On occasion, the lore becomes the law. A legal "principle" — without any basis in statutes or regulations — may be repeated so often by individuals who would be expected to know the rules that others begin to believe that it's an actual, valid principle. My personal favorite is that "Medicare is entitled to your best price." While the federal government has recognized that that particular "principle" does not actually exist, in other situations, an administrative agency may attempt to rely on a rule that is nowhere to be found in the statutes, regulations, or agency interpretive manuals. A federal appellate court recently took the Centers for Medicare & Medicaid Services ("CMS") to task for doing so.

In Chippewa Dialysis Services v. Leavitt, (D.C. Cir. Dec. 21, 2007), three dialysis facilities sought an exception that would provide them with Medicare payments that exceeded the "composite rate" on which such facilities were usually paid. Under Medicare regulations then in effect, each facility was required to show (among other things) that its patients received atypically intense dialysis services. In rejecting the exception requests, CMS determined that none of the three facilities provided, on average, more than 3 hours of direct patient care per treatment, which the agency's historic data indicated was the average number of hours per treatment. The dialysis facilities challenged CMS' reliance of the 3 hour per treatment standard.

According to the Court, the Medicare statute required the agency to publish a list of all manual instructions, interpretative rules, statements of policy, and guidelines of general applicability in the Federal Register at least every three months. The Court stated that the agency had previously applied the 3 hours per treatment standard and intended to use it in the future in reviewing exception requests. Therefore, it was a guideline of general applicability that was required to be published in the Federal Register. Because the standard had never been published, presumably, CMS' denial of the facilities' exception requests based on this standard would be impermissible.

Unfortunately, other requirements had to be satisfied before a dialysis facility was entitled to additional Medicare payments; a dialysis facility was required to prove that it had an atypical patient mix. Because two of the three facilities couldn't prove that that was the case, and the record was incomplete regarding the third facility, the Court didn't require CMS to pay the dialysis facilities the additional amounts sought. However, the legal principles announced by the Court could assist other health care providers facing denial of a Medicare payment claim based on principles that had never been incorporated into a CMS manual or other agency issuance.

Ober|Kaler's Comment:
Since December 1987 when the statutory provision on which the Court relied went into effect, CMS has generally published a quarterly list of Medicare manual instructions, interpretive rules, statements of policy, and guidelines of general applicability that had been issued in preceding months. A Medicare principle that had never been included in an agency manual or other written issuance would not have been included in the quarterly list of CMS issuances. The Court's recent decision makes it questionable whether such a policy might serve as a legally adequate basis for a payment determination. Therefore, before accepting a Medicare payment denial based on a general payment principle (other than that included in a regulation published in the Code of Federal Regulations or a program issuance that preceded the statutory requirement), it pays to "look it up," to see if the principle actually exists and whether the document in which it was included had been listed in the Federal Register as legally required.