US Supreme Court rejects rural Iowa hospital's challenge over Medicare payments

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The U.S. Supreme Court denied to hear a case Nov. 18 that challenged the calculation method for Medicare payments to rural hospitals.

Eight things to know:

1. Unity HealthCare, a rural, nonprofit acute care hospital in Muscatine, Iowa, brought the case against HHS. Unity HealthCare's parent corporation is Trinity Regional Health System, a subsidiary of West Des Moines, Iowa-based UnityPoint Health.

2. Unity HealthCare challenged the method the federal government used to calculate Medicare payments to rural, sole community hospitals that experience large and uncontrollable declines in inpatient volume. These payments are made to eligible hospitals through volume decrease adjustments under the Medicare prospective payment system.

3. The volume decrease adjustment statute states that if a sole community hospital sees a decrease of more than 5 percent in a reporting period, HHS will "fully compensate the hospital for the fixed costs it incurs in the period in providing inpatient hospital services, including the reasonable cost of maintaining necessary core staff and services."

4. The Iowa hospital contends that HHS did not properly interpret the volume decrease adjustment for its facility and as a result Unity HealthCare did not receive all the reimbursement it is owed, according to court documents.

5. The lawsuit centers on a volume decrease adjustment of $741,308 that the hospital requested for its fiscal year 2006. Court documents state that Medicare notified the hospital in 2009 that it reduced the payment to the hospital significantly, saying that certain costs it requested were "neither fixed nor semi-fixed, but were 'variable costs'" that shouldn't be included in the volume decrease adjustment.

6. In 2010, the hospital subsequently appealed CMS' reimbursement decision to the Provider Reimbursement Review Board, an expert panel of Medicare reimbursement adjudicators, asserting that Medicare's reclassification of certain costs as "variable" was incorrect. Prior to the CMS decision, volume decrease adjustments were based on "costs" and Medicare made no distinction between fixed, semi-fixed and variable costs, the lawsuit contends. However, the review board disagreed with the Iowa hospital.

7. The CMS administrator upheld the PRRB's determination regarding the classification of certain costs as variable but reversed the determination regarding the appropriate methodology to compute the VDA. The hospital appealed through the courts. Most recently, the hospital appealed an 8th U.S. Circuit Court of Appeals ruling that sided with Medicare's payment decisions. The U.S. Supreme Court declined to hear the case.

8. Leslie Demaree Goldsmith, of Baltimore-based law firm Baker, Donelson, Bearman, Caldwell & Berkowitz, who represents the hospital, expressed disappointment about the Supreme Court decision.

She told Becker's Hospital Review: "We are deeply disappointed, because we believe that the hospital didn't receive payments to which it was entitled under the Medicare statute and regulations."


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