9 NJ hospitals sue HHS over Medicare reimbursement rates

A group of New Jersey hospitals sued HHS Secretary Sylvia Mathews Burwell in federal court on Thursday, alleging the agency wrongly reduced Medicare payments to hospitals for treating high numbers of low-income patients under the New Jersey Charity Care Program.

The following hospitals brought the lawsuit:

  • Cooper University Hospital in Camden
  • Deborah Heart & Lung Center in Brown Mills
  • East Orange (N.J.) General Hospital
  • Hackensack (N.J.) University Medical Center
  • Jersey Shore University Hospital in Neptune
  • Kennedy Memorial Hospital in Cherry Hill
  • Palisades Medical Center in North Bergen
  • Robert Wood Johnson University Hospital in New Brunswick
  • St. Mary's Hospital in Passaic

The hospitals claim for the fiscal years that ended Dec. 31, 2006, and Dec. 31, 2007, HHS arbitrarily excluded all days attributable to indigent patients eligible for services through the NJCCP when calculating their disproportionate share hospital payments. The hospitals claim NJCCP patients were excluded because they are not eligible for Medicaid.

Section 1115 of the Social Security Act gives the secretary of HHS authority to approve experimental, pilot or demonstration projects that promote the objectives of the Medicaid program. The waiver gives states additional flexibility to design and improve their programs in a number of ways, including by expanding eligibility to individuals who are not otherwise eligible for Medicaid or the Children's Health Insurance Program.

Initially, the HHS secretary did not recognize hospital days covered under section 1115 waiver programs in the Medicare DSH calculation, except for patients who were eligible, or could qualify for "traditional Medicaid" benefits under the state plan. Patients receiving services under the waiver program who were not eligible for "traditional Medicaid" could not be included in the calculation.

However, the policy changed in 2000, according to the hospitals' complaint. That year, HHS abandoned its prior interpretation of the statute and permitted hospitals to include the entire section 1115 waiver population in the DSH calculation.

New Jersey does not provide medical assistance under a section 1115 waiver. However, "at least some, if not all, of the indigent individuals who receive charity care coverage for inpatient care are indistinguishable in any material respect from individuals covered as part of 'expansion populations' in states utilizing section 1115 waiver programs," according to the complaint.

The hospitals accuse HHS of inconsistently applying the statute by allowing section 1115 waiver program populations to be included in the DSH calculation while refusing to recognize NJCCP days in the calculation. The hospitals further allege inconsistent application "discriminates against plaintiffs (and other hospitals located in non section 1115 states)."

In their lawsuit, the hospitals ask the court to require Ms. Burwell to remand the matter to the Provider Reimbursement Review Board with instruction to recalculate and make appropriate DSH payment to each of the hospitals for the fiscal years that ended Dec. 31, 2006, and Dec. 31, 2007, taking into account the previously disallowed NJCCP patient days. The hospitals further request the court declare HHS' exclusion of the NJCCP patient days invalid.

More articles on healthcare industry lawsuits:

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39 recently unsealed False Claims Act case: 5 things to know

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