Health Law Daily Wrap Up, DISPROPORTIONATE SHARE HOSPITALS—D.D.C.: Hospitals’ challenge to DSH SSI fraction calculation dismissed for lack of jurisdiction, (Oct 20, 2025)

By Justin Marcus Smith, J.D.

While this matter was pending, the Supreme Court upheld the Secretary’s interpretation for the calculation based on patients who received actual cash payments during their hospitalization month.

Hospitals challenging the calculation of their disproportionate share hospital (DSH) percentages for Medicare reimbursement, based on data used for the supplemental security income (SSI) fraction calculation, could not proceed with their claims against HHS, held the federal district court in Washington, D.C. The court lacked subject matter jurisdiction because the hospitals did not exhaust their HHS administrative remedies. Although Congress potentially provided for expedited judicial review (EJR), denial of EJR was not final HHS action, and the doctrine of futility did not apply. The court accordingly granted the HHS motion to dismiss the hospital’s legal claims for lack of subject matter jurisdiction. Mandamus relief for access to individual patient SSI data, data the Social Security Administration (SSA) does not provide to HHS, would have been unjustified. The court reasoned the Medicare Modernization Act (MMA) did not impose any clear duty on the Secretary to provide the data “necessary” for hospitals to compute the number of patient days factored into the DSH percentage where the data qualifying as “necessary” was subject to interpretation. The Supreme Court had, in the meantime, upheld the HHS Secretary’s interpretation of counting SSI patients based on their actual receipt of SSI cash payments during their hospitalization month. The court accordingly granted the HHS motion to dismiss the hospitals’ petition for mandamus relief for failure to state a claim (HMH Hospitals Corporation v. Kennedy, No. 24-1901 (BAH) (D.D.C. Oct. 9, 2025)).

Background. A small group of hospitals sued the Secretary of HHS in his official capacity. The hospitals alleged that HHS calculated their SSI fractions for Fiscal Year (FY) 2015 and FY 2016 in a way that caused Medicare to underpay their Medicare reimbursements. The hospitals sought relief under the Medicare Act, 42 U.S.C. § 405(g), 1395oo(f)(1), the Administrative Procedure Act (APA), 5 U.S.C. § 706(2), and the Mandamus Act, 28 U.S.C. § 1361.

In the instant HMH I matter, the hospitals conceded they did not exhaust administrative remedies with the Provider Reimbursement Review Board (PRRB). In HMH II, which the court later consolidated with HMH I, the hospitals disputed PRRB denial of statutory Medicare EJR before a final PRRB decision and relied on essentially the same statutes in their prayer for relief. HHS moved to dismiss for lack of subject matter jurisdiction and failure to state a claim, and both sides cross-moved for summary judgment.

EJR. Pertinent here, the Medicare statute includes the possibility of EJR. If the PPRB fails to make a determination on a question, EJR may relieve providers from waiting for administrative review if the PRRB finds it is without authority to decide the question.

SSI fraction. Generally, Medicare pays a hospital a fixed rate for treating a Medicare patient regardless of actual cost. However, Congress provided for the “disproportionate share hospital” (DSH) adjustment to give hospitals enhanced Medicare payments for serving local populations of disproportionately low-income patients. DSH adjustments involve a Medicare fraction and a Medicaid fraction. This case concerned only the Medicare fraction, also known as the SSI fraction. SSI is a “subsistence allowance” offered to the needy aged, blind, and disabled.

The SSI fraction counts the number of patient days attributable to SSI Medicare patients in the numerator, and the number of patient days attributable to all Medicare patients in the denominator. The fraction attempts to capture what percent of Medicare patient days pertain to Medicare beneficiaries on SSI. This requires a determination of which Medicare patients are “entitled to” SSI benefits during their hospitalized month. CMS obtains the SSI data from the SSA without SSA sharing the underlying individual SSI eligibility codes with CMS.

In 2003, Congress enacted Section 951 of the Medicare Modernization Act (MMA) to enable hospitals to check the CMS calculations. However, CMS does not share with the hospitals the SSI eligibility file data it receives from SSA.

Procedural history. The seven hospitals in HMH I and HMH II were dissatisfied with their Medicare Administrative Contractor (MAC) reimbursement determinations for FY 2015 and FY 2016. Their respective administrative appeals challenged whether CMS used the correct SSI factors to calculate their Medicare DSH adjustment and DSH reimbursement rates.

