HHS Faces Legal Action From 10 Hospitals Over 2023 Medicare Advantage Rule and Reimbursement Calculations

Ten hospitals sued the US Department of Health and Human Services (HHS), claiming that they were underpaid Medicare reimbursements for serving low-income patients.

The hospitals, including Scripps Mercy Hospital in San Diego; California, University of Texas-affiliated hospitals in Tyler and Athens, Texas; and Richmond University Medical Center in Staten Island, New York, allege that they will lose out on billions of dollars in reimbursement because of a rule passed by HHS in 2023.

The rule retroactively changes Medicare reimbursement calculations for the years 2004 to 2013. It addresses Medicare’s annual payments specifically designated for hospitals that care for large populations of low-income patients known as disproportionate share hospitals.

In this lawsuit, the hospitals claim that the 2023 rule includes patient days covered by the Medicare Advantage Part C in the same category as traditional Medicare days. They argue that this lowers their reimbursements based on the complex payment formula for disproportionate share hospitals.

The hospitals say the rule is “arbitrary and capricious, an abuse of discretion, not in accordance with the law, and unsupported by substantial evidence.”

HHS initially attempted a similar rule change in 2004, which faced legal challenges. In 2019, the US Supreme Court ruled that the 2004 rule change was improperly implemented without public notice and comment. The 2023 rule was enacted in response.

In September 2024, approximately 80 hospitals filed a similar lawsuit against HHS in the same court, indicating a growing concern with HHS’s current approach to Medicare reimbursements in these hospitals.

References

Pierson B. Hospitals accuse US of underpaying them for serving low-income patients. Reuters. Published October 28, 2024. Accessed October 29, 2024. https://www.reuters.com/legal/government/hospitals-accuse-us-underpaying-them-serving-low-income-patients-2024-10-28/

Scripps Mercy Hospital San Diego; UT Health Tyler; UT Health Athens, et al v Xavier Becerra, Secretary, United States Department of Health and Human Services. No 1:24-cv-3052. US District Court for the District of Columbia; 2024. https://fingfx.thomsonreuters.com/gfx/legaldocs/zgvoarerevd/Scripps%20v%20Becerra%20complaint%2010-25.pdf