Healthcare Litigation

Quality Reimbursement Services, has a 28+ year history of advocating for hospital rights and reimbursements. In addition to cost report and S-10 consulting, disproportionate share, crossover bad debt, SSI Disability Eligibility and 340B services – QRS is possibly best known for its work at the PRRB and in District Court. Whenever QRS sees an injustice or an error by the government that adversely affects US hospitals, a group appeal will be formed. Beginning with the landmark case of Loma Linda Medical Center vs. HHS back in 1992 , QRS has built a sterling reputation for representing client hospitals at the PRRB, District and the Supreme Court. The end result has been over $900 million in court settlements for client hospitals.

There’s still time to join a QRS group appeal.

QRS is compensated entirely on a contingency basis, so it costs hospitals nothing to join a QRS group appeal. QRS pays all up-front and filing costs. If the case is decided in favour of the providers, QRS negotiates a settlement with CMS for client hospitals. If the case is not decided in favour of providers, there is no fee/charge. Following is a brief history of QRS healthcare litigation. Note that QRS is still accepting hospitals who want to join the St. Francis Medical Center v. Azar group appeal. If you are interested in joining this appeal, simply contact us at groupappeals@qualityreimbursement.com.

• Loma Linda Medical Center vs. HHS

QRS was the lead firm in this 1992 appeal that protested the manner in which SSI percentages were used in calculating DSH reimbursements. Up until this decision, hospitals had no way of knowing how SSI data was applied to their DSH calculations. Success in this appeal made it possible for providers to request their SSI information from CMS via a “Data Use Agreement” (DUA) and receive PSA reports. Providers have since been able to confirm or protest SSI percentages in their DSH calculations and reimbursements.

• In Re Medicare.

QRS represented over 130 hospitals (out of a total 667 plaintiffs) in this group appeal. The case was concluded in 2008 after more than 4 years of litigation, and resulted in a $666.1 million settlement for providers that participated in the group appeal.

• Cape Cod v. Sebelius.

Sometimes known as the Rural Floor Budget Neutrality Adjustment (RFBNA) Appeal, this decision in the DC Circuit Court of Appeals, found that CMS knowingly perpetuated an error in factoring the “Rural Floor Budget Adjustment” in calculating PPS payments. QRS represented over 200 hospitals in this group appeal, resulting in $190 million in reimbursements to client hospitals.

• 2-Midnight Rule.

The 2014 IPPS Final Rule changed the criteria for inpatient admissions, requiring the admitting doctor to determine if the patient needed a hospital stay lasting 2 midnights in order for the patient to qualify as an Inpatient. After being challenged by multiple lawsuits, CMS agreed to reimburse hospitals for shortfalls in 2014, 2015 and 2016 IPPS payments. The 2017 Federal Register increased IPPS payments for all Medicare hospitals by a factor of 0.6% (0.2% per year for each of the three years in dispute). However, in representing over 300 hospitals in this appeal, QRS contends that the increase does not make all client hospitals “whole.” This is because the 0.2% factor was based on 2014 data, and hospitals had fewer inpatients in 2017 than in 2014, so increased payments on a per-patient basis, result in less money for the hospital. Also, QRS believes that hospitals should be reimbursed for interest on lost revenue over the course of payment shortfalls. A decision was reached in favor of providers, but only for lost interest. A settlement is being negotiated for hospitals that appealed this issue.

• American Taxpayer Relief Act (ATRA) appeal.

With the American Taxpayer Relief Act of 2012, congress directed CMS to recoup $11 billion from hospitals. CMS projected it could recoup the $11 billion by applying an -0.8% rate adjustment for each year between 2014 and 2017 – total of 3.2% reduction. By 2017, ATRA had accrued 3.9%, exceeding its goal by 0.7%. QRS argues on behalf of 330 client hospitals, that CMS acted erroneously by failing to restore the reduction through a 0.7% positive adjustment for 2018. As a result, CMS is recouping from providers more than the $11 billion authorized by ATRA. The QRS group appeal seeks a one-time settlement for client hospitals equal to 0.7% of DRG for FFY 2017, and each year thereafter, that doesn’t account for the correction.

