Health Law Daily Bar to judicial review of DSH estimate is also a bar to review of methodology used
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Thursday, June 6, 2019

Bar to judicial review of DSH estimate is also a bar to review of methodology used

By Rebecca Mayo, J.D.

A federal Court of Appeals found that it did not have jurisdiction to hear a challenge to the underlying data used to calculate a DSH payment where the court was precluded from reviewing the payment calculation itself.

A challenge to the underlying data selected or the methodology employed to calculate an estimate, is necessarily a challenge to the estimate itself because they are so intertwined that one cannot be reviewed without the other. A Court of Appeals upheld a District Court decision to dismiss a hospital’s challenge to the underlying methodology used in the calculation of its disproportionate share hospital payment (DSH payment) for lack of jurisdiction. The court held that the statute expressly precluded administrative and judicial review of the calculations and therefore precluded review of the methodology used in those calculations (DCH Regional Medical Center v. Azar, June 4, 2019, Katsas, G.).

DSH payment. Hospitals that serve a significantly disproportionate number of low-income patients are eligible for DSH payment from Medicare. One of the DSH payments, called an "additional payment," is provided based on three statutory factors estimated by the Secretary of HHS. The third factor measures an individual hospital’s share of all nationwide uncompensated care by taking the amount of uncompensated care for such hospital for a period selected by the Secretary and dividing it by the aggregate amount of uncompensated care for all DSHs that receive payments during such period. For hospitals that have merged, this factor is calculated based on the data under the surviving hospital’s certification number. The statute precludes administrative or judicial review of any estimate of the Secretary for the purposes of determining the factors and any period selected by the Secretary for such purposes.

Complaint. DCH Regional Medical Center merged with Northport Regional Medical Center and operated under DCH’s name and certification number. Based on the statute, it received a DSH payment for fiscal year 2014 based on DCH’s share of uncompensated care but not Northport’s. DCH filed an appeal with the Provider Reimbursement Review board, which determined that administrative review was precluded. DCH then filed suit in district court, arguing that it was challenging the methodology adopted and employed to calculate the third factor, rather than the estimate. The district court dismissed the case for lack of jurisdiction, finding that judicial review was precluded, and DCH appealed.

Decision. The court noted that the intent to bar review was very clear in the statute, leaving the court to decide whether the challenged action falls within the preclusive scope of the statute. Here, the court found that a challenge to the methodology for estimating uncompensated care was unavoidably a challenge to the estimates themselves. There was no way for the court to review the method of estimation without reviewing the estimate itself. DCH sought vacatur of the calculation and an order compelling the Secretary to recalculate the DSH adjustment, which the court found to be an attack on the estimate used to calculate the DSH additional payment. Distinguishing between methodology and estimates would eviscerate the statutory bar and allow any challenge to be recast as a challenge to the methodology. The court pointed to several previous cases where it held that the underlying data selected and used to make estimates is inextricably intertwined with the estimates themselves and therefore the bar on judicial review applied to both.

The case is No. 17-5203.

Attorneys: Geoffrey M. Raux (Foley & Lardner LLP) for DCH Regional Medical Center. Abby C. Wright, U.S. Department of Justice, for Alex Michael Azar, II.

Companies: DCH Regional Medical Center; Northport Regional Medical Center

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