The U.S. Court of Appeals for the 6th Circuit yesterday affirmed a district court decision that barred the Centers for Medicare & Medicaid Services from using FAQs 33 and 34 in calculating Medicaid Disproportionate Share Hospital payments for Tennessee hospitals. The appeals court agreed with the district court’s conclusion that CMS’s policy is inconsistent with its 2008 rule and cannot be enforced against plaintiffs unless it is promulgated pursuant to notice-and-comment rulemaking and sent the case back to the district court with instructions to permanently prohibit the agency from enforcing the FAQs against the hospitals on that basis. The Tennessee Hospital Association and several Tennessee hospitals challenged the CMS policy, claiming it reduced the amount of payment they were entitled to under the Medicaid Act and violated the Administrative Procedure Act. The case is the latest in a string of lawsuits brought by hospitals across the country against the CMS FAQs 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. In March, the U.S. District Court for the District of Columbia voided CMS’s rule issued through notice-and-comment that adopted the same position asserted in the FAQs; CMS is appealing that decision.

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