The December 19, 2008, Disproportionate Share Hospital (DSH) audit rule (73 Fed. Reg. 77904) indicated all Medicare payments must be included in the DSH audits for Medicaid/Medicare dual-eligible patients. The Centers for Medicare & Medicaid Services (CMS) issued “Additional Information on the DSH Reporting and Audit Requirements” in February 2010 (commonly referred to as the “FAQ”). In that document, FAQ #33 requires DSH audits to include private insurance payments for individuals eligible for Medicaid and also enrolled in private health insurance, and FAQ #34 requires the DSH audits to include Medicare payments for individuals dually-eligible for Medicare and Medicaid.
In recent years, several hospitals and hospital associations filed legal actions challenging the CMS guidance on including the Medicare and private insurance payments in the DSH audits. Several court decisions have been issued affecting CMS’ regulatory treatment of DSH overpayments for those hospitals.
Following multiple court decisions, CMS issued a Final Rule on April 3, 2017, clarifying that, effective with services furnished on or after June 2, 2017, Medicare payments and private insurance payments must be included in the DSH audits for Medicaid dual-eligible patients (82 Fed. Reg. 16114-02, 16117).
Several hospitals and hospital associations filed legal actions challenging the 2017 Rule. On March 6, 2018 the United States District Court for the District of Columbia sided with the 12 plaintiff hospitals in Children’s Hosp. Ass’n of Texas v. Azar and vacated the 2017 Rule stating that the 2017 Rule was inconsistent with the Medicaid Act.