The United States District Court for the District of Columbia Circuit recently handed providers a victory in Catholic Health Initiatives – Iowa v. Sebelius, No. 10-cv-411 (D.D.C. Jan. 30, 2012), ruling that CMS used an impermissibly retroactive policy when it calculated the provider’s Medicare disproportionate share hospital (DSH) adjustment. This case follows in the footsteps of last year’s decision by the U.S. Court of Appeals for the District of Columbia in Northeast Hospital v. Sebelius, which addressed a similar issue regarding the inclusion of days associated with dually eligible Medicare M+C patients in the Medicaid versus the Medicare Fraction. We previously discussed Northeast Hospital here.

The DSH calculation measures the number of patient days associated with low income patients using two fractions: (1) the Medicare fraction, which includes only days associated patients that are “entitled to benefits under Medicare Part A,” and (2) the Medicaid fraction, which excludes days associated with patients who are “entitled to benefits under Medicare Part A.” The issue in CHI – Iowa was the proper treatment of patient days associated with beneficiaries who were eligible for Medicaid, and who had exhausted their entitlement to benefits under Medicare Part A. Inclusion of days associated with such patients in the Medicare fraction, as opposed to the Medicaid fraction, significantly diminishes reimbursement under the DSH adjustment.

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