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Supreme Court Issues Ruling in Medicare DSH Allina Case

On June 3, the Supreme Court issued a ruling siding with hospitals in a case involving Medicare disproportionate share hospital (DSH) payments for fiscal year (FY) 2012.

In a series of lawsuits — commonly referred to as the Allina line of cases, as Allina Health Services is a plaintiff — hospitals have challenged various attempts by the Centers for Medicare & Medicaid Services (CMS) to include Medicare Part C enrollees in the calculation of the Medicare fraction used to determine Medicare DSH payments.

The lawsuit the Supreme Court ruled on last week is related to CMS’ posting online of DSH calculations for FY 2012 that count Part C enrollees, resulting in substantial reductions to Medicare DSH payments to hospitals for that year. The agency did not go through notice-and-comment rulemaking before posting the calculations.

The Supreme Court ruled that CMS acted unlawfully, as the decision to count Part C enrollees is a “substantive” policy that requires notice-and-comment rulemaking under the Medicare Act. The ruling means that hospitals are entitled to higher Medicare DSH payments for FY 2012, though the precise remedy has not yet been determined; the case was remanded back to the district court to determine next steps.

Other Allina lawsuits still pending in the courts address different time periods for Medicare DSH payments.

No Impact on 340B, Medicaid DSH Litigation

The Supreme Court’s decision does not impact ongoing litigation challenging Medicare Outpatient Prospective Payment System policies, including the 340B Drug Pricing Program and site-neutral litigation against CMS, which involve substantive (not procedural) challenges to Medicare payment policies.

The ruling also does not impact ongoing litigation challenging CMS’ Medicaid DSH third-party payer policy, which involves the Medicaid Act, not the Medicare Act.

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