Hospitals lose appeal in CMS outlier payment case

A federal appeals court ruled Aug. 20 against more than a dozen hospitals that filed a lawsuit challenging the amount of Medicare outlier payments they received from 2008-11.

The U.S. Court of Appeals for the District of Columbia issued the ruling Aug. 20, stating that the hospitals' legal defense in their latest appeal falls short. 

The lawsuit dates back to 2013, when hospitals claimed that CMS owed them more in outlier payments than they received. Outlier payments are reimbursements made by Medicare to compensate hospitals for extraordinary, costly patient care cases. The payments are designed to protect hospitals from significant financial losses resulting from them. 

Hospitals can ask a HHS review board to grant expedited judicial review of challenges to outlier payments, which sends the claim directly to a federal court rather than having the board determine the outcome.

The appealing hospitals, led by Billings (Mont.) Clinic and Lee Memorial Hospital in Fort Myers, Fla., were part of a cohort of facilities that asked CMS for expedited review but were denied that request for reportedly failing to comply with certain agency filing procedures. 

That subset of hospitals then filed a suit against CMS in a district court, arguing that the board's rejection was subject to judicial review. The hospitals asked the district court to rule on the merits of their challenge rather than remand the decision to the board, as the board would simply grant the expedited review and send it back to the district court.

The district court ruled in favor of the hospitals, saying the court could proceed and consider their legal challenge without a remand to the board. 

At that time, the appealing hospitals and the group of hospitals initially granted the expedited review filed an amended complaint arguing that the Medicare outlier rules should be vacated. The district court rejected the hospitals' challenge, granting summary judgment to CMS.

On its most recent appeal, the hospitals claimed that the district court did not have the jurisdiction to make such a ruling in the first place and that the judgment should be void.

"Having persuaded both the district court and our court to reach the merits of their challenge but neither court that they should prevail, some of the hospitals now reverse course and contend that the district court lacked jurisdiction to entertain their challenge at all," the ruling said.

The district court already "declined to give effect to the hospitals’ about-face, and so do we," the appellate court said.

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