More than 600 hospitals are suing the U.S. Department of Health and Human Services over a formula used to determine Medicare payments that the plaintiffs allege is based on bad math.
The plaintiffs - 677 hospitals located throughout the United States - filed suit against the department on Tuesday in U.S. District Court for the District of Columbia. The complaint (PDF) accuses department officials of relying on a formula for determining per patient payments made to hospitals that unlawfully lowers the rate each year.
According to the complaint, HHS has relied for decades on a system for determining payments that takes into consideration a standardized per patient discharge amount paid to all hospitals and also a wage index, which raises or lowers the rate paid to an individual hospital based on wages in the surrounding region.
In 1997, Congress set up a “rural floor” for the wage index, meaning that the wage index for urban hospitals couldn’t be less than the wage index in rural hospitals in the same state. In order to make sure that the adjustment wouldn’t affect the total amount of Medicare payments, HHS was directed to adjust the wage index to keep the total budget neutral.
According to the complaint, the hospitals allege that in calculating the adjustment to the payment rates needed to keep the overall budget neutral, HHS officials mistakenly duplicated the "rural floor" wage adjustment mechanism in the overall formula. This in turn lowered the overall payments to hospitals, according to the complaint, which the plaintiffs claim violated the law requiring such adjustments to be budget neutral.
The hospitals claims HHS has been relying on the formula since at least 2007. In practice, the hospitals allege that in keeping the flawed formula in place, the hospitals have unlawfully received increasingly lower payments over the years.
Stephanie Webster of Washington’s King & Spalding is representing the hospitals; firm spokesman Les Zuke said they do not comment on client matters. HHS, through a spokesman, declined to comment.