A federal court has ruled in favor of dozens of teaching hospitals in a case seeking greater Medicare reimbursement payments for training physicians as part of their residency programs.
This week’s decision not only requires the Department of Health and Human Services (HHS) to recalculate years of reimbursement payments to the plaintiffs, but also paves the way for other teaching hospitals to contest their own training payments from the agency, according to a firm representing the plaintiffs.
Addressing five consolidated suits filed in the U.S. District Court for the District of Columbia in 2019 and 2020 against then-Secretary Alex Azar, the decision concerns calculations used by HHS to determine a hospital’s direct graduate medical education (DGME) payments.
Plaintiffs argued that HHS limited reimbursement by unlawfully issuing a regulation that reduces weighting factors outlined by Congress in a 1997 amendment to the Medicare Act. The regulation reduced the weighted number of full-time equivalents (FTEs) hospitals could claim for reimbursement should they exceed the number of FTEs reported by the hospital in 1996 or prior.
By doing so, the plaintiff teaching hospitals said they were under reimbursed by millions of dollars for fiscal years dating as far back as 2005. One plaintiff, Milton S. Hershey Medical Center, said that its reimbursements were collectively reduced by more than $12.8 million due to the regulation.
Plaintiffs argued that the regulation applied by HHS went against Congress’ statute and was “arbitrary and capricious as applied to them.” The agency said that the plaintiffs did not challenge the regulation during its initial notice-and-comment period and that the regulation was “a reasonable exercise of [its] discretion” due to the ambiguity of the Medicare statute.
“The Court holds that Defendant’s application of the regulation to compute Plaintiffs’ [FTE] residents was contrary to law because the regulation effectively changed the weighting factors statutorily assigned to residents and fellows,” a U.S. district judge said in a written opinion. “Thus, the Court will grant Plaintiffs’ motions, deny Defendant’s and remand to the agency so that it may recalculate Plaintiffs’ reimbursement payments consistent with this Opinion.”
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The court’s decision opens the door for other teaching hospitals that are over their DGME FTE cap and train FTE residents who are past the five-year initial residency period, Powers Law Firm, which represented several of the plaintiffs, wrote in a release.
“These teaching hospitals should consider contesting their DGME payments by protesting this issue when filing their cost reports and by appealing to the Provider Reimbursement Review Board when they receive a Notice of Program Reimbursement,” the firm wrote.
“The reimbursement impact of this decision can be substantial. Each hospital will be impacted differently depending upon how many residents they train and how many of those residents are beyond their initial five-year residency period.”
HHS did not immediately respond to a request for comment on the decision.