Hospitals not entitled to interest from Medicare payment cuts, judge rules

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A group of hospitals are not entitled to recoup interest they claim they lost after HHS implemented payment cuts for its two-midnight rule for Medicare inpatient admissions, a federal court judge ruled Feb. 8. 

U.S. District Judge Randolph Moss ruled that the hospitals were not entitled to the interest payment because they failed to petition CMS or its review board to address the matter before filing a lawsuit, according to a written opinion.

The plaintiffs in the case include Shands Jacksonville (Fla.) Medical Center, San Francisco-based Dignity Health and a slew of other hospitals. 

Under the two-midnight rule, the treating physician must expect a Medicare beneficiary to be hospitalized for two midnights before they can bill the stay as an inpatient admission. Stays lasting, or expected to last, less than two midnights must be treated and billed as outpatient stays. 

The rule also planned to reduce inpatient prospective payment system rates for fiscal years 2014 through 2018 by 0.2 percent, or $220 million in aggregate for each year. However, after receiving comments, the HHS secretary issued a proposed rule to remove the 0.2 percent rate decrease for fiscal year 2017 and address the effects of the payment rate reductions for 2014, 2015 and 2016 by adopting a 0.6 percent payment rate increase for 2017. 

Some of the hospitals then asked for interest, raising concerns about the time value of money. The court ruled that some of them, including those that had sought relief from CMS and filed lawsuits before April 2016, were entitled to interest, but the rest were not.

The hospitals in the Feb. 8 decision were among those not awarded interest by the court initially. They had asked the court to reconsider its ruling or to remand the case to CMS' Provider Reimbursement Review Board. The judge declined to remand the case. 

"In asking that the court remand the matter, plaintiffs are seeking a form of affirmative relief; in essence, they want the court's assistance in reopening administrative proceedings that they failed to pursue prior to bringing suit," the written opinion reads. "To the extent the [HHS] secretary is open to considering plaintiffs' claims at this late date, they are, of course, free to ask. But they do not need the court's assistance to do so."

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