The U.S. Supreme Court has issued a significant ruling in Advocate Christ Medical Center v. Kennedy, siding with the Department of Health and Human Services Hospitals across the country are reigniting legal battles over Medicare reimbursements for treating low-income patients, despite a recent Supreme Court ruling against hospitals on a different reimbursement issue. Multiple new lawsuits have been filed since the Court’s decision, signaling that providers are doubling down on efforts to secure higher compensation under the Medicare Disproportionate Share Hospital (DSH) program.
At the heart of the dispute is how the Centers for Medicare and Medicaid Services (CMS) calculates DSH payments — a crucial funding mechanism designed to support hospitals that serve a large volume of patients with limited financial means. These payments are vital for safety-net hospitals, which often operate on thin margins and rely heavily on federal reimbursement for Medicaid and Medicare patients.
In its ruling, the Supreme Court upheld CMS’s methodology for calculating DSH adjustments as it related to patients who might receive Supplemental Security Income (SSI), determining that only patients who were eligible to receive SSI payments during the month of their hospitalization should be included in the DSH calculation. This interpretation significantly narrowed the scope of eligible patients, resulting in reduced payments for many hospitals.
Hospitals had argued that all Medicare patients eligible for SSI — regardless of whether they received a cash payment in the exact month of hospitalization — should be included in the count. That broader calculation could have yielded an estimated $1.5 billion annually in additional funding for DSH-eligible hospitals.
Although the Supreme Court rejected that interpretation, it did not weigh in on whether CMS has the authority to modify or broaden the criteria for which patients count toward DSH totals. That nuance leaves a potential legal opening — and it’s one that the new lawsuits will explore. Plaintiffs argue that the current approach fails to account for the full financial burden these hospitals assume when treating low-income populations and undermines the intent of the DSH program.
Despite the setback, the fight over DSH payments is far from over.
For further guidance on hospital payment issues, please reach out to:
David Dirr
Partner, DBL Law
Health Care Practice Group
Email: ddirr@dbllaw.com
