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Copyright© 2012, Ober, Kaler, Grimes & Shriver
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November 1, 2012
www.ober.com
Editors: Leslie Demaree
Goldsmith and Carel T.
Hedlund
Court Rejects Secretary’s Denial of
Exhausted Benefit Days in the DSH
Medicaid Proxy
By: Thomas W. Coons
As part of the ongoing battle between the Secretary of Health and Human Services
and the hospital community, the United States District Court for the District of
Columbia has sided with the hospitals. At issue was whether days attributable to a
patient who was eligible for both Medicare and Medicaid (dual-eligible) but who had
exhausted all of his Medicare hospital coverage (exhausted benefit days) should
be counted in the Medicare or the Medicaid fraction of the disproportionate share
(DSH) adjustment. The provider maintained that for the days in question the patient
had not been entitled to benefits under Medicare Part A and that the days,
therefore, were properly included in the Medicaid fraction. The Secretary, however,
acting through CMS, took the position that it is the status of the patients, as
opposed to the payment for the specific days, that determines whether a patient
day is included in the numerator of the Medicaid proxy. The court sided with the
provider. Columbia St. Mary’s Hosp. Milwaukee, Inc. v. Sebelius, Case No. 09-
2031 (DDC, Oct. 4, 2012) [PDF].
In its ruling, the court followed much of the logic set forth in the D.C. Circuit’s
Northeast Hosp. Corp. v. Sebelius, 657 F.3d 1 (DDC, 2012) opinion. In that case,
the court of appeals ruled that the Secretary’s policy of excluding Medicare Part C
enrollees from the numerator of the Medicaid fraction and, instead, including them
in the Medicare fraction was in error. Applying the first prong of the time honored
Chevron analysis, the Northeast court ruled that the Secretary’s interpretation was
arguably permissible under the Medicare statute. The court of appeals
nevertheless did not go on to resolve the issue under the second prong of Chevron
(whether the interpretation by the Secretary was reasonable) because it found that
the Secretary’s policy was impermissibly retroactive. Similarly, in the Columbia St.
Mary’s case, the district court concluded that, although the Secretary’s
