Hospitals closed amid spurious Medicare payment, yet again

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Last week, a federal appeals court dismissed the latest attempt by a group of hospitals to get higher reimbursements for outlier Medicare payments they received between 2008 and 2011.

United States Court of Appeals for the District of Columbia made the decision against the group of more than a dozen hospitals represented by the Lee Memorial Hospital and the Billings Clinic, claiming their latest appeal attempt had failed.


In 2013, hospitals first claimed that the Centers for Medicare and Medicaid Services had underpaid them for taking care of cases of patients who were incurring extraordinarily high costs. They accused the agency’s methodology for determining the threshold for outliers of being “arbitrary and capricious” and questioned its legality.

In these situations, hospitals can challenge the amount of their Medicare outlier payments by having the request reviewed by the Provider Reimbursement Review Board or by asking the Department of Health and Human Services for an expedited forensic review, which refers the case in federal court.

The group of hospitals appealing was part of a group that requested an expedited judicial review, arguing that the Commission did not have the power to resolve their claims, but was denied for failing to follow certain procedures agency deposit.

Following the dismissal for expedited judicial review, hospitals filed a lawsuit against the HHS in the district court, claiming the decision was a “final decision” subject to judicial review. They asked the court not to send the case back to council and to rule on the outliers instead. The court accepted but finally ruled that the outlier threshold calculations were neither arbitrary nor capricious.

In their most recent appeal, the hospitals reversed their previous claims that district and federal courts had jurisdiction to adjudicate on the challenge. Instead, they now argue that the previous ruling should be void because the courts supposedly did not have the power to make it.

The new ruling aligns with that of the lower court and dismisses the hospitals’ appeal.

“The district court refused to give effect to the hospital flip-flop, and so did we,” the ruling said.

“For hospitals to win by showing that the now final judgment against them was void because the district court clearly did not have jurisdiction to seize it, they had to prove that there was not even a basis questionable for the conclusion of this tribunal – at the exhortation of the hospitals themselves – this jurisdiction existed over their challenge. The hospitals fail to make this demonstration. “


Outlier Medicare Payments are designed to protect hospitals from financial loss when treating patients with extremely expensive cases. To be eligible for outlier payments, a case must have costs above a fixed loss threshold amount based on both operating and capital costs and DRG payments.

In 2003, CMS made changes to its outlier payment methodology to improve accuracy in determining the high cost of cases and to ensure that outliers are only made for really expensive cases. These changes were made after it was discovered that some hospitals were increasing their fees to get higher outlier payments.

Despite these changes, the Office of Inspector General find that between 2011 and 2014, CMS overpaid $ 502 million in outliers. He said CMS could have saved $ 125 million a year if it had reconciled its payments to the hospital cost reports.

Twitter: @HackettMallory
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About Matthew R. Dailey

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