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Category: Mcare Court

Good News from the Ninth Circuit Court of Appeals

Last week, providers won a major victory at the Ninth Circuit Court of Appeals relating to the government’s inclusion of non-covered Medicare Part A days (such as exhausted benefit days and Medicare Secondary Payer days) in the SSI Ratio of the Medicare DSH payment calculation. The Court held in favor of providers that the 2005 Rule promulgated by the Secretary of Health and Human Services be vacated on the grounds that the rule is “substantively invalid.” (Empire Health Foundation v. Azar, Case 18-35845).

Ninth Circuit Holds ‘Entitled’ Does Not Mean ‘Eligible’
The Empire Court found HHS’s implementation of the 2005 Rule, wherein HHS arbitrarily included non-covered Medicare Part A days in its calculation of the SSI Fraction, to directly conflict with the Ninth Circuit’s longstanding interpretation of the meaning of “entitled to [Medicare].” The Ninth Circuit in 1996 interpreted the meaning of the words “entitled” and “eligible” in another appeal. (Legacy Emmanuel Hospital and Health Center v. Shalala, 97 F. 3d 1261, 1265-66 (9th Cir. 1996)). According to the Legacy Emmanuel Court, “entitled” means the patient has an “absolute right . . . to payment,” whereas the word “eligible” means the patient “simply meets the Medicaid statutory criteria.” Because the Ninth Circuit’s interpretation of the word “entitled” is unambiguous, HHS’s decision to treat the words “entitled” and “eligible” as having the same meaning directly contravenes the Ninth Circuit’s interpretation of the statute and “cannot stand,” according to the Empire court.
What It Means To You
Toyon Associates, Inc. has been helping Providers in appealing the agency’s implementation of the 2005 Rule relating to non-covered Part A days. Toyon’s position has consistently been that non-covered Part A days should be excluded from the SSI Fraction and the portion of those days that are dual eligible be included in the numerator of the Medicaid fraction. 
While the Ninth Circuit decision is a great win for providers who have this issue under appeal, the decision is not yet final. HHS has 45 days from the date of the decision to request en banc review or appeal to the Supreme Court, and there is no reason to believe HHS would decline to fight this appeal further. However, in anticipation of this positive ruling, Toyon has engaged the same attorney who prevailed in the Empire Health Foundation case and is actively working to move all its pending Medicare Part A appeals into court so as to position providers in the best situation to benefit from this positive ruling.

What Now?
Providers will need to wait to see how HHS responds to the Ninth Circuit’s ruling but be prepared to move their appeals forward. Toyon will be contacting affected hospitals in the coming weeks as necessary, as more details become available on this issue.

Please contact Karen S. Kim at (888) 514-9312 or if you have any questions or concerns.

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2-Midnight Rule – Appeal Status

We have been asked by several of our clients whether the 2-Midnight rule is dead now that CMS has made adjustments to the current PPS base rate increases to reverse the effects of the past implementation of the 2-Midnight rule.  After review of the issue and follow-up with our legal counsel, we are continuing to pursue the issue as we believe that there are additional reimbursements to be recovered not reflected in CMS’ changes in the FY2017 final rules.

Our plan for clients in our groups is to continue pursuing this issue.  We will keep you appraised as this issue progresses.

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CMS Stands by Calculations for 2004 Medicare Outlier Payments

From: Modern Healthcare – 1/22/16

The CMS will not recalculate payments made to hospitals in 2004 for particularly expensive patients, despite hospitals’ objections. The agency published a clarification Friday in response to a court decision last year.

A federal judge ordered the CMS to better explain its calculations in a May decision in District Hospital Partners v. Burwell (PDF).

In that case, 186 hospitals alleged that Medicare underpaid them by more than $3 billion in outlier payments. Outlier payments are extra payments made to hospitals when the estimated cost of treating a patient exceeds the standard Medicare payment. They alleged HHS didn’t properly account for hospitals that “turbocharged,” a practice in which hospitals would improperly manipulate their charges to receive additional outlier payments.

The CMS, however, is standing by its calculations.

Stephen Nash, a partner with Squire Patton Boggs who is representing dozens of hospitals that have filed lawsuits similar to the one decided in May, said he’s disappointed.

“They have failed to address the underpayments they’ve made to almost every hospital in the country for the last 20 years,” Nash said.

Part of the reason the case has taken so long is because the hospitals had to exhaust their administrative remedies before bringing the issue to court, he said. He predicted that hospitals will continue to push their point in court.

In the May decision, a three-judge panel of the D.C. Circuit Court of Appeals disagreed with a lower court over the 2004 payments, saying HHS’ secretary had better explain those calculation methods. The panel also, however, at that time rejected the hospitals’ arguments that the thresholds were “arbitrary and capricious” and led to underpayments in 2005 and 2006 as well.

The District Court for the District of Columbia in a separate case (PDF) in September came to a similar ruling regarding the 2004 payments, also saying the calculations needed more explanation.

CMS Stands by Calculations for 2004 Medicare Outlier Payments

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