Federal appeals court throws out rural hospital suit

Rural hospitals fighting what they perceive are unfair reimbursement formulas devised by the U.S. Department of Health and Human Services have lost a round in federal appeals court.

The District of Columbia Circuit Court of Appeals upheld a lower court's decision that ruled the HHS's formula for keeping payments to rural hospitals neutral was fair.

Some 60 rural hospitals had filed the suit. The plaintiffs claimed that HHS had improperly used budget neutrality adjustments in prior years to make calculations in base years. They claimed under statute that HHS must make calculations in years beyond the base period. The court's judges ruled that that requirement actually applied to inflation adjustments and was irrelevant to their case. 

The court also rejected an argument of the rural hospitals that budget neutraility should also be applied to patient mix factors.

"There is little doubt here that the (department's) chosen method of achieving budget neutrality lies within her broad discretion," the judges wrote in their decision.

Rural hospitals have been hit hard in recent years, with 48 closing since 2010 and another 283 in financial straits, the Washington Post reported. The decision of many states not to expand Medicaid eligibility and reduction in reimbursements under the Affordable Care Act have also hit rural facilities hard.

In Georgia, state officials may remake rural facilities into a holistic "hub and spoke" model that would take pressure on some of the more financially vulnerable facilities. In Tennessee, four rural facilities have shut down in recent months.

To learn more:
- here's the court opinion (.pdf)
- check out the Washington Post article