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Category: Mcare Court

Judge tells HHS to revisit two-midnight rule’s inpatient pay cut

From: Modern Healthcare – 9/22/15

A federal judge handed hospitals a partial win Monday when he ruled the HHS secretary must provide better justification for the part of the much maligned two-midnight rule that would cut inpatient payments to hospitals.

The judge’s ruling doesn’t change the two-midnight rule or the payment reductions for now, but it may open the door to possible changes in the future, experts said. The judge also ordered HHS to re-open that part of the rule to comments.

U.S. District Court Judge Randolph Moss sided Monday with the American Hospital Association and scores of hospitals and other associations around the country who challenged payment reductions accompanying the two-midnight rule. The rule, currently on hold, directs CMS payment contractors to consider short-term hospital stays as inpatient admissions if they span two midnights even though they otherwise should have been billed as an outpatient observation visit.

The HHS secretary predicted the two-midnight change would lead to a large shift of encounters from outpatient to inpatient status at a cost of $220 million to Medicare. She proposed offsetting that cost by reducing compensation for inpatient services by 0.2%.  Hospitals, however, disagree with that prediction and say the rate cut is unnecessary.

The hospitals argued in this case, Shands Jacksonville Medical Center v. Burwell, that the payment reduction was put forward without adequate notice or a meaningful opportunity to comment. Randolph agreed Monday that the agency did not allow for adequate comment.

“This is not a case where the agency simply failed to provide sufficient detail in its explanation for its action or failed to address a discrete comment,” the judge wrote. “Rather, the Secretary omitted ‘critical material on which it relie[d],’ and thus ‘deprive[d] commenters of a right … to participate in rulemaking.”

The judge, however, stopped short of throwing out the entire rule. Instead he said the HHS secretary must provide additional justification for that part of the rule and allow public comment. The judge wrote, however, that vacating the entire rule may be a possibility if the Secretary doesn’t take corrective action quickly and give serious consideration to new comments.

CMS referred a request for comment on the case to the Department of Justice, which declined to comment Tuesday.

Lawrence Hughes, assistant general counsel for the American Hospital Association, called the decision Monday “a significant victory for hospitals.”

Some experts say that while the decision is potentially good for hospitals, it doesn’t necessarily change anything for them in the immediate future. But it gives them a chance to keep fighting against the rate reduction.

“It doesn’t have any immediate impact, but it means the Secretary is going to have to explain the basis for its conclusion … so the hospitals are still in the game,” said David Glaser, a shareholder at Fredrikson and Byron.

He called the decision “a slap to CMS.”

Michael Clark, special counsel at Duane Morris, said hospitals shouldn’t change what they’re doing in response to the latest decision on the controversial rule. “If I’m one of the affected hospitals, I’m certainly not going to run the risk of violating the pronouncement of the Secretary,” Clark said. “If it turns out they can justify the rulemaking later on, you’re putting yourself at risk.”

The decision Monday is not a clear victory for hospitals but rather a “partial victory in the sense that they’ve won their procedural challenge,” Clark said. He noted that any type of victory in administrative rulemaking cases is unusual.

The real issue, he said, will be whether HHS can justify the rate cut. “The ultimate question is going to be can they win the war after they’ve won this battle,” Clark said.

The judge rejected hospital arguments that the decision to reduce payments exceeded the agency’s statutory authority. They had also argued that the payment reduction was arbitrary and capricious, but the judge didn’t weigh in on that argument in his opinion, saying he didn’t need to because he had already decided HHS didn’t provide a meaningful opportunity to comment.

Judge tells HHS to revisit two-midnight rule’s inpatient pay cut

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CMS Ruling 1498-R2 – Revised SSI Issuances 1988-2005

From: CMS DSH Website – 4/23/15

CMS posted several new data files on their DSH SSI website location.  Most significant of these postings is an issuance of a revised ruling regarding the handling of SSI for DSH purposes titled 1498-R2.  This issuance was precipitated by the “Catholic Health” decision in the D.C Circuit court related to the exclusion of Medicare non-covered days in the SSI ratio.

This revised ruling can be found by clicking the link above and scrolling to the end of the download section.  The application of this revised ruling is only for providers that either have not had a finalized cost report issued or have properly pending appeals between 1988 – 2005 (ending on or before October 1, 2014).  Included as part of this revised ruling are revised SSI files all titled “R2” covering 1988-2005.

CMS states in the application of this revised ruling:

“This modification and amendment of CMS Ruling 1498-R allows providers to elect whether to receive Medicare-SSI fractions on the basis of “total days,” or “covered days,” but it does not alter any other provisions of CMS Ruling 1498-R, including the mechanism for implementation by the administrative tribunals; applicability to cost reports not yet finally settled by an initial notice of program reimbursement (NPR); the Ruling’s general provision for unitary relief on all three DSH issues; and the determination that CMS Ruling 1498-R is not an appropriate basis for reopening of any final determination of the Secretary or a contractor or an decision by a reviewing entity.”

We have been expecting this issuance by CMS and will be evaluating the revised issuance for all of our clients with appeals properly established for the timeframes described above.  The revised SSI issuances are not necessarily an improvement over the original issuances.

CMS Ruling 1498-R2 – Revised SSI Issuances 1988-2005

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DSH SSI – Revised Ruling 1498-R2 – Toyon Client Memo

To:        Medicare DSH Appeal Clients

From:   Thomas P. Knight, President

Re:       Medicare DSH Appeal Update

CMS–1498–R2

We are pleased to report there has been a breakthrough on the Medicare SSI Ratio appeals for cost reports containing services prior to 10/1/04.  See the attached new ruling CMS-1498-R2 dated April 22, 2015.  This ruling has come about due to multiple court decisions related to Medicare DSH appeals.

Specifically, CMS has now published corrected SSI ratios on both a total patient day and covered patient day basis, and will allow Providers to choose which method they want to use.  Further, it appears that CMS will also allow Providers to realign their SSI ratios to their cost reporting period from the federal fiscal year basis normally used.  Further instructions regarding this are supposed to be released.

We are in the process of analyzing the new SSI ratios for all of our clients and will be identifying the best option for each facility.  We will also be requesting the supporting MedPar data for each applicable year to determine if there are any further discrepancies in the data as well as to determine whether realignment from federal fiscal year to hospital fiscal year is beneficial.

Please note that these corrected SSI ratios only apply to those fiscal years where an open Medicare appeal on the SSI issue exists or where the SSI Ratio appeal had been remanded to the Intermediary for action.

Upon completion of our initial review, we will notify each client of the potential reimbursement impact.  Due to the large number of clients, this will take a little while, but we will get it accomplished as soon as possible.

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