In Final Chapter of Inpatient Prospective Payment Suit, Judge Upholds Denial of Interest Payment

Judge Randolph D. Moss of the District of Columbia District Court, in “the final chapter” of broader litigation involving more than a thousand hospitals, has upheld a previous decision that denied interest payments to a subset of the plaintiffs.

After a Department of Health and Human Services (HHS) regulation imposed a 0.2% reduction in Inpatient Prospective Payment System (IPPS) rates — which are used to compensate hospitals under Medicare — an array of hospitals across the country challenged the rule, eventually leading to the HHS secretary proposing a rule to remove the rate reduction and adopting a one-time 0.6% rate increase for fiscal year 2017.

Although this was a remedying attempt by the HHS secretary, some commenters on the proposed 2017 rule “raised concerns about the time value of money” and asserted that “some or all” of the hospitals are entitled to interest, the judge explained. As a result, the secretary “decided not to contest” awarding interest to the hospital parties in Shands Jacksonville Medical Center Inc. v. Burwell, the originating suit, or “other currently pending cases” disputing the rate adjustment, but “otherwise declined to compensate hospitals for the time value of money,” according to the court.

With the question solved of whether any interest would be paid, the matters in dispute after the secretary’s declaration was which hospitals would be entitled to interest and by which avenues. Three subsets of litigant hospitals all argued that they were “prevailing parties” pursuant to 42 U.S.C. § 1395oo(f)(2), which applied only to “those who are successful in litigating claims against the Secretary,” the judge noted. The judge ruled that the hospitals that complained before the secretary adopted the 0.6% rate increase remedy in the 2017 rule were the sole parties entitled to interest awards — specifically those that did such before Aug. 2, 2016, when the rule was promulgated, excluding those that only brought suit after the 2017 rule.

One subset of hospitals not found to be eligible under § 1395oo(f)(2), represented by Hooper, Lundy & Bookman PC and Akin Gump Strauss Hauer & Feld LLP (the Hooper and Akin plaintiffs), argued that they could receive prevailing-party interest pursuant to 42 U.S.C. § 1395g(d). The difference between the two codes, as noted by the court at the time, was that “§ 1395g(d) imposes a duty on the Secretary to pay interest, while § 1395oo(f)(2) authorizes the federal courts to award interest.”

The court at that time said the Hooper and Akin plaintiffs did not exhaust their administrative remedies, which would involve asking the HHS secretary and the Provider Reimbursement Review Board (PRRB) to award interest under § 1395g(d). The Hooper and Akin plaintiffs continued to make various claims for why they were entitled to interest payments, to no avail. Although the plaintiffs never actually filed a motion for reconsideration, the court treated their continued assertions as such but made no action to overturn any previous rulings on the matter.

The judge explained that first, if the Hooper and Akin plaintiffs had wanted to argue entitlement to interest under § 1395g(d), they could have done so, but they did not, and they failed to offer enough reason why. They also never brought the matter to the HHS secretary nor the PRRB, rendering the court lacking in jurisdiction. Further, the court denied a request to remand the proceeding to the PRRB for lack of jurisdiction and “in any event, the hospitals have failed to demonstrate good cause for not raising the § 1395g(d) issue with the Secretary in the first instance.”