On April 29, in a 7-2 decision authored by Justice Barrett, the Supreme Court held in Advocate Christ Medical Center v. Kennedy (No. 23-715) that the “Medicare fraction” of the Medicare program includes only those patients who were eligible to receive supplementary social income (SSI) payments during the month of their hospitalization, as opposed to patients who were merely enrolled in the SSI system at the time of their hospitalization.

We previously detailed this case’s background and the parties’ arguments. As a refresher, the Medicare program provides health insurance to elderly or disabled individuals and reimburses hospitals for services provided to those patients. That reimbursement is generally paid at a fixed rate, no matter what a hospital’s actual costs are, to incentivize hospitals to provide efficient medical care. But there is a “disproportionate share hospital” (DSH) adjustment that applies to hospitals that treat a disproportionate share of low-income Medicare patients, to provide additional reimbursements because “low-income individuals are often more expensive to treat than higher-income ones, even for the same medical conditions.”

This “highly technical” DSH adjustment is calculated using a “Medicare fraction” and a “Medicaid fraction.” Those two fractions, representing the proportion of patients who “have low incomes, as identified by their entitlement to [SSI] benefits” and who “are entitled to Medicare and have low incomes, as identified by their eligibility for Medicaid,” are “designed to capture two different low-income populations that a hospital serves.”

What’s at issue here is how to calculate the Medicare fraction. The numerator of the Medicare fraction counts the number of patient days attributable to Medicare patients who are entitled to SSI benefits under subchapter XVI of the Social Security Act. And the denominator counts the number of patient days attributable to all Medicare patients. The resulting percentage determines whether a hospital is entitled to a DSH adjustment, and what that adjustment is. The higher the percentage, the more funding a hospital receives. As the majority opinion explained, the Supreme Court had recently defined the denominator, the phrase “entitled to [Medicare Part A] benefits,” to mean “all those qualifying for the program, regardless of whether they are receiving Medicare payments for part or all of a hospital stay,” in Becerra v. Empire Health Foundation for Valley Hospital Medical Center, 597 U.S. 424, 445 (2022). But in doing so, it did not define what it means to be “entitled to supplementary security income benefits… under subchapter XVI.”

The parties offered dueling interpretations. The U.S. Department of Health and Human Services (HHS) argued this phrase refers to patients who are “entitled to receive SSI benefits during the month in which they were hospitalized,” while the petitioners, a group of more than 200 hospitals, contended the phrase sweeps in all patients enrolled in the SSI system at the time of their hospitalization, whether or not they were entitled to an SSI payment during the specific month of their hospitalization. A larger numerator for the hospitals would mean a larger reimbursement.

The Supreme Court sided with HHS. Looking to the statutory text, along with neighboring statutory language, the Court equated the term “SSI benefits” with “cash benefits” that are determined using a “month-to-month inquiry.” And based on this, the Court “conclude[d] that an individual is ‘entitled to [SSI] benefits… under subchapter XVI’ when she is eligible to receive an SSI cash payment. And because eligibility is determined on a monthly basis, an individual is considered ‘entitled to [SSI] benefits’ for purposes of the Medicare fraction only if she is eligible for such benefits during the month of her hospitalization.”

The Court rejected the hospitals’ two arguments to the contrary—that SSI benefits encompass “noncash benefits for which eligibility is not determined on a monthly basis,” and that “eligibility for SSI benefits persists until a person must reapply for them, which occurs after 12 consecutive months of ineligibility for a cash payment.” The first argument, the majority found, would include benefits that fall outside the scope of “subchapter XVI.” And the second argument, which the dissent would have adopted, conflicted with the statute’s text, as “SSI benefits under subchapter XVI consist of monthly cash payments and nothing more.” Last, the Court rejected an argument that focused on a broader statutory purpose of “providing hospitals that serve the neediest among us with the appropriate level of critical funds,” finding that “Congress chose a specific means to advance its end of better funding hospitals that care for a disproportionate percentage of needy Medicare patients,” and the Court was bound to follow that choice.

Justice Jackson, joined by Justice Sotomayor, dissented and would have found that eligibility for SSI benefits persists until a person must reapply for them (which occurs after 12 consecutive months of ineligibility for a cash payment), even if they are not entitled to payment during the month of hospitalization.

Takeaways

• Agency Deference: As we noted in our December case preview, this case had the potential to show how the Court would interpret statutes in a post-Loper Bright world. And, although the Court did not specifically mention Loper Bright, the Court’s silence itself is informative. The Court sided with the agency without ever mentioning the agency’s interpretation or the need to consider that interpretation. Thus, the Court appears to be doing exactly what it promised: faithfully interpreting the statutory text. In some instances, as in this case, that interpretation will be consistent with the agency’s. And in others, it may not.
• Impact on Hospitals: As a practical matter, the Court’s opinion will result in a lower amount of funding to hospitals serving low-income patients, which could, in turn, impact the availability of healthcare options. The Court’s decision, however, did not alter the status quo, as it is consistent with the rulings from the Centers for Medicare & Medicaid Services, the U.S. District Court for the District of Columbia, and the D.C. Circuit Court of Appeals.

For more information, please contact Chantel Febus, James Azadian, Kyle Asher, or Ryan VanOver.