Four Hospitals File Suit Over Medicare Part C Enrollee DSH Payment

A group of four hospitals, two based in Puerto Rico and one each in Oklahoma and Georgia, filed suit against the Department of Health and Human Services earlier this week, adding to a recent slew of litigation brought by hospitals against the agency. The suit concerns a recent Provider Reimbursement Review Board (PRRB) decision as to the reimbursment amount alloted to hospitals in compensation for stays where patients are eligible for Medicare Part C.

The case, like others filed recently, concerns Disproportionate Share Hospitals, a system under which hospitals receive a statutory payment compensating them for accepting Medicare for circumstances where the Medicare patients do not pay their patient share. This suit takes issue with how the PRRB decision allegedly “remands [the hospitals’ challenges] for recalculation of the DSH payments at issue using criteria that were set forth in a proposed notice-and-comment rule that purports to have retroactive effect but that has not yet been finalized while, at the same time, prohibits reopening, which is the action necessary to issue the recalculated payments.” They also said that the decision deprives the hospitals their right to challenge finalized payment criteria and seek interest on incorrect payment amounts.

The proposed rule at issue is entitled “Treatment of Medicare Part C Days in the Calculation of a Hospital’s Medicare Disproportionate Patient Percentage.” The plaintiff explained that the proposal engages in retroactive rulemaking, in response to the vacatur of an earlier rule from 2004. However, the plaintiffs argued, the unfinalized rule ” would effectively reinstate CMS’s vacated 2004 rule and expand its retroactive effect…” The plaintiffs also took issue with CMS’ Ruling CMS-1739, which it said resulted from the proposed rule and, because it “establishes the procedural policy by which the Hospitals’ DSH payments will be changed,” must use the notice-and-comment rulemaking process.

The plaintiffs charged the agency with a number of Adminsitrative Procedures Act violations, alleging that “the Ruling improperly and prematurely remands the appeals at issue to the applicable MACs for recalculation of their DSH payments using payment criteria that have not yet been adopted in a notice-and-comment rule” and that the ruling is arbitrary and capricious. The plaintiffs also requested a writ of mandamus ” prohibiting the PRRB from remanding the Hospitals’ appeals to the [ Medicare Administrative Contractors].”

The plaintiffs are represented by Hooper Lundy & Bookman.