America’s Essential Hospitals led four national and state hospital associations in filing an amicus brief in the Fourth Circuit Court of Appeals this week in support of a lawsuit brought by South Carolina. The lawsuit seeks reversal of the Centers for Medicare & Medicaid Services’ (CMS’) disapproval of state plan amendments (SPAs) in South Carolina based on the proposed source of intergovernmental transfers (IGTs).
CMS asserted to South Carolina that IGTs must be derived from taxes or appropriations — a precedent that if applied beyond South Carolina could dramatically limit states’ ability to finance their Medicaid programs. The Association of American Medical Colleges, Children’s Hospital Association, and North Carolina Healthcare Association joined America’s Essential Hospitals in signing the brief.
The South Carolina lawsuit stems from CMS’ denial of proposed SPAs implementing supplemental payments for two South Carolina hospitals. Upon administrative appeal, the Department of Health & Human Services (HHS) upheld CMS’ disapproval of these amendments on the grounds that the state’s proposed source of the nonfederal share — IGTs derived from patient care revenues and provided by the Greenville Health Authority, a public entity that owned and operated the two hospitals during the relevant time period — was impermissible. In addition to objecting to the use of non-tax sources for IGTs, HHS also concluded that IGTs from the public entity were an impermissible, non–bona fide provider-related donation.
The amicus brief argues that HHS’ conclusion that IGTs may be derived only from taxes or appropriations is unsupported by law and the legislative history, as well as inconsistent with longstanding and current agency practice under which public providers routinely finance IGTs from patient care revenues and other sources. It also argues that HHS’ interpretation of the donation rules is legally flawed. In the brief, the association asks the court to reverse HHS’ decision.
Contact Director of Policy Rob Nelb, MPH, at rnelb@essentialhospitals.org or 202.585.0127 with questions.
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