Hospitals sue HHS over Medicare payment denials

Four hospital systems join AHA in lawsuit

Topics: Reimbursement, Finance, RAC and Other Post-Payment Audits, Revenue Cycle, Uncompensated Care, Billing and Collections, Payer and Regulatory Policy

November 2, 2012

The American Hospital Association (AHA) and four health systems on Thursday sued HHS over a policy that denies Medicare payments to hospitals when auditors retroactively determine care could have been provided in an outpatient setting.

According to the lawsuit, filed Thursday in the U.S. District Court for the District of Columbia, CMS refuses to pay hospitals for Medicare outpatient services in cases where auditors retroactively determine that an inpatient service should have been performed outside the hospital.

"In short, CMS simply refuses to pay hospitals for services that it acknowledges are covered under Medicare Part B and that it acknowledges were reasonable and medically necessary in the particular case," the lawsuit states, adding, "That policy has resulted in hospitals losing hundreds of millions of dollars for necessary care—surgeries, drugs, observation care, and on and on—that the hospitals provided to Medicare beneficiaries months or years earlier."

AHA President and CEO Rich Umbdenstock said his group decided to file suit because hospitals and federal officials had “come to an impasse” on the issue.

"What the federal government is doing is wrong, unfair and a clear violation of federal law," Umbdenstock says, adding that allowing recovery audit contractors (RACs) "to second-guess these difficult medical decisions about where to best treat a patient years later based on a cold record and then refuse to pay for that care is indefensible."

"Hospitals deserve to be paid for care that is reasonable and necessary," he says. "The lawsuit notes that the policy was not established by the formal rulemaking process. "This is just something they have put in their policy manual," Umbdenstock says.

AHA, Missouri Baptist Sullivan Hospital, Munson Medical Center, Lancaster General Hospital, and Trinity Health Corporation are asking the court to override the non-payment policy and reimburse hospitals that have been denied payment in past years.

A CMS spokesman said Thursday the agency is reviewing the lawsuit but cannot comment on pending litigation (Daly/Carlson, Modern Healthcare, 11/1 [subscription required]; AHA release, 11/1; AHA lawsuit, 11/1; Wilde Mathews, Wall Street Journal, 11/1; Morgan, Reuters, 11/1; Viebeck, “Healthwatch,” The Hill, 11/1).

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