15 hospitals sue HHS over Medicare reimbursement

Capital Health Medical Center-Hopewell in Pennington, N.J., and 14 other New York and New Jersey hospitals are suing HHS, alleging the agency is disregarding a previous U.S. Supreme Court ruling that sided with hospitals in a Medicare payment dispute, according to Bloomberg Law, which cites the complaint.

At issue in the lawsuit, filed Nov. 21 in Washington, D.C., is the calculation of Medicare disproportionate share payments to hospitals. Specifically, the complaint concerns the proper treatment in the calculation for Medicare Part C enrollees.

In June, the Supreme Court ruled that HHS improperly failed to undergo formal notice-and-comment rulemaking before announcing a decision to include Medicare Part C enrollees with Medicare Part A enrollees when calculating DSH payments.

The Supreme Court decision in Azar v. Allina Health Services came after the U.S. Court of Appeals for D.C. affirmed a lower court decision that the final rule issued in 2004 — which included a new methodology for allocating Medicare Part C days in the DSH formula — violated the Administrative Procedures Act because it was not a "logical outgrowth" of the proposed rule CMS issued in 2003 that excluded Part C days from the calculation.

In the Nov. 21 complaint, hospitals say HHS is disregarding the Supreme Court's decision.

"Although the D.C. Circuit has twice ruled against the 2004 policy, and the Supreme Court has upheld the [lower court] decision, the Secretary nonetheless has not acquiesced in those decisions," the lawsuit states. "Instead, [HHS] unlawfully has continued to apply the Part C days policy adopted in the now-vacated 2004 rule, including in the [federal government's] payment determinations at issue for the plaintiff hospitals in this case."

The hospitals said HHS' continued application of the vacated 2004 rule and the Part C policy adopted in that rule "are procedurally and substantively invalid."

"The Part C policy adopted in the 2004 rule and applied to plaintiff hospitals is not founded on reasoned decision-making and is inconsistent with the DSH provision of the Medicare statute," they added.

The plaintiff hospitals want a federal court to set aside HHS DSH payment determinations and direct the agency to recalculate their DSH payments by excluding Part C days from the Medicare fraction of the Medicare DSH formula and including the Medicaid-eligible portion of those days in the numerator of the Medicaid fraction.

CMS, which is part of HHS, declined to comment to Bloomberg Law, citing pending litigation.


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