Teaching Hospitals Contest HHS Calculations For Medicaid Reimbursements

On Monday a complaint was filed in the District Court for the District of Columbia by fourteen teaching hospitals. They claimed that Xavier Becerra, in his role as the Secretary of Health and Human Services overseeing Medicare reimbursements, should alter policies that disincentivize hospitals from ensuring residents complete their training when it is not done in the initial residency period. 

The case concerns the payment formula used to reimburse teaching hospitals, which gives them a higher rate than non-teaching hospitals. Teaching hospitals provide an internship certification environment, known as residency, where newly graduated doctors gain the experiences necessary to properly treat patients, especially those with complex medical issues. The filing explained that providing this teaching environment requires funding, which the Department of Health and Human services and the statutory measures both acknowledge. 

This funding is provided by a factor known as the “Full Time Equivalent” factor (FTE) which is multiplied in the equation for reimbursement for Medicare payments. An adjustment to this factor can result in a significant reduction in the payment amounts, the hospitals explained.

The FTE is set at 1 point per resident that is being taught at the teaching hospital up to a number that is capped at the numbers that were set in 1996. However, not every resident completes their residency within the initial residency period. Any residents that take longer than that set period are only counted as “0.5” of a resident. 

The Plaintiffs argued that statute 42 U.S.C. § 1395ww(h)(4)(F) allows for an unweighted count of the residents up to the statutory cap, which would essentially count all residents within their initial residency period without penalizing the facility for having the longer term residents. However, the regulation at 42 C.F.R. § 413.79(c)(2)(iii) indicates that the calculation should include a weighted count of the residents, which has a greater impact on the residents that are only counted at 0.5 instead of at 1. 

The plaintiffs alleged that this penalty runs counter to public policy as it encourages teaching hospitals to release doctors from their residency prior to completing the training. They asked the court to rule that the regulation including a weighted count is “arbitrary, capricious, an abuse of discretion, and contrary to statutory law, and is, therefore, invalid.” Additionally, the training hospitals asked the court to forbid the defendant from using the weighted calculation. 

The plaintiffs are represented by the firm of Powers, Pyles, Sutter & Verville.