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August 22, 2019

D.C. Circuit Court of Appeals Reverses District Court’s Decision Affecting Disproportionate Share Hospital Payments

On August 13, 2019, the D.C. Circuit Court of Appeals in Children’s Hospital Association of Texas, et. al. v. Azar reversed the district court’s decision in a case affecting Disproportionate Share Hospital (DSH) payments to hospitals. Pursuant to the Medicaid Act, a hospital may not receive a DSH payment that exceeds its “cost incurred” in furnishing hospital services to low-income patients. Costs incurred are, inter alia, determined by the Secretary of the HHS. In 2017, the Secretary promulgated a regulation defining “costs incurred,” which had held that the regulatory definition of “costs incurred” was contrary to the Medicaid Act. The D.C. Circuit Court of Appeals held that the regulation is not inconsistent with the Medicaid Act and that the Secretary of HHS did not act in an arbitrary or capricious manner. The case was remanded for further proceedings.