NYU Langone Health joined nine other medical centers in suing the Health Secretary Robert F. Kennedy Jr., claiming that his agency is withholding Medicare funds used to treat low-income senior patients.

The lawsuit, filed last month, alleges that the U.S. Department of Health and Human Services is unlawfully cutting support by distorting patient counts at Disproportionate Share Hospitals — medical centers that primarily serve lower-income patients — and applying a 2023 rule to payments dating back to 2004. Jean Bae, a clinical associate professor at NYU’s School of Global Public Health, told WSN that if the HHS wins the lawsuit, less federal money will go towards Medicare, forcing hospitals to rely more heavily on internal and taxpayer funds.

“These hospitals often operate on thin margins and rely heavily on federal reimbursement for Medicaid and Medicare patients,” Bae said. “DSH funding cuts can be a huge blow to their financial stability, and by extension, healthcare access for the already vulnerable Americans.”

Hospitals are eligible for DSH payments if the percentage of patients relying on federal health care support exceeds a certain threshold. NYU Langone joined on behalf of its southwest Brooklyn site, which serves one of the largest Medicaid populations in the country.

The HHS decided in 2023 to change its funding calculations to consider patients enrolled in Part C Medicare — a more expansive coverage option provided by private insurance companies, typically to higher-income clients — shrinking the hospitals’ poverty scores. Part A Medicare, which is entirely federal and covers lower-income patients, was previously the main consideration when deciding how much funding hospitals require.

Merging the records of treatments provided through Plans A and C makes hospitals appear to serve more low-income patients, negating the fact that many are able to afford their own treatment plans with private insurance. Several medical centers quickly contested the rule, citing the HHS’s 2003 and 2014 attempts to ratify it that were quickly shut down by courts.

“The 2023 rule cannot be said to be in the public interest, given that it offends fundamental notions of justice, disregards the significant public interest in advance notice-and-comment rulemaking and results in thousands of safety-net hospitals losing billions of dollars in funding,” the complaint reads.

The hospitals are also alleging that the HHS skipped steps in the rulemaking process and is now illegally applying the change retroactively. Some hospitals report receiving abnormally low DSH payments that incorporate the new methodology for years prior to 2023.

The DSH payment program was created in 1981 to fund care for patients without insurance or with insurance that doesn’t completely cover their treatments. If the program were to be shut down, it would most prominently affect lower-income patients and likely force some hospitals to close down due to a lack of funding. 

“These hospitals are often the main, if not only, providers of healthcare services for medically and socially vulnerable populations, and the DSH payment is designed to cover the costs of providing care to uninsured patients,” Bae said. “The financial challenges of these hospitals, or ultimately hospital closure, would more likely affect low-income people of color, sicker people with more healthcare needs and immigrants.”

NYU Langone declined to comment on the current status of the lawsuit and how it may affect its current and future patients.

Contact Ashlie West at [email protected].