Billions at stake as SCOTUS takes up hospital case
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About $1.5 billion in annual Medicare payments to hospitals will be on the line Tuesday when the Supreme Court hears arguments in a case over whether the federal government shortchanges facilities that care for low-income seniors.
Why it matters: It's the latest legal skirmish over so-called disproportionate share payments that have steadily declined in recent years but are a lifeline for hospitals that treat a substantial number of poor patients, who typically are sicker and have more complex needs.
- "While some hospitals are getting bigger and richer because of mergers, other hospitals struggle," said Jolie Apicella, a partner at Wiggin and Dana. "The medical profession is under a lot of pressure to make profit at a time where there's a lot of low-income patients that need care."
State of play: Hospitals say they'll have to scale back services or possibly even close if the Health and Human Services Department doesn't change the way it calculates these safety-net payments.
- "Many hospitals around the country are operating on thin margins and teetering on the edge of survival," the American Hospital Association and five other national groups wrote in an amicus brief to the Supreme Court.
- "HHS's flawed interpretation of the [supplemental payment] formula is exacerbating that decline, with the costs of its policy falling hardest on the hospitals and communities that can least afford it," the brief continues.
More than 200 hospitals, led by Illinois-based Advocate Christ Medical Center, brought the case to the Supreme Court after a federal district court in D.C. sided with HHS last year. Justices are expected to rule by late June.
Zoom in: The extra Medicare payments are based in part on the number of days the hospital has served patients who are entitled to both Medicare and Supplemental Security Income.
- HHS only counts those patients who received cash benefits in the month of their hospitalization.
- Hospitals argue they should still get credit for taking care of the many people who couldn't get their cash benefits because of bureaucratic red tape, or who weren't eligible for cash benefits that month but can get other SSI-related services.
The other side: The government maintains that it's following the law and that hospitals' interpretation would boost their payments by counting many people who earn more than the SSI eligibility threshold.
- A person's SSI eligibility can fluctuate throughout the year if their income changes. Because of that, whether someone got cash benefits during a specific time period is important, HHS said.
Between the lines: This isn't the first time the Supreme Court has delved into safety-net hospital payments. In 2022, justices decided that Medicare enrollees should count toward hospitals' disproportionate share payments even when Medicare wasn't paying the enrollee's bill.
- Hospitals argue the same logic should apply for SSI. But HHS and lower courts have said SSI eligibility works differently from health insurance, so the 2022 case isn't relevant here.
- "I'm hopeful that the hospitals prevail," said Lisa Hawke, a partner at Holland and Knight. "But whether they will or not is as unclear to me as who's going to win the election."
What we're watching: Disproportionate share payments are just one part of a growing conversation around how tax dollars should be used to pay hospitals.
- Hospital finances are strikingly uneven across the industry. In 2023, more than one-third of hospitals in the United States had negative operating margins, while the top-earning hospitals had margins above 30%.
