Hospitals Take On HHS Over Medicare Reimbursement Rule

A coalition of seven Ohio hospitals has sued the acting secretary of the Department of Health and Human Services (HHS) over the agency’s alleged mishandling of the hospitals’ challenge to its computation of the Medicare disproportionate share hospital (DSH) adjustment, which relates to Medicare in-patients enrolled in a certain program. The complaint asks the District of Columbia District Court to assert jurisdiction over the matter and review the merits of the plaintiffs’ claims.

Wednesday’s filing recounts the history of the Medicare hospital reimbursement calculation at issue. Allegedly in July 2009, a computation revising the previous one was published and subsequently met by a challenge from hospitals. The court reportedly agreed with those plaintiffs that the policy announced in the final rule was not the logical outgrowth of the proposed rule. HHS appealed that litigation, and in the meantime, commenced a rulemaking.

The product of that rulemaking was purportedly another rule, effective Oct. 1, 2013, that instituted the same DSH calculation that hospitals previously took issue with. This time, the case journeyed to the Supreme Court. The high court reportedly held that the agency’s subsequent application of the challenged policy required notice-and-comment rulemaking, which was absent from the process.

At the heart of their complaint, the hospitals claim that HHS is still using the invalidated formula for their reimbursement. Also at issue is the outcome of an administrative process through which the hospitals attempted to have their total Medicare program reimbursement and, in particular, their DSH calculations reviewed.

The hospitals complain that at the conclusion of the process, they were left with no clear right to obtain review of those determinations or relief as to their DSH calculations. They assert that the HHS secretary has deprived them of their statutory appeal rights, and now ask the court to intervene.

Accordingly, the hospitals request that the court find each of their DSH determinations invalid based on the use of the overturned calculation method. They also request that the court hold that the denial of their rights to appeal was “prototypically ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.’”

The plaintiffs are represented by Honigman LLP.