Some hospitals may be in line for larger Medicaid disproportionate share hospital payments as a result of a federal court decision that calls for changes in how those Medicaid DSH payments are calculated.

Last week, a U.S. District court in Texas again vacated a 2023 Centers for Medicare & Medicaid Services regulation that excludes inpatient days covered by uncompensated care pools, such as through section 1115 waivers, when quantifying Medicaid days for the purpose of calculating hospitals’ Medicaid DSH payments.  This decision applies nationwide and has implications for the computation of some hospitals’ Medicaid DSH payments and for establishing hospitals’ eligibility to participate in the federal 340B Drug Pricing Program.

As a result of this ruling, hospitals – especially safety-net hospitals – in states that have uncompensated care pools may be in line for increases in their Medicaid DSH payments going back to 2024.  In addition, some hospitals that come close to but do not qualify for participation in the 340B program may now meet that program’s participation criteria as a result of the decision.

While the ruling could help hospitals in many states, it may have an especially significant impact for providers in Texas and Florida.

Learn more from the court’s decision in the case of Covenant Medical Center v. Kennedy and from the Modern Healthcare article “Medicare DSH ruling could boost safety-net hospital payments” (subscription required).