Hospitals Sues HHS Over Medicare
A group of U.S. hospitals has filed lawsuits against the Secretary of Health and Human Services, challenging how Medicare reimbursements are calculated for under-resourced and high-need facilities. The core disputes focus on how HHS interprets the “DSH” (Disproportionate Share Hospital) payment formula — specifically, how the agency counts patients eligible for Supplemental Security Income (SSI) and how it handles “bad debt” (unpaid patient bills) in Medicare cost reporting.
In one case, hospitals argue that HHS wrongly denied reimbursement for bad debts tied to Medicare patients, claiming the decision contravenes long-standing Medicare rules that require certain uncollectible debts to be reimbursed.
Another suit centers on HHS’s methodology for the DSH program: Plaintiffs contend that HHS’s restrictive definition of who is “entitled” to SSI benefits improperly reduces their “Medicare fraction” (a key part of the reimbursement formula), thereby lowering their payments.
These hospitals argue that the policy leads to underfunding, despite serving a disproportionately large share of low-income and Medicare-dependent patients. Legal claims include violations of the Medicare Act and the Administrative Procedure Act (APA), asserting arbitrary or capricious agency interpretations and improper rule-making.
While related litigation has been going on for years (including a major Supreme Court case in Advocate Christ Medical Center v. Kennedy), these new suits signal continued resistance from hospitals to how HHS and CMS apply complex Medicare rules.
🧭 Why it matters
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It challenges how HHS calculates payments to safety-net hospitals, affecting financial stability for institutions serving low-income patients.
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Could reshape or limit the agency’s discretion in interpreting “entitlement” standards under the DSH formula.
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Highlights ongoing tension between Medicare policy and real-world hospital financing, especially for hospitals caring for many disadvantaged patients.
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Signals potential legal pressure on HHS from the provider community to revise or clarify reimbursement rules.
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May influence future regulatory or legislative reforms on Medicare reimbursement methodology.
⚖️ Key Legal Outcomes
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Hospitals are suing HHS for allegedly wrongly denying bad-debt reimbursement under Medicare.
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They dispute HHS’s interpretation of SSI “entitlement” in calculating DSH payments — alleging underpayment.
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Lawsuits assert HHS actions violate the Medicare Act and the Administrative Procedure Act (APA).
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If successful, hospitals may force CMS to recalculate past reimbursement and adjust future payments.
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The legal battles could set precedent for how HHS applies Medicare’s payment formulas going forward, especially for safety-net hospitals.
