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Wednesday, December 6, 2023
Courthouse News Service
Wednesday, December 6, 2023 | Back issues
Courthouse News Service Courthouse News Service

No Medicare Refund of Illinois Hospital Tax

CHICAGO (CN) - Hospitals cannot seek a Medicare reimbursement of the taxes they paid to Illinois because they benefited from state funding, the 7th Circuit ruled.

In 2004, Illinois passed legislation imposing a tax on hospitals for 2004 and 2005 equal to $84.19 for each occupied bed day. The money entered a fund that the Illinois Department of Health used to make hospital access improvement payments to hospitals.

Nineteen hospitals included this tax assessment as part of their application for reimbursement of medical services to Medicare beneficiaries.

In declining to reimburse this cost, the Illinois Department of Health and Human Services found that the access payments already reimbursed the hospitals for the tax assessment.

The hospitals filed suit, but a federal judge in Springfield granted the state summary judgement.

A three-judge panel of the 7th Circuit affirmed Tuesday, praising the lower court's "thoughtful and carefully drafted opinion."

"A plain reading of the legislation evidences that the access payments clearly served to reduce related expenses, i.e., the tax assessments, and therefore were appropriately offset against the tax assessments," according to the opinion authored by U.S. District Judge Ruben Castillo, sitting by designation from the Northern District of Illinois.

"To simply ignore the access payments, while recognizing the tax assessments in full in determining the hospitals' reimbursable costs, as the hospitals essentially request, would violate the statutory and regulatory directives that health care providers should be reimbursed only for the costs they have actually incurred, i.e., their net costs," he continued.

"While the hospitals are correct that the secretary must assess the costs 'actually incurred,' their argument does not recognize that the secretary's regulations require that reimbursable costs must necessarily take into account any amounts that defray a health care provider's costs. In determining allowable costs, the secretary should not look at costs in a vacuum, but must look at the totality of the circumstances. The hospitals' argument ignores the real net economic impact of the access payments," the 48-page decision held.

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