Hospitals increase legal pressure to boost Medicare pay

Modern Healthcare – Thursday, December 5, 2024
By Alex Kacik

Hospitals have expanded their legal push for the federal government to boost Medicare reimbursement.

More than 500 hospitals last week sued the Health and Human Services Department for allegedly miscalculating a 40-year-old Inpatient Prospective Payment System base reimbursement rate that providers say has lowered years of subsequent Medicare payments to hospitals. The lawsuit is the latest in a series of similar complaints that allege the Health and Human Services Department must increase Medicare inpatient pay.

Each lawsuit challenges different batches of denied requests to amend reimbursement rates, but the arguments are largely the same. Hundreds of millions of dollars are at stake, providers allege. If the federal government changes the inpatient base pay rate, hospitals stand to not only recoup money from prior fiscal years but also increase future reimbursement rates.

Here’s what to know about those lawsuits and where they stand.

Adena Regional Medical Center et al v. Becerra

Adena Regional Medical Center in Chillicothe, Ohio, was one of hundreds of hospitals that on Nov. 26 sued Xavier Becerra in his capacity as Health and Human Services secretary.

The complaint, filed in the U.S. District Court for the District of Columbia, followed hospitals’ unsuccessful pleas to the Provider Reimbursement Review Board to augment Medicare IPPS payment rates set in fiscal 1984 — the first year of the payment system — and fiscal 1985. Those rates are used to update annual hospital inpatient reimbursement levels based on yearly shifts in treatment costs, hospital worker wages and other factors.

The federal government double-counted some Medicare beneficiaries by including transfer patients in the pay rate calculations, the complaint alleges. The alleged miscalculation led to $860 million in underpayments in fiscal 2024 alone, the hospitals claimed in their appeals to the review board. The appeals spanned fiscal 2009 to fiscal 2024 and varied by hospital.

The board denied the hospitals’ appeals on Sept. 27, claiming it does not have jurisdiction to change the fiscal 1984 and 1985 inpatient base payment rates because those rates are tied to budget neutrality adjustments. Budget neutrality ensures there are offsetting cuts to any increase in Medicare spending. Federal law prohibits administrative or judicial review of any regulation linked to budget neutral changes, the review board said in its denial notice.

Hospitals allege the board’s interpretation of the budget neutrality preclusion provisions is overly broad.

HHS did not respond to a request for comment.

Acadia General Hospital et al v. Becerra

The Adena Regional Medical Center case was filed about seven months after Acadia General Hospital in Lafayette, Louisiana, and more than two dozen other hospitals sued the federal government over another batch of denied appeals to increase Medicare inpatient pay.

The complaint, filed in the same court as the Adena case, cited similar concerns regarding HHS including transfer patients in Medicare hospital inpatient base rate calculations. The hospitals are seeking higher Medicare payments from fiscal 2019 to fiscal 2023.

According to the lawsuit, hospitals began filing appeals in 2002 with the Provider Reimbursement Review Board to amend the fiscal 1984 Medicare inpatient pay rate. The board denied the appeals using a similar argument about the payment system’s budget neutrality framework, the lawsuit alleges.

The court paused proceedings in July, waiting for the St. Mary’s Regional Medical Center et al v. Becerra case to unfold before ruling.

St. Mary’s Regional Medical Center et al v. Becerra

The St. Mary’s Regional Medical Center June 2023 lawsuit, which listed more than 200 hospitals as plaintiffs, has a narrower scope than the Acadia lawsuit.

The complaint, also filed in the U.S. District Court for the District of Columbia, only seeks to change the fiscal 2019 Medicare inpatient pay rate.

Similar to the other lawsuits, the hospitals allege HHS erred by including transfer patients in the inaugural Medicare inpatient pay rate and the review board incorrectly denied hospitals’ appeal requests based on budget neutrality preclusion provisions.

The hospitals ask the court to reverse the board’s denial, declare the fiscal 2019 Medicare inpatient pay rate unlawfully low and increase fiscal 2019 Medicare inpatient reimbursement. The case is ongoing.

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