U.S. Told to Cough Up Interest for Hospitals

WASHINGTON (CN) - Medicare providers can charge interest on underpayments by the government sooner rather than later, a federal judge ruled, refusing to dismiss a hospital's lawsuit.

UPMC Mercy, a Pittsburgh hospital, had sued Department of Health and Human Services Secretary Kathleen Sebelius over its practice of delaying interest from accruing on money that the government owes providers.

As the parties cross-moved for summary judgment, and U.S. District Judge Henry Kennedy Jr. sided with the hospital in a 15-page ruling, which comes 20 years after Blue Cross of Western Pennsylvania recouped more than $9.7 million in alleged overpayments from the hospital.

Though the money was later returned to UPMC, a legal battle ensued over how much interest the hospital could charge the government for the delay.

"UPMC, counting from the date of the Board's 1998 decision, calculated that it was owed over $9 million in interest as of March 2008," Kennedy wrote. "The Board, however, disagreed, ruling that its own 1998 decision had not been a 'final determination' of an underpayment for the purposes of the Hurry-Up-and-Pay Statute's interest provision."

The government claimed any interest had to be put on hold until revised paperwork went through. Since the government had paid the hospital within 30 days of completing the revised paperwork, it claimed it owed no interest at all.

Though Kennedy sided with UPMC that the government violated the Administrative Procedure Act in adopting the interest regulation of Medicare, he did not close the door on future challenges Sebelius could bring.

"Any future Board interpretations of the interest-payment regulation will [sic] judged by the strength of the rationales offered by the Board at that time," Kennedy wrote.

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