Owensboro Health, Inc. v. U.S. Dept of Health and Human Servs. — Aug. 2016 (Summary)

MEDICARE DISPROPORTIONATE SHARE

Owensboro Health, Inc. v. U.S. Dep’t of Health and Human Servs.
Nos. 15-6109 and 15-6110 (6th Cir. Aug. 10, 2016)

The United States Court of Appeals for the Sixth Circuit affirmed a district court’s grant of summary judgment in favor of the federal government and against three hospitals, holding that the district courts were correct in concluding that the Medicare statute is unambiguous in excluding Kentucky Hospital Care Program (“KHCP”) patient days from the calculation of the Medicare Disproportionate Hospital Share (“DHS”) payment.

Kentucky enacted KHCP, a program that provides medical coverage to low-income individuals who do not qualify for Medicaid.  The hospitals submitted their Medicare cost reports to their fiscal intermediaries, and in their computations for the DHS payment, the hospitals included both Medicaid and KHCP patient days in their calculations.  The fiscal intermediaries disagreed with the inclusion of the KHCP patient days, and excluded such patient days from the DHS payment.  The hospitals went through the Medicare administrative process, then sought review in district courts, which ruled that the KHCP patient days should be excluded from the calculation, and the hospitals then appealed to the court of appeals, which consolidated the appeals.

The appeals court reviewed the Medicare statute to determine whether KHCP patient days should be included or excluded from the calculation.  The appeals court stated that it was clear that Congress’s use of the phrase “eligible for medical assistance under a State plan approved under subchapter XIX” is synonymous with being eligible for Medicaid – thus, in order for patient days to be considered in the calculation for DHS payment, a patient must be eligible for Medicaid.  The appeals court then found that, in accordance with the KHCP program, individuals must be ineligible for Medicaid in order to qualify for coverage.  Since KHCP patients were ineligible for Medicaid, the court affirmed the district courts’ rulings that the statute unambiguously excludes KHCP patient days from the calculation for DHS payments.