Supreme Court dismisses hospitals' Medicare lawsuit

Ruling reverses circuit court decision for hospitals to appeal reimbursement reviews
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The Supreme Court sided with the U.S. Department of Health & Human Services when the high court on Tuesday refused to allow extensions for Medicare reimbursement appeals beyond the usual 180 days or three years for good cause. The blow essentially hits the wallets of 18 hospitals, which filed suit against HHS for what they say are Medicare underpayments worth millions of dollars.

But even more, it's a letdown for hospitals everywhere; Sebelius v. Auburn Regional Medical Center represented a fight from hospitals to recoup millions from Medicare in back DSH (disproportionate share hospital) payments.

The suit, spearheaded by Auburn (Wash.) Regional Medical Center, said Medicare had miscalculated payments between 1987 and 1994. The Provider Reimbursement Review Board (PRRB) had discovered the error in CMS' methodology in an unrelated 2006 administrative appeal, Courthouse News Service reported.

By then, however, the window of opportunity for hospitals to appeal had closed. Hospitals have three months to file an appeal, although there is an exception of up to three years for "good cause." Nevertheless, some of the claims were 25 years old, Reuters reported.

The American Hospital Association filed a friend-of-the-court brief, saying hospitals should be able to appeal PRRB decisions beyond the usual time limit in extraordinary circumstances.

But the court found "the government and providers have an interest in payment finality and reaching a point at which program payments are no longer open to correction," King & Spalding, an international law firm, wrote in a statement yesterday.

Hospitals argued it's unfair that the HHS secretary has unlimited time to reopen payment errors for fraud but providers don't have that luxury. Justice Ginsburg said it's not the same thing because there are only a few dozen intermediaries in charge of issuing thousands of Notices of Program Reimbursement, while each provider can concentrate on its own NPR.

"This observation by the Court does not necessarily reflect the realities of the Medicare reimbursement system, as the payment formulae under prospective payment systems are complicated and are growing more complex," the law firm said. "It is no easy task to detect a government error in the application of statutorily required formulae. Computational errors can remain hidden for years, even to the most diligent."

For more information:
- here's the Reuters article
- read the Courthouse News Service article
- read the King & Spalding brief
- see the opinion (.pdf)
- check out the AHA amicus brief (.pdf)

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