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Third Appeals Court Reinstates Medicaid Third-Party Payer Final Rule

The United States Court of Appeals for the Fifth Circuit issued an April 20 decision in Baptist Memorial Hospital-Golden Triangle Inc. et al v. Azar et al with significant implications for Medicaid disproportionate share hospital (DSH) payments.

This ruling reinstates a 2017 final rule issued by the Centers for Medicare & Medicaid Services (CMS) requiring hospital-specific Medicaid DSH limit calculations to include payments from Medicare and commercial payers. The final rule initially was struck down by three lower district courts, which concluded the rule conflicted with federal Medicaid statute.

The Fifth Circuit is the third appeals court to uphold the rule. An August 2019 decision issued by United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) reinstated the rule in parts of the country, followed by a November 2019 decision upholding the rule by the United States Court of Appeals for the Eighth Circuit.

The final rule now is valid nationwide and district courts will have to address whether the rule is in effect as of its original effective date of June 2, 2017, or the dates of the 2019 or 2020 court decisions.

Plaintiff hospitals in the D.C. Circuit case on April 9 filed a petition for writ of certiorari to appeal the decision to uphold the final rule before the United States Supreme Court.

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

This article was prepared in consultation with Eyman Associates and does not constitute legal advice.


About the Author

Zina Gontscharow is a former senior policy analyst for America's Essential Hospitals.

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