Kentucky’s hospitals cannot receive additional Medicare reimbursements for treating patients covered by the Kentucky Hospital Care Program (“KHCP”), according to a recent federal appeals court decision.

The U.S. Court of Appeals for the Sixth Circuit recently considered whether Kentucky hospitals may receive additional Medicare reimbursements for serving a disproportionate share of low-income patients and whether the calculation of those additional Medicare reimbursements is affected by how Kentucky allocates its Medicaid funds. 

Under federal law, a hospital’s Medicare reimbursement increases if it serves a disproportionate share of low-income patients.  This is known as the Medicare Disproportionate Share Hospital (“DSH”) adjustment.  One method of calculating the Medicare DSH adjustment is to use a state’s Medicaid DSH adjustment as a proxy. 

Kentucky’s Medicaid plan awards additional Medicaid DSH funds based on a formula that includes the number of days a hospital treats patients who are eligible for the KHCP, a state program that provides medical coverage for low-income persons who do not qualify for Medicaid. 

Multiple Kentucky hospitals sought to include the KHCP patient days used in the Medicaid DSH calculation also in the Medicare DSH calculation for additional Medicare reimbursements. 

The Sixth Circuit refused to allow the hospitals to include KHCP patient days for purposes of calculating Medicare reimbursements. The Sixth Circuit joined three other federal appeals courts and concluded that the phrase “eligible for medical assistance under a State plan approved under the [the Medicaid statute]” was synonymous with “eligible for Medicaid.” Because KHCP patients are, by their very definition, not eligible for Medicaid, the statute excludes KHCP patient days from the calculation of additional Medicare reimbursements. 

As a result of this decision, Kentucky hospitals may count as “patient days” for the purpose of receiving additional Medicare reimbursements only the number of days they served patients who were eligible for Medicaid.