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Hospital Sues HHS Over Inpatient Claims Payments

The sign outside the Washington, D.C. building of the Department of Health and Human Services.

Washington D.C., USA - February 29, 2020: Sign of U.S. Department of Health & Human Services (HHS) at its headquarters building in Washington, D.C. USA.

On Tuesday a case was filed in the District of Columbia District Court by San Miguel Hospital Corporation against Xavier Becerra in his capacity as Secretary of the Department of Health and Human Services. The case is regarding the incorrect payment of Medicare inpatient claims under the Inpatient Prospective Payment System (IPPS).

Medicare inpatient claims are paid according to a formula under the IPPS, the complaint explained. These claims are paid according to a diagnosis related group (DRG), which groups together related illnesses by degree of difficulty in treatment to provide an average payment that compensates providers for their total costs.

The complaint explained that many factors go into this pricing process, such as special provisions for Sole Community Hospitals which applies to hospitals that are the only facility within a 35 mile radius, and for Medicare Dependent Hospitals,which has Medicare beneficiaries accounting for at least sixty percent of their inpatient treatments.

The plaintiff said they qualify under both of these designations, meaning that they qualify for an additional factor known as a volume decrease adjustment (VDA). The VDA, the complaint said, accounts for situations where these remote hospitals experience an unexpected decrease in the volume of patients that are treated by the facility due to the small population being served.

In its complaint, the hospital argues that the methodology used by HHS for calculating the additional payment due was flawed and resulted in an underpayment to the hospital. Specifically, the hospital argues that HHS’ choice to compare the portion of the DRG related to fixed costs to the full DRG payment that was being made was a comparison that resulted in an underpayment in HHS’ favor.

Plaintiffs are suing for violation of the APA, arguing that the new pricing methodology was contrary to the law, arbitrary and capricious, and violated the notice and comment period requirements. Plaintiffs are represented by King & Spalding

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