On May 18, 2015, the United States District Court for the District of Columbia ordered HHS to adjudicate the appropriate treatment of Medicare Part C patient days in determining disproportionate share hospital (DSH) payments.  The order effectuates the D.C. Circuit’s prior ruling from April 1, 2014, which held that HHS failed to provide appropriate notice for its 2004 final rule on DSH treatment of Part C patient days.  See Allina Health Servs. v. Sebelius, 746 F.3d 1102 (D.C. Cir. 2014).

Under the 2004 final rule, inpatient days for Part C beneficiaries paid under Part C of the Medicare statute were nonetheless treated as days for which the beneficiaries were “entitled to benefits under Part A.”  This interpretation substantially affected certain hospitals’ DSH payments and, according to the D.C. Circuit, was not a “logical outgrowth” of the proposed rule, given that CMS had proposed to codify its policy of not treating Part C days as days “entitled to benefits under Part A.” 

In its April 2014 opinion, the D.C. Circuit left open the question of whether HHS could, in the absence of the invalidated regulation, reach the same conclusion through individual adjudication.  This portion of the D.C. Circuit’s ruling was at odds with the district court’s opinion, which instead specifically instructed HHS to recalculate the hospitals’ DSH payments without treating Part C days as days entitled to benefits under Part A.

The order is primarily a formality since, as the court itself notes, “the Secretary recognized the remand without formal order.”

To view the May 18, 2015 order, click here.  To view the April 1, 2014 opinion, click here.