November 25, 2019

Hundreds of hospitals sue HHS for cutting Medicare reimbursements

Daily Briefing

    Hundreds of hospitals last week filed two separate lawsuits challenging HHS' Medicare inpatient reimbursement cuts and reductions to Medicare disproportionate-share hospital (DSH) payments, Healthcare DIVE reports.

    Cheat sheets: Medicare payment programs

    More than 600 hospitals sue HHS over cuts to inpatient payments

    A group of more than 600 hospitals, including Rush University Medical Center and Ascension hospitals, on Tuesday filed a lawsuit claiming HHS illegally reduced their inpatient reimbursements for fiscal years (FYs) 2018 and 2019.

    The lawsuit states that Congress authorized the 0.7% reduction in Medicare inpatient hospital reimbursements for FYs 2014 through 2017 to recoup $11 billion in overpayments that dated back to 2008. "Congress explicitly prohibited CMS from continuing any of the recoupment adjustments beyond (federal [FY]) 2017," the hospitals state.

    However, they claim that CMS "unlawfully" included the reductions in its Inpatient Prospective Payment System (IPPS) final rules for FYs 2018 and 2019, "which resulted in massive savings for CMS and significant financial detriment to" hospitals. According to the lawsuit, the payment cuts in FYs 2018 and 2019 cost the nation's hospitals a total of $840 million in Medicare payments annually. The hospitals in the lawsuit claim they lost about $124 million per year for FYs 2018 and 2019 as a result of the cuts.

    The hospitals in the lawsuit are asking the U.S. District Court for the District of Columbia to increase inpatient Medicare reimbursements for FYs 2018 and 2019 by 0.7% plus interest to offset the financial losses they incurred because of the cuts.

    Hall Render, the law firm representing the hospitals in the lawsuit, did not respond to a request for comment, Modern Healthcare reports.

    CMS declined to comment on the pending lawsuit, according to Modern Healthcare.

    Dozens of hospitals sue HHS over Medicare DSH payment cuts

    In addition, Capital Health System and dozens of hospitals on Thursday filed a separate lawsuit alleging HHS has maintained billions of dollars in reductions to Medicare DSH payments, despite a Supreme Court ruling in June that struck down the payment cuts.

    The lawsuit centers on changes CMS made to the DSH payment formula in 2014 under former President Barack Obama's administration. As part of the changes, CMS began to include Medicare Advantage (MA) enrollees along with traditional Medicare beneficiaries when calculating a hospital's DSH payment. Providers have argued that the method undercounted the number of low-income Medicare beneficiaries hospitals treat, and that HHS implemented the changes without complying with the notice-and-comment requirements under the federal Medicare Act.

    The Supreme Court in June struck down the policy, ruling that HHS needed to launch a notice-and-comment period before implementing the change.

    But hospitals in the lawsuit filed Thursday argue that HHS has not yet complied with ruling and, as a result, has been underpaying providers. The hospitals are asking the U.S. District Court for the District of Columbia to order HHS to declare the policy invalid, to recalculate their DSH payments without the MA enrollees, and to reimburse them for at least $4 billion in underpayments.

    CMS said the agency does not comment on pending litigation, Bloomberg Law reports (Herman, Axios, 11/22; Brady, Modern Healthcare, 11/21; McAffe, Bloomberg Law, 11/21; Luthi, Modern Healthcare, 6/3; Liss, Healthcare DIVE, 11/22; Gooch, Becker's Hospital Review, 11/22).

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