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In a dramatic turn that reshapes how billions in federal funds flow to hospitals serving low-income patients, the U.S. Supreme Court on Tuesday delivered a 7-2 decision favoring the Department of Health and Human Services (HHS) in a long-simmering battle over the agency’s controversial formula for determining “disproportionate share” hospital (DSH) payments.

This ruling in the HHS Hospital Pay Formula Dispute cements the agency’s position that only those patients who are actively receiving Supplemental Security Income (SSI) cash payments can be counted in the complex formula — a position hospitals claim slices deep into their funding lifelines.

Barrett Leads Majority: “Eligibility Isn’t Enough”

Justice Amy Coney Barrett, writing for the majority, likened the formula’s nuances to a monthly ticking clock: only individuals both eligible for and receiving SSI payments during their hospital stay qualify in the DSH calculus. This, she emphasized, is a monthly determination — timing is everything.

“An individual is considered ‘entitled to [SSI] benefits’ only if she is eligible for such benefits during the month of her hospitalization,” Barrett wrote, driving the point with legal precision.

In siding with HHS, the court upheld the D.C. Circuit Court’s earlier ruling that said HHS had “reasonably limited” the eligible population for the payment formula.

Hospitals Argue $1.5 Billion Is Being Left on the Table

The lawsuit, spearheaded by Advocate Christ Medical Center and backed by over 200 hospitals nationwide, aimed to expand the formula's reach. Their argument? That those legally entitled to SSI — even if not receiving payments — should count toward the DSH calculations.

The hospitals warned that HHS’s narrow interpretation denies them up to $1.5 billion annually, a blow to institutions already serving financially vulnerable communities.

Dissenters Warn of Systemic Undercuts

In a powerful dissent, Justice Ketanji Brown Jackson, joined by Justice Sonia Sotomayor, took aim at the majority’s logic, arguing that excluding patients simply because their SSI payments were momentarily paused creates “an artificial and harmful barrier” to funding.

“This approach risks abandoning the very patients DSH payments are meant to help,” Jackson wrote, warning of a ripple effect on public health.

A Déjà Vu Decision: Echoes of Empire Health

This marks the second time the Supreme Court has delved into the murky waters of DSH math. In 2022, the justices narrowly upheld HHS’s stance in Becerra v. Empire Health Foundation, concluding that patients could still be included in the DSH count even if they'd temporarily run out of Medicare Part A coverage.

That case revealed just how “baffling” the justices themselves found the formula. Now, with Advocate Christ Medical Center v. HHS, the fog has thickened, but HHS stands on firmer legal ground.

The Legal Firepower Behind the Fight

Hospitals in the suit were represented by a coalition of legal heavyweights from Hall Render Killian Heath & Lyman PC and Deutsch Hunt PLLC, while Methodist Hospitals - Northlake Campus brought in Latham & Watkins LLP.

Defending the government, U.S. Solicitor General Elizabeth Prelogar led a Department of Justice team that included Edwin Kneedler, Mark Stern, Ephraim McDowell, and Stephanie Marcus — all seasoned veterans in administrative and health law.

What Comes Next?

While the Supreme Court has now firmly outlined how HHS can wield its SSI measuring stick, the fallout is far from over. Hospitals will have to reassess funding strategies, and legal analysts anticipate further litigation on how these calculations play out in practice.

In the high-stakes world of hospital funding, this decision might be the calm before the next storm — and for many hospitals, it’s a verdict that cuts with surgical precision.