receive health insurance under the Medicare Act, via which hospitals generally receive fixed-fee payments for services rendered. Hospitals are paid predetermined amounts for each Medicare patient, but Congress decided that DSH hospitals should receive higher fees to cover the higher cost of treating low-income individuals, who are often in worse health.

HHS supplements payments to DSH hospitals using a mathematical formula. The agency adds two fractions, known as the Medicare fraction and the Medicaid fraction, which separately measure a hospital’s low-income patients. Medicaid is a joint federal-state program that treats the indigent. Some individuals, called “dual eligibles, qualify for both programs at the same time.

A hospital qualifies for higher payments in part based on how many days it provides inpatient care to senior (or disabled) low-income patients, measured as those who “were entitled to benefits under part A of [Medicare] and were entitled to supplementary security income [SSI] benefits.”

The court upheld a 2005 rule that decreased the amount of extra Medicare payments DSH hospitals take in for serving a greater share of poor patients.

The ruling meant some providers might not be able to recoup the greater costs they incur in treating low-income individuals. The court agreed with HHS, finding that “individuals ‘entitled to [Medicare Part A] benefits’ are all those qualifying for the program, regardless of whether they are receiving Medicare payments for part or all of a hospital stay.”

The Empire Health decision left open the question of whether the phrase “entitled to [SSI] benefits” includes all those who qualify for the SSI program. HHS argues that only patients who received an SSI cash payment for the month of their hospital stay are “entitled to benefits.”

“This case thus presents Empire’s open question: Does the phrase ‘entitled ... to benefits,’ used twice in the same sentence of the Medicare Act, mean the same thing for Medicare part A and SSI, such that it includes all who meet basic program eligibility criteria, whether or not benefits are actually received[,]” according to court documents.

In 2017, Advocate Christ Medical Center and more than 200 hospitals filed suit against the HHS over how the agency calculated DSH payments. They said the formula failed to take into account the care rendered to patients eligible for SSI benefits, which the department uses to approximate care given to low-income individuals.

The U.S. District Court for the District of Columbia ruled against the hospitals and gave summary judgment to HHS, finding the funding formula complied with the law. The court also refused to grant the hospitals’ request that their payments from fiscal 2006 through 2009 be recalculated.

The U.S. Court of Appeals for the District of Columbia Circuit affirmed the lower court’s ruling in September 2023.

In its petition, Advocate Christ urged the Supreme Court to take up the case.

Resolving the question presented here to favor a consistent reading of “entitled” would avoid the necessity of courts dealing with “a parade of future challenges about the many ways the agency’s matching process is arbitrary.”

Decades have demonstrated that the agency’s “approach is unworkable[.]”

“Declining review and waiting for a future vehicle—which will cover the same terrain—has no upside, and a clear downside continuing to embroil the courts in endless calculation-by-calculation litigation,” the petition states.

“The Court should seize this opportunity to review this question of pressing importance, which affects the survival of safety net hospitals across the country and the health of the Nation’s most vulnerable communities.”

U.S. Solicitor General Elizabeth Prelogar had filed a brief urging the Supreme Court not to accept the case.

The circuit court’s decision “which sustained the interpretation of the SSI portion of the Medicare fraction that HHS has followed since the outset of the DSH program … is correct and does not conflict with any decision by this Court or another court of appeals,” she wrote.

“No further review is warranted.”

The Supreme Court is expected to hear the case in its new term, which begins in October.