Hospital Loses Bid for ‘Pure Research’ Funding

(CN) - Rush University Medical Center cannot bill Medicare for the time residents and interns spend doing "pure research" unrelated to direct patient care, the 7th Circuit ruled Monday.

The university, which operates a teaching hospital in Chicago, wanted to include its residents' research time in its bill to Medicare for indirect medical education, which is designed to allow residents to explore ways to improve overall patient care. Rush asked Medicare for reimbursement of pure research expenses incurred in fiscal years 1993, 1994 and 1996.

Since 1983, however, the U.S. Department of Health and Human Services has interpreted the Medicare Act as excluding pure research from other compensable medical education costs and denied the university's request.

Because new regulations under the Patient Protection and Affordable Care Act have now made some research activities - like attending conferences - compensable, Rush sued HHS for retroactive reimbursement of its pure-research costs.

A federal judge found for the university on the basis of a 2010 decision by the 7th Circuit, University of Chicago Medical Center v. Sebelius, which found that Congress intended the new reimbursement scheme to be retroactive to 1983 and to include pure research costs for reimbursement by Medicare.

HHS put this decision into question, however, by subsequently issuing its view of the ACA guidelines to continue the exclusion of pure research costs.

In reversing Monday, a three-judge panel with the 7th Circuit emphasized that University of Chicago predated the agency's interpretation of how Medicare would reimburse teaching hospitals under the ACA.

It is paramount that the HHS secretary has the final say on which costs not related to indirect patient care will be covered, according to the 16-page ruling.

To undo the secretary's interpretation, the court would have to find that she had based it on an incorrect reading of the law, the panel found. Rush argued HHS did exactly that by denying reimbursement for its residents' nonpatient care activities as "hospital-based activities."

"We have a number of problems with that line of reasoning," Chief Judge Diane Wood wrote for the court. "First, if a hospital is entitled to be reimbursed for both 'patient-care activities' and 'nonpatient-care activities,' why bother with the adjectives? The statute would just say 'activities.' Second, it is hard to square Rush's position with Congress' decision to place pure research outside the realm of compensable activities for the period beginning in 2001 under the Affordable Care Act. Third, the ACA did not foreclose the possibility of pure research's falling outside the compensable categories of activity between 1983 and 2001. To the contrary, it directed that no inference should be drawn about that period based on its post-2001 directive."

The secretary's interpretation also underscores Congress' use of the words "patient care" since pure research typically requires that residents be removed from the rotation of caring for patients in order to spend time conducting research, the court found.

"Confronted with an express delegation of authority to the agency over a question that has long occupied that agency's attention, and an explicit disclaimer by Congress that it meant to send any signal about the correct interpretation of the matter, we are not willing to override the agency's position," Wood wrote.

She continued: "Our decision in University of Chicago, which at the time represented our best interpretation of the statute before the regulation was on the books, is no obstacle to affording the secretary's regulation the deference that it is due."

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