In 2021 and 2022, the hospitals and Medicare exchanged preliminary position papers. The hospitals argued their CMS MAC-calculated SSI percentages were “likely understated” because CMS allegedly failed to include several categories of patients in the SSI fraction numerator. The hospitals asked for recalculation using the latest and best data for the SSI fraction and to be provided the data used to verify the recalculation. However, the hospitals did not argue their right to data under the MMA or the proper way to interpret “entitled to [SSI] benefits” under 42 U.S.C. § 1395ww(d)(5)(F)(vi)(I).

While the hospitals’ HMH I and HMH II administrative appeals were pending with the PRRB, the D.C. Circuit affirmed the Secretary’s statutory interpretation that a patient is “entitled to” SSI only on receipt of a cash payment during the month of hospitalization. See Advocate Christ II, 80 F.4th 346, 355 (D.C.

Cir. 2023). That case also denied mandamus to share the patients’ underlying SSI status codes. The Supreme Court granted the hospitals certiorari, but just a few weeks later, three hospitals initiated HMH I judicially with a two-count complaint against the Secretary alleging the SSI calculations were unlawful on four separate alleged grounds. See Advoc. Christ Med. Ctr. v. Kennedy (“Advocate Christ III”), 605 U.S. 1 (2025).

The complaint also alleged mandamus relief was appropriate because (i) CMS allegedly failed to execute a clear MMA duty to disclose full SSI-eligibility data in CMS possession and (ii) to obtain from SSA, and then disclose to the hospitals, the underlying SSI payment status codes for the individual patients included in the denominators of the hospitals’ SSI fractions. The hospitals asked for compelled disclosure of that data; to declare the CMS “entitled to” interpretation as contrary to law; and to remand for recalculation of the SSI fractions.

The hospitals never sought EJR from the PRRB, and they conceded thus in the judicial phase of HMH I. However, they took a different path in HMH II by seeking EJR first. The MAC denied EJR, and then the PRRB denied EJR on procedural grounds, specifically, that the hospitals failed to raise the two “questions of law.”

The PPRB faulted the hospitals for not perfecting these issues on administrative appeal by omitting them in either their issue statement or in their preliminary position paper three years earlier. The hospitals filed a second EJR request, got the same result, and then began HMH II in the instant court raising “effectively the same claims and seeking the same relief” as in HMH I. The hospitals amended HMH I naming all seven hospitals and conforming the pleading with HMH II. The court consolidated both actions.

No futility. The court held the futility doctrine did not excuse the hospitals’ failure to exhaust administrative appeal. First, the court held it lacked subject matter jurisdiction because the Medicare statute limits judicial review to final PRRB decisions, and the PRRB did not make a final decision. The hospitals conceded there was no decision at all with respect to HMH I; however, they argued the PPRB made final decisions with respect to HMH II when it denied the two EJR requests. The PPRB attempted to distinguish that while a grant of EJR is a final decision, denial of EJR is not a final decision.

The court ruled that the PRRB had the better reading of 42 U.S.C. § 1395oo(f)(1). The PPRB grants an EJR request after determining it does not have authority to decide the question at hand. The law does not provide for judicial review of a determination not to grant EJR. Judicial review is dependent on a “no authority” determination. The court explained its reasoning with reference to the legislative history at length, but it also said the hospital’s position made “little sense in practice.” EJR denials usually happen because jurisdictional or facial questions must be resolved first, before a determination on the merits, making judicial review impractical. Courts, and the Supreme Court in dicta, have repeatedly interpreted the statute as permitting judicial review only after a PRRB grant of EJR. The court continued this discussion at length.

Moreover, the futility doctrine was inapplicable. It poses a high hurdle. Mere suppositions of a foregone, adverse decision are not enough.

No mandamus. The court held mandamus relief was not available because the hospitals did not show a clear right to relief or violation of a clear duty to act. HHS implemented MMA Section 951 by providing a list of inpatient days with a binary yes-or-no marker indicating counting as entitled to SSI benefits for almost two decades, yet the hospitals here sought broader disclosure. The HHS interpretation was also possible. Mandamus relief cannot apply in instances of doubt. SSA does not provide HHS with the specific codes anyway, and case law did not unambiguously compel the release of any data beyond that already disclosed by CMS.

The case is No. 24-1901 (BAH).

Judge: Howell, B.

Attorneys: Andrew A. Lyons (McDermott Will & Schulte LLP) for HMH Hospitals Corp. Kartik Narayan Veng swamy, U.S. Department of Justice, for Robert F. Kennedy.

Companies: HMH Hospitals Corp.

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