New court ruling on Disproportionate Share Calculation

Catholic Health Initiatives – Iowa (CHI) received a summary judgment in their favor from the District Court for Washington D.C. related to their FYE: June 30, 1997 cost report. This judgment favored CHI’s position on Medicaid days that, where the Medicare inpatient Part A benefits were exhausted, those days were still includable in the Medicaid portion of the Disproportionate Share (DSH) fraction.

The position of the Secretary of Health and Human Services (HHS) was that HHS has historically excluded exhausted dual-eligible days from the Medicaid portion of the DSH calculation. The court determined that HHS did not start excluding these days, from a policy stand point, until after the filing of CHI’s 1997 Medicare cost report. The court ruled that HHS did not have the right to apply the new policy retroactively.

This ruling impacts Inpatient Acute Care Hospitals that report Dual-Eligible days in their Medicare DSH calculation, where Medicare coverage is exhausted. These hospitals would be able to include these exhausted days in the numerator of their DSH calculation for cost reporting periods prior to 1997, thereby receiving increased DSH reimbursement.

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