Federal appeals court limits hospitals’ disproportionate-share funding
HOSPITALS THAT CARE for a large share of Medicaid, low-income and uninsured patients stand to receive less funding from the federal government after an appeals court reconsidered how Medicaid disproportionate-share hospital reimbursement is calculated.
A three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit last week reversed a lower-court decision and reinstated a 2017 rule establishing that payments by Medicare and private insurers are to be included in calculating a hospital’s DSH limit, ultimately lowering its maximum reimbursement.
The case, brought by four children’s hospitals in Minnesota, Virginia and Washington and an association representing eight children’s hospitals in Texas, concerns the calculation of the uncompensated costs of treating Medicaid beneficiaries known as the “Medicaid shortfall.”
For instance, if a hospital spends $1 million on treating Medicaid patients who have no other healthcare coverage and Medicaid pays $600,000, then the Medicaid shortfall is $400,000.
In some instances, Medicaid patients have additional third-party coverage such as Medicare or private insurance.
Hospitals cannot receive more money in Medicaid DSH payments than they spent to treat Medicaid beneficiaries or the uninsured. Part of the motivation behind that stipulation was to prevent hospitals from double dipping by collecting DSH payments to cover costs that had already been reimbursed.
The Children’s Hospital Association of Texas said in a statement that it is exploring its options.
“We are disappointed with the result because it will reduce critical Medicaid funding to safety-net providers like children’s hospitals,” the association said. “These hospitals are heavily reliant on Medicaid payments because 50% to 80% of their inpatient days are covered by Medicaid. Children’s hospitals care for all children, and are, in fact, often the only place that children with complex conditions can get life-saving care.” ●