The U.S. District Court for the District of Columbia this week voided a Centers for Medicare & Medicaid Services rule regarding how third-party payments, such as private insurance or Medicare, are treated for purposes of calculating the hospital-specific limitation on Medicaid disproportionate share hospital payments. Twelve not-for-profit children’s hospitals in Texas, Minnesota, Virginia and Washington, D.C., that serve a disproportionate share of Medicaid and uninsured patients had asked the court to vacate the 2017 final rule as contrary to the plain language of the Medicaid Act and “arbitrary and capricious” under the Administrative Procedures Act. U.S. District Judge Emmet Sullivan found that the agency acted outside the scope of its statutory authority under the Medicaid Act and vacated the rule; as a result it no longer applies nationally. AHA had urged CMS and Congress to withdraw the rule, voicing support for the plaintiff’s arguments and significant concerns about the rule’s impact on Medicaid DSH hospitals.

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