AHA, hospitals sue HHS for denied outpatient Medicare payments

Hospitals allege RACs second-guess medical decisions, CMS unfairly withholds payment
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It's one of the most contentious issues between hospitals and the Centers for Medicare & Medicaid Services--payment for outpatient services, or lack thereof.

After years of arguments, the American Hospital Association yesterday filed a federal lawsuit against the U.S. Department of Health & Human Services for allegedly denying "hundreds of millions of dollars" in reimbursements for what it says is necessary care, according to the national trade group that represents nearly 5,000 hospitals.

Four hospitals also are listed as plaintiffs: Missouri Baptist Sullivan Hospital in Sullivan, Mo.; Munson Medical Center in Traverse City, Mich.; Lancaster (Pa.) General Hospital; and South Bend, Ind.-based Trinity Health Corporation, in the American Hospital Association v. Sebelius case.

"The government's refusal to pay for this care is harming hospitals and patients," the complaint states.

The lawsuit alleges recovery audit contractors have routinely determined inpatient care should have been performed in an outpatient setting, thus revoking payments under Part A and CMS failing to restore them under Part B.

AHA further suggested auditors may be incentivized to rule against hospitals because they are paid "primarily on the basis of how much Medicare funding is taken back." The AHA last week also urged the Office of Inspector General to investigate the audit process.

"Doctors and nurses provide the best care possible using their medical judgment and training," AHA President and CEO Rich Umbdenstock said yesterday in a statement. "Allowing government auditors to second-guess these difficult medical decisions about where to best treat a patient, years later, based on a cold record and then refuse to pay for that care is indefensible."

AHA and the four hospitals point to a takes-backies policy in which the third-party contractors determine inpatient services, such as surgeries, drugs and observation care, could have been performed on a less-expensive outpatient basis, therefore ruling that hospitals must return reimbursements, sometimes for procedures that occurred years earlier.

AHA claimed the CMS Payment Denial Policy violates the federal law to reimburse for patient care. The policy also forces hospitals to go through an arduous appeals process, which AHA said, turn out in their favor 75 percent of the time--or worse, smaller hospitals simply give up to avoid the appeals process.

Umbdenstock told The Wall Street Journal the hospital association sued because it had "come to an impasse" in talks with the agency on the issue. "Hospitals deserve to be paid for care that is reasonable and necessary," he said.

A spokeswoman for CMS told the WSJ the agency is reviewing the suit but can't comment on pending litigation.

For more information:
- read the AHA statement (.pdf)
- see the complaint (.pdf)
- here's WSJ article

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