On September 13, 2011, the D.C. Circuit Court of Appeals issued its decision in the Northeast Hospital case regarding whether Medicare+Choice (M+C) days are days “entitled to benefits under Part A” for purposes of the DSH payment calculation for cost reporting periods 1999-2002.  See Northeast Hospital Corp. v. Sebelius, No. 10-5163, (D.C. Cir., Sept. 13, 2011). The district court had determined that the Secretary’s policy of including M+C days, which are administered under Part C of Medicare, as days “entitled to benefits under Part A,” violated the plain language of the statute.  The three judge panel all agreed with the district court’s outcome, but two of the three judges disagreed with the district court’s finding that the plain language of the statute prohibited the Secretary’s current interpretation.  Instead, they upheld the district court’s outcome in favor of the hospital for its 1999-2002 fiscal years because they determined that the Secretary was bound by her prior policy, in place until October 1, 2004, of not counting M+C patients as entitled to benefits under part A.  The majority opinion expressly left open the question of whether or not the Secretary’s policy of including M+C days in the Medicare Part A fraction beginning October 1, 2004, is reasonable under the statute.  The concurring opinion, by contrast, agreed with the district court and argued that the Secretary’s current policy violates the plain language of the statute and is therefore invalid whether before or after the 2004 policy change.

For providers, the upshot of the court’s decision is that CMS cannot add M+C days to the SSI fraction of the DSH calculation for any cost reporting period beginning before October 1, 2004.  In addition, hospitals that have valid appeals pending on the issue for these pre-October 1, 2004 periods should be allowed to add M+C days to the numerator of the Medicaid fraction to the extent they are also Medicaid eligible days.  While the court did not address how other days for which Medicare Part A did not make payment, such as Part A exhausted days or Medicare secondary payer days, should be treated, it would seem that court’s reasoning would apply with equal force to these categories of days.   How M+C days, or any other days for which Medicare Part A did not make payment, should be treated for periods beginning October 1, 2004, is a question the court left open for a future case.  Each side has 60 days in which to file a petition for rehearing.