Payment Matters

October 1, 2009

District Court of Michigan Deals Blow to Non-Hospital Site Provider Education

By: Thomas W. Coons and Joshua J. Freemire

In a disappointing decision for providers, the United States District Court for the Eastern District of Michigan recently issued an opinion rejecting a provider's challenge to the CMS requirement of written agreements between hospitals providing graduate medical education and off-site educational locations (such as clinics). Covenant Medical Center, Inc., v. Sebelius [PDF] 2009 WL 2926442 (E.D. Mich. Sept. 10, 2009). The District Court's analysis relied heavily on the principle that agency interpretations of regulations for "complex" programs such as Medicare are due an especially high level of deference.

Covenant Medical Center (Covenant), a hospital based in Saginaw, Michigan, owns and operates, along with St. Mary's Hospital (St. Mary's), Synergy Medical Education Alliance (Synergy). Synergy operates outpatient clinics. Residents assigned to Covenant rotated through Covenant, St. Mary's and Synergy Clinics. The residents assigned to Synergy clinics were employed and paid by Synergy for the time they spent in the clinics. Covenant and St. Mary's each reimbursed Synergy for their proportional share of the expenses, including salaries, that Synergy incurred to provide graduate medical education.

New Fully Bundled Prospective Payment System for Renal Dialysis Facilities

By: Carel T. Hedlund and Lisa D. Stevenson

Under a newly proposed rule, outpatient renal dialysis facilities that provide services to Medicare beneficiaries who have end-stage renal disease (ESRD) would begin receiving bundled payments for dialysis services in 2011.

The current payment system used to reimburse renal dialysis facilities, known as the basic case-mix composite base rate, was implemented in 1983 and covers routine drugs and supplies used during dialysis services. However, advances in the treatment of ESRD, including the use of injectable drugs and biologicals such as erythropoietin, iron and vitamin D, are not included in the base composite rate. As a result, these services are currently billed separately under Medicare.

CMS Issues Final Rule Limiting Recoupment of Overpayments

By: Mark A. Stanley

On September 16, 2009, CMS issued a final rule that limits recoupment of overpayments. The rule suspends recoupment of overpayments that are appealed through the Medicare claims appeals process and increases the interest available to providers or suppliers that establish an underpayment on appeal. The final rule can be viewed here [PDF]. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) mandated the final rule, and it essentially duplicates changes to the Medicare Financial Management Manual that were implemented by CMS last year. See "CMS Releases New Rules Limiting Recoupment Pending Claims Appeals" (Payment Matters, October 2, 2008), and CMS Transmittal 141, Pub. 100-06 [PDF].

Consistent with last year's transmittal, the final rule establishes that a provider or supplier may avoid any recoupment of a deemed overpayment by filing an appeal within 41 days for a first level appeal, or within 60 days for a second level appeal. CMS may commence recoupment of a deemed overpayment after the expiration of these deadlines, but will halt recoupment if the provider or supplier files a timely appeal to the next level. The deadlines for appealing a payment determination (i.e., 120 days for a first level appeal, and 180 days for a second level appeal) are not changed by the final rule.

DC Appeals Court Upholds Secretary's Exclusion of CAH Data from Wage Index Calculation

By: Leslie Demaree Goldsmith

The United States Court of Appeals for the District of Columbia recently reversed the ruling of the lower district court in a wage index appeal. The appeals court held that the Secretary of Health and Human Services (Secretary) is permitted to exclude from the wage index calculation, data from hospitals that operated as inpatient prospective payment system (IPPS) hospitals during the survey year, i.e., the cost reporting year from which wage data is reported, if those hospitals become critical access hospitals (CAHs) prior to the year in which the data is used to calculate the wage index in the IPPS payment calculation. Anna Jaques Hospital, et al., v. Sebelius [PDF], No. 08-5407 (D.C. Cir. Sept. 11, 2009).

A group of Massachusetts hospitals challenged the Secretary's exclusion of data for Nantucket Cottage Hospital, the only rural hospital in Massachusetts during the survey year, because the hospital converted to a CAH the following year. The exclusion of this hospital's data resulted in there being no rural hospital data in Massachusetts. The Secretary therefore imputed a rural floor for the state wage index, which was lower than the actual rural floor would have been had Nantucket Cottage Hospital's data been included. The lower court ruled that the wage index statute did not give the Secretary "discretion to remove data from a group of institutions that were subsection (d) [IPPS] hospitals at the time of the survey." Anna Jaques Hosp. v. Leavitt, 537 F.Supp.2d 24 (D.D.C. 2008).