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Courts Rule in Favor of Hospitals on DSH Limits

Courts in three states have ruled in favor of hospitals challenging the Centers for Medicare & Medicaid Services’ (CMS’) policy requiring the inclusion of Medicare and commercial payments in the calculation of the Medicaid disproportionate share hospital (DSH) limits.

The policy was outlined in a January 2010 Frequently Asked Questions (FAQs) document related to implementation of annual independent DSH audits.

In the recent decisions, courts sided with hospitals to grant:

  • a permanent injunction in Tennessee, where hospitals challenged the policy on Medicare and commercial payments;
  • a permanent injunction in Minnesota, where hospitals challenged the policy on commercial payments; and
  • emergency injunctive relief in Virginia, where hospitals challenged the policy on commercial payments .

The decisions are the latest in a series of lawsuits filed in multiple states over enforcement of the FAQs document. Thus far, courts in five cases representing six states have sided with hospitals. Final decisions are pending in Virginia, Texas, and Washington, and two additional cases have been filed in Missouri and the District of Columbia.

The recent decisions do not prevent enforcement of a final rule issued April 3 on requirements for calculating uncompensated care costs to determine hospital-specific DSH payment limits in annual  audits.

Contact Director of Policy Erin O’Malley at or 202.585.0127 with questions.


About the Author

Rachel Schwartz is a former policy associate at America's Essential Hospitals.

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