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The U.S. Department of Health and Human Services (HHS) asked a D.C. federal court on Thursday to dismiss a lawsuit filed by a group of hospitals challenging Medicare payment determinations for low-income patients. On the same day, the court rejected the hospitals' request to extend the stay on the case.

HHS Argues Premature Filing and Lack of Jurisdiction

HHS's motion to dismiss contends that the court lacks jurisdiction over the claims brought by the hospitals, led by Tarzana Providence Health System, as the lawsuit was filed prematurely. The hospitals, according to HHS, failed to exhaust their remedies through the agency's review process before turning to the courts.

"This court lacks jurisdiction to consider these challenges because plaintiffs filed this action prematurely, without exhausting their administrative remedies under the Medicare statute," the HHS motion stated. The agency further noted that recent decisions by the U.S. Supreme Court and the D.C. Circuit have already resolved the legal issues raised in the hospitals' claims.

HHS Hospital Payment Rule Suit : Dispute Over DSH Payment Calculations

The lawsuit, originally filed in May 2022, targets the complex calculations involved in determining Disproportionate Share Hospital (DSH) payments. These payments are crucial for hospitals serving a high number of low-income patients.

DSH payments are calculated by combining two fractions. The first fraction considers days spent in the hospital by patients eligible for Medicare Part A and Supplemental Security Income, while the second accounts for days spent by patients who qualify for a state Medicaid plan but not Medicare Part A. The hospitals allege that HHS's interpretation of "entitled" under the Medicare DSH statute leads to inconsistencies, reducing their payments.

Courts Side With HHS in Similar Cases

After filing their complaint, the hospitals agreed with HHS to pause the case pending the outcome of a similar dispute, Advocate Christ Medical Center v. Becerra, which was being reviewed by the D.C. Circuit. The U.S. Supreme Court also ruled in favor of HHS in a related case, Becerra v. Empire Health Foundation, slightly under a month after Tarzana filed its lawsuit.

On Thursday, the court issued a brief docket entry denying the hospitals' request to extend the stay, citing insufficient reason to do so.

HHS Hospital Payment Rule Suit : HHS Pushes for Administrative Resolution

HHS maintains that the hospitals' premature filing prevented the agency's review board from determining its own jurisdiction or addressing other preliminary issues. According to HHS, the Medicare statute requires that providers who disagree with a DSH reimbursement first seek administrative review, and only then, if unresolved, may they pursue court action.

"Should the board ultimately determine that it lacks authority to decide a question of law or regulations relevant to the matters in controversy, or should the board fail to timely render such a determination, plaintiffs could then re-file in district court if they wish," the HHS motion added.

The Department of Justice Civil Division, representing HHS, declined to comment on the ongoing litigation. The attorneys for both HHS and the hospitals have not yet responded to requests for comment.