Hospitals Reap Interest on Medicare in 2013

(CN) - The U.S. government must start the new year recalculating Medicare and Medicaid payments, plus interest, for more than 100 hospitals, a federal judge ruled.

Four of these hospitals first filed suit on Nov. 2, 2011, complaining that the Department of Health and Human Services miscalculated the payments owed to them for treating a disproportionate share of low-income patients without private health insurance. Such hospitals are classified as disproportionate share hospitals.

They took issue with the department's retroactive application of a 2004 rule concerning participants in the Medicare + Choice program.

Administered through Medicare Part C, this program gives beneficiaries an alternative to the traditional Part A fee-for-service system, allowing enrollment in a managed care plan.

The new rule barred hospitals from seeking reimbursement in the "Medicaid fraction" portion of their calculations.

But the D.C. Circuit stopped the government from applying it retroactively in 2011.

The hospitals and the government agreed that the ruling required Health and Human Services to recalculate owed benefits, but the agency wanted to undertake that process out of court.

On New Year's Eve, U.S. District Judge Emmet Sullivan gave both sides a partial victory, instructing the agency to award interest to the hospitals but refusing to mandate court oversight.

"Although the court sympathizes with plaintiffs' desire for clear directions to, and prompt attention from, the agency, '[u]nder settled principles of administrative law, when a court reviewing agency action determines that an agency made an error of law, the court's inquiry is at an end: the case must be remanded to the agency for further action consistent with the corrected legal standards,'" Sullivan wrote.

The seven-page opinion dismisses the action without prejudice for the hospitals to refile at a later date.

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