A group of rural hospitals filed suit Thursday against the U.S. Department of Health and Human Services, claiming that they've lost $86.6 million in Medicare reimbursements to date because of an unlawful change in policy.
According to the complaint (PDF), filed in U.S. District Court for the District of Columbia, the hospitals are claiming that in trying to keep the department's overall budget unchanged, Health and Human Services Secretary Kathleen Sebelius unlawfully adjusted how the reimbursement rate for rural hospitals is calculated.
The lawsuit centers on a change in the hospital-specific rate, or HSP, used to calculate Medicare reimbursements for sole community hospitals and Medicare-dependent small hospitals in rural areas. Under the statute, the hospitals argue that officials are only allowed to make adjustments to the formula used to determine reimbursements for other hospitals, and not the hospital-specific rate for rural hospitals.
The adjustment “is going to fall on these primarily rural hospitals and the change in policy is going to negatively affect them financially,” said McDermott Will & Emery partner Ankur Goel, who is representing the hospitals. “The lawsuit is just intended to pay the reimbursement in accordance with the statute.”
Under the current system, Medicare reimburses many hospitals using a formula based on each patient’s diagnosis and treatment. Patients are grouped based on their type of diagnosis, and each group receives a “weight” classification that reflects the amount of treatment needed.
The reimbursement for the non-rural hospitals is determined by multiplying the different grouping weights per patient by the standardized amount which, in 2012, will be $5,200. At the rural hospitals, however, the weight is multiplied by the hospital-specific rate, which tends to be higher.
As the Health and Human Services Department began transitioning to a new system for grouping patients, officials needed to adjust the reimbursement formulas to make sure the overall budget stayed the same. The hospitals are claiming that under the law governing reimbursements, the department can’t make those adjustments to the hospital-specific rates for rural hospitals.
The complaint alleges that when the department first began considering changes to the grouping system in 2007 and 2008, officials at the time rejected making adjustments to the hospital specific-rate because they believed it wasn’t allowed under the statute.
A spokesman for the department did not return a request for comment.
Rural hospitals aren’t alone in challenging how the department calculates reimbursements. In late May, a group of more than 600 hospitals filed suit against the department, also in Washington federal court, claiming that part of the reimbursement formula was based a “basic math error” that lowered payments.