On September 24, HHS filed its notice of appeal to the Fifth Circuit following the Northern District of Texas's July ruling in Covenant Medical Center v. Kennedy.
As we previously reported, the District Court:
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Declared CMS's 2023 Section 1115 Exclusion Rule unlawful
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Vacated the rule
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Again, rejected CMS's position on excluding qualifying Section 1115 demonstration project days from the Medicare DSH Medicaid fraction
In the Baylor All Saints case, the Fifth Circuit vacated the District Court's provider-favorable ruling because the hospital had not satisfied the Medicare administrative process. The Fifth Circuit did not decide the merits of the 1115 waiver-day dispute.
Covenant was designed to cure that procedural problem.
The District Court found that the administrative process had been completed and again ruled for the hospital on the merits.
Now HHS is appealing and it puts the substantive question back before the Fifth Circuit without the same jurisdictional obstacle that prevented a merits decision in Baylor.
For hospitals with significant Section 1115 waiver populations, this remains an important Medicare DSH issue to follow—particularly given the potential implications for both DSH reimbursement and 340B eligibility.
If you have questions regarding Medicare DSH, 340B or Section 1115 waiver days, feel free to contact Adam Blackwell:
adamblackwell@govdataservices.com
