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In this Issue
CMS Adopts Final Rule Addressing Part A Appeals Before Intermediaries And The PRRB CMS Adds IDTFs to Payment Manual D.C. District Court Rules Moratorium Laws Prohibit CMS From Changing Its Bad Debt Policy To Disallow Bad Debts Claimed While Still At A Collection Agency Beware of Overpayments in a CHOW Situation "Incident To" Transmittal Rescinded CMS Note to Providers on FY 2006 DSH/SSI Ratios Payment Group
Principals Associates |
June 11, 2008 D.C. District Court Rules Moratorium Laws Prohibit CMS From Changing Its Bad Debt Policy To Disallow Bad Debts Claimed While Still At A Collection AgencyIn a decisive victory for the provider, the Federal District Court for the District of Columbia recently ruled that the Intermediary had improperly disallowed the Provider's fiscal year 1995 Medicare bad debts that were still at a collection agency when claimed. Foothill Hospital – Morris L. Johnston Memorial v. Leavitt, D.D.C., No.1:07-cv-00701-ESH, 5/30/08, No. 07-701, 2008 U.S. Dist. LEXIS 41816 (May 30, 2008). The threshold issue, according to the Court, was whether the Bad Debt Moratorium only prohibits the Secretary from requiring providers to change their bad debt policies if accepted by the intermediary before August 1, 1987, the date the Moratorium was signed into law (as the Secretary contended), or whether it also prohibits the Secretary from changing its bad debt policies as they existed on August 1, 1987 (as the Provider contended). The original, 1987 version of the Moratorium states that "the Secretary of Health and Human Services shall not make any change in the policy in effect on August 1, 1987." Id. (quoting 42 U.S.C. § 1395f note) (emphasis supplied). The Court determined that the statutory language unambiguously prohibits the Secretary from making any changes in the agency's bad debt policy as it existed as of August 1, 1987. Finding as it did, the Court need have gone no further. However, the Court found that even if it were required to determine whether to give deference to the Secretary's interpretation of the bad debt regulations, prohibiting reimbursement of debts claimed while the accounts were still open at the collection agency because they cannot be considered uncollectible or worthless, it would come to the same conclusion. Noting that it would otherwise defer to the Secretary's reasonable statutory interpretation, the Court however concluded that deference was unwarranted in this case. First, this blanket prohibition is an interpretive rule, entitled to less deference than a substantive one promulgated through notice-and-comment rulemaking. Second, this current policy has been applied inconsistently in the past. And third, it is not entitled to deference because it is essentially a litigating position as evidenced by the Secretary's contrary assertions in other cases. Finally, the Court determined that the Secretary's blanket prohibition against reimbursement while collection efforts are ongoing constitutes a change in policy, for this policy did not exist prior to the effective date of the Moratorium. For example, in denying the Provider's claim, the Administrator relied on the Medicare Intermediary Manual (MIM) 13-4, § 4198 (providing that bad debts written off on the provider's books more than 121 days after the date of the bill and then turned over to a collection agency, cannot be claimed as a bad debt on the date of the write-off; that it can be claimed only after the collection agency completes its collection efforts). The Court concluded that this manual provision cannot be applied against the Provider because it constituted a new rule when it was enacted in 1989, after the date of the Moratorium. The Court vacated the Administrator's decision and remanded the case to the agency for further action consistent with the correct legal standard enunciated in the decision. Ober|Kaler's Comments: The case marks a promising turn for the interpretation of the Moratorium Laws for providers and runs directly contrary to the Joint Signature Memorandum (JSM/TDL-08290) issued by CMS on May 2, 2008. That memorandum instructed intermediaries and Medicare Administrative Contractors that the protection of the Moratorium does not apply to bad debts claimed while at a collection agency. See Carel Hedlund's article in the May 28, 2008 publication of Payment Matters. The Secretary will in all likelihood appeal the court's decision in the Foothill case to the United States Circuit Court for the District of Columbia, where it could take years to get a final decision. In the meantime, hospitals that could stand to gain from a similar interpretation of the Moratorium Laws should protect their ability to go forward on appeals of their Medicare bad debt costs by preserving the issue in their appeals before the Provider Reimbursement Review Board. Copyright© 2008, Ober, Kaler, Grimes & Shriver | |