(CN) – The D.C. Circuit upheld dismissal of 114 hospitals’ challenges to Medicare reimbursement rates in all respects except one, remanding to the Department of Health and Human Services a policy including postage as a wage-related cost.
The Southeast Medical Center and 113 other hospitals in low-wage areas challenged the HHS’ formulation of the Medicare “proportion” and “factor” rates, set forth in a 1983 statute used to compute Medicare payments.
Reimbursement rates vary geographically, with lower-wage areas receiving less money than high-wage areas for the same services and procedures.
The DC Circuit upheld a District of Columbia Federal Court summary dismissal of most of the hospitals’ arguments, citing statutory ambiguity that gives the federal government discretion in choosing data sources and defining geographic areas.
Money that hospitals spend on health insurance, pension plans and other fringe benefits for their own employees are reasonably included in the definition of “wage,” the appeals court ruled, and may be included in calculating Medicare reimbursement.
The ruling upheld including in the proportional rates the costs of external landscapers, accountants and lawyers, saying that the department thus captured the “buy-versus-hire” decisions that hospitals make.
But the D.C. Circuit did find a flaw in the agency’s inclusion of postage costs in calculating the Medicare proportion. The buy-versus-hire rationale “cannot justify including postage costs as wages or wage-related, as there is no realistic possibility that a hospital would hire its own employees to deliver any significant fraction of its mail,” Judge Garland wrote for the panel.
The appellate court noted that subsequent statutory amendments addressed or mooted several of the hospitals’ challenges.
The Obama administration recently asked Congress to empower an independent advisory panel to suggest Medicare reimbursement rates, which are often subject to local political battles.