HHS Wins Supreme Court DSH Payment Case: Impacts Payments for Hospitals Caring for Low-Income Patients

In a 5-4 decision, the Supreme Court of the United States (SCOTUS) sided with the Department of Health and Human Services (HHS) finding that HHS correctly calculated safety-net payments, reversing a decision from the U.S. Court of Appeals Ninth Circuit. 


  • The lawsuit, brought by the Empire Health Foundation, challenged HHS’s method of calculating the disproportionate share hospital adjustments, or DSH payments. 
  • The Court found that HHS’s methodology was compliant with the 2004 regulations concerning DSH payments. The majority opinion, drafted by Justice Kagan, held that “HHS’s regulation is consistent with the text, context, and structure of the DSH provisions.” 
  • Further, the Court held that Medicare patients should count in a hospital’s calculation even if Medicare doesn’t reimburse that particular patient’s stay (e.g., when a Medicare patient is in the hospital >90 days).   

Hospitals caring for low-income patients could see payments negatively impacted resulting from this decision.    

”HHS’s misreading of the statute has significant real-world effects: It financially harms hospitals that serve low-income patients, thereby hamstringing those hospitals’ ability to provide needed care to low-income communities,” Justice Kavanaugh wrote. 

Click here to read the full Court’s opinion. 

About the DSH Program

Effective May 1, 1986, the Disproportionate Share Hospital (DSH) program was enacted as part of the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985. The DSH program supports hospitals that care for a high number of low-income patients.  

According to the Centers for Medicare and Medicaid Services (CMS) website, “there are two methods for a hospital to qualify for the Medicare DSH adjustment,” or DSH payment. Most simply put, the DSH payment calculation includes consideration of: 

  1. The Medicare fraction: proportion of hospital’s low-income Medicare patients 
  1. The Medicaid fraction: proportion of hospital’s low-income patients not on Medicare   

Click here for CMS information about DSH payments, including calculations, program updates and notes to providers.  

Other recent SCOTUS ruling: American Hospital Association Wins 340B Hospital Supreme Court Case: Impact is in the Billions 

We will continue to monitor developments and provide updates as they become available.