| The lawsuit
This week, 131 hospitals sued HHS Secretary Robert F. Kennedy Jr., arguing that CMS is wrongfully reducing billions in payments for hospitals serving vulnerable patient populations. Medicare disproportionate share hospital (DSH) payments are intended to support hospitals that serve a high number of uninsured and low-income patients. These payments are meant to counterbalance safety net hospitals' uncompensated care costs so that they can be more financially stable, as well as protect people's access to care. The argument
The complaint focuses on a CMS policy finalized in 2024 that treats patients covered by Medicare Advantage differently depending on which part of the DSH formula is being calculated. Under the rule, these patients are counted when calculating the Medicare portion of a hospital's DSH payments but ignored when calculating the Medicaid portion, which makes hospitals look like they serve fewer low-income patients than they actually do. The plaintiffs argue that CMS' methodology violates federal law and unfairly hurts hospitals that care for large numbers of low-income patients. HHS did not respond to MedCity News' request for comment. The ongoing saga
This lawsuit is just the latest chapter in a long-running legal conflict over CMS' calculation of DSH payments. For the past decade, hospitals have repeatedly challenged the agency's methodology, typically arguing that changes to how patient days are counted unfairly reduce payments for safety net providers.
For example, in 2024, a smaller group of hospitals sued over retroactive adjustments to DSH payments for prior years, claiming CMS undercounted Medicare Advantage days. And last year, more than 200 hospitals were involved in a case that reached the U.S. Supreme Court, which ultimately sided with HHS on the agency's interpretation of the DSH formula. — By Katie Adams | 
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