Hospitals Win Funding Battle With New Hampshire

by | March 7, 2017

By Dave Solomon

A federal judge has sided with New Hampshire hospitals in their argument with the state over how much the hospitals are due for uncompensated care, which is usually the difference between Medicaid payments and hospitals' true costs.

The ruling means there will be no immediate relief from the courts for a current budget deficit in the Department of Health and Human Services, and Gov. Chris Sununu may have to revise his budget for the next two fiscal years to pay hospitals more than he had hoped, unless the ruling is overturned on appeal or Congress changes the law.

Based on his reaction to the lawsuit, the governor is hoping for one of those two outcomes.

"The ruling is as expected," Sununu spokesman David Abrams wrote in an email. "This is an ongoing issue and, though we will continue to receive clarity in the coming months, we are comfortable that the 2018-19 budget is appropriate."

The New Hampshire Hospital Association, which filed the complaint on behalf of some of its members, issued a statement saying "hospitals are very pleased with the ruling, which ensures that long-standing policy with respect to the calculation of uncompensated care is upheld and maintained."

In her March 2 order, U.S. District Court Judge Landya McCafferty sided with the hospitals on all major points in a case that has been under consideration since early last year, with millions of dollars at stake.

For the fiscal year ending on June 30, the New Hampshire Hospital Association says its members are due $224 million in what are called DSH payments, a Medicaid acronym for Disproportionate Share Hospital payments.

Under federal law, hospitals that take on a "disproportionate share" of uninsured or Medicaid patients are entitled to extra money from the federal Centers for Medicaid and Medicare Services (CMS), which is channeled through state treasuries.

While the hospitals are expecting $224 million based on a written agreement with the state, the state only budgeted $191 million for the obligation, leaving a $33 million shortfall.

The problem continues with the budget Sununu submitted for the next two fiscal years, which the hospitals claim could underfund their DSH payments by even greater amounts.

At issue is how DSH payments are calculated. Until 2010, the DSH hospitals claimed all allowable costs, minus whatever money they got from Medicaid.

But in 2010, CMS posted an answer to a frequently asked question (FAQ) on the agency website, indicating that "third-party payments" hospitals receive, primarily from Medicare, should also be factored in.

This had the potential to significantly lower DSH payments. The New Hampshire Hospital Association and four member hospitals sued the Centers for Medicaid and Medicare Services, claiming the so-called "policy clarifications" contradict the "plain language" of the Medicaid Act and were improperly implemented. Hospital associations in other states sued as well.

They argued that if the federal government wants to make that kind of change in the DSH program, it should be an act of Congress, not through an FAQ on the agency website.

Judge McCafferty issued an injunction in February 2016, prohibiting the state from implementing the lower DSH payments, and heard arguments from both sides in September.

In her 48-page ruling, McCafferty issues a permanent ban against the state using the FAQs to lower its liability to the hospitals.

She agreed with the hospitals that the FAQ language made substantive rules that should have been, but were not, made known through notice-and-comment rulemaking.

"Because of the lack of rulemaking procedure, (the FAQs) represent agency action that is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law," she wrote.

The judge also dismissed efforts by the state to intervene in the case.

On Feb. 6, 2017, more than a year after the lawsuit was filed, Health and Human Services Commissioner Jeffrey Meyers moved to intervene.

"Meyers offers no persuasive justification for his failure to move to intervene sooner," writes McCafferty. "Therefore, (his) motion is denied."

(c)2017 The New Hampshire Union Leader (Manchester, N.H.)