Hospital Sues HHS Over VDA Recalculation

On Wednesday a case was filed in District of Columbia District Court by Massena Memorial Hospital against Xavier Becerra, in his role as Secretary of Health and Human Services. The case is regarding a recalculation of Volume Decrease Adjustments (VDA) paid by Medicare through the program’s inpatient payment system.

The number of patients seen in any given year in a rural hospital can vary wildly, making staffing and sustaining a viable business model difficult, especially in underserved communities. In recognition of this difficulty, the Medicare inpatient payment system includes a possible additional payment, known as the Volume Decrease Adjustment (VDA) and only payable if the facility experiences a substantial decrease in inpatient cases due to circumstances beyond the rural facilities control.

In 2009, 2012, and 2013, Massena Memorial said they experienced these substantial decreases in inpatient cases and timely applied for a VDA payment. Medicare agreed and issued initial VDA payments per the Medicare Provider Reimbursement Manual and the active Medicare payment processing comments issued in the Federal Register, the complaint said. However, in 2016, Medicare issued an intent to reopen these payments and subsequently reprocessed the VDA for a fraction of the original payment.

According to the plaintiffs, this recoupment was based off of a new Medicare contractor calculation that reduced the VDA for additional variable factors that were not previously included in the calculation. The plaintiff argues that there was no notice of the change in factors in violation of the Administrative Procedure Act (APA).

The plaintiffs are suing for reprocessing and repayment of the APA, under the theory that the original reprocessing was capricious and arbitrary in violation of the APA. The plaintiffs are represented by the Law Office of Joseph D. Glazer and Verrill Dana LLP