• 1498R and 1498R1 or “SSI Systemic Errors”

QRS contends that CMS erroneously placed SSI “No Pay” and “Exhausted Days” in the Part A denominator for DSH calculations, thereby reducing payments to DSH hospitals. As a general business practice, QRS appeals this issue for all DSH clients – thereby preserving their rights to appeal the issue if/when the appeal is found in favor of providers. A favorable decision on 1498R has resulted in settlements totaling more than $85 million for 300 QRS Clients. 1498R2 is expected to be settled in 2019.

• St. Francis Medical Center v. Azar.

Also known as the Predicate Facts/Standardized Amount Appeal, alleges that CMS erroneously calculated the 1981 standardized amounts (Federal rate) by failing to properly account for transfer cases in calculating the Federal rate. CMS used the “Predicate Facts” rule to dismiss any challenges to a rule already in existence. The Saint Francis decision in the DC Court of Appeals, held that “Predicate Facts” cannot be used to shield CMS from errors made in the past, but still affecting providers today. The Saint Francis case also mentioned errors in the cap on the number of full-time (FTE) residents eligible for reimbursement established in a previous year. By knocking-down the “Predicate Facts” rule, providers may appeal this issue as well. QRS organized a group appeal for the 2018 Federal Register, seeking reimbursements for the standardized amount issue – estimated to be 1% of DRG for all cost report years that can still be appealed. And until there is a final decision (if the Supreme Court decides to take the case), QRS will add hospitals to the group and appeal the issue on NPRs as they are released. There are currently 350 hospitals signed-up for this group appeal, and new hospitals may join the appeal up until a final decision is reached. Plans are also in the works to appeal the Predicate Facts/FTE Cap.

• Allina v. Sebelius (Allina I).

At issue, was the 2004 final rule that placed Medicare Advantage (Part C) days in the denominator of the DSH Medicare fraction, thereby diluting the value of the Medicare fraction and reducing reimbursements for most hospitals. Allina I challenged the rule on procedural as well as substantive grounds. The district court in Washington DC found that the rule was procedurally invalid because CMS did not provide fair notice changing the existing rule (which excluded Part C days from the fraction). The DC circuit agreed and vacated (invalidated) the 2004 rule. This victory for hospitals resulted in over $50 million for over 200 hospitals in the QRS group appeal.

• Allina v. Azar (Allina II & III)

Allina II. Following the decision in Allina I, CMS instructed its contractors (MACs), to include Part C days in the Medicare fraction for cost report years not before the D.C. Circuit. Hospitals sued, citing failure to follow required notice and comment procedures, and the D.C. Circuit invalidated this rule as well. The secretary appealed to the Supreme Court, which affirmed the D.C Circuit. QRS represents over 400 hospitals in this appeal.

Allina III. Instead of honoring the Supreme Court decision and compensating hospitals for lost revenue, CMS published a proposed “retroactive” rule that would require Part C days to be counted in the Medicare fraction for cost reporting periods before FFY 2014.The Medicare statute generally prohibits retroactive rulemaking, except for two limited exceptions: (1) if such retroactive application is necessary to comply with statutory requirements; or (2) if failure to apply the change retroactively would be contrary to the public interest. If this retroactive rule is finalized, providers will surely sue on the basis: (1) because the 2004 rule was invalidated, the pre-existing 1986 rule, which allows only covered days to be put in the Medicare Fraction, controls; (2) the plain language of the statute requires that only covered days may be included in the statute; (3) Congress amended the statute to prohibit retroactive rulemaking only in narrow circumstances (see above).

Hospitals should not be forced to fight any more battles in this war of attrition. Hospitals almost always operate on razor thin margins, but they are especially in peril given the ongoing COVID-19 pandemic. Hospitals need Congress’s and the Administration’s help to be paid the DSH payments they are rightly owed. Resolving the Part C Days issue in favor of the hospitals would result in reimbursements close to $6 billion nationwide. This is important for hospitals with active Part C appeals before the Board as well as hospitals that don’t, because the use of “retroactive rulemaking” in this broad context would pose a slippery slope towards negating any appeal or court decision that does not favor the government.

• Empire v. Becerra

Becker’s Healthcare, June 27, 2022

The Supreme Court on (June 24) dealt a blow to safety-net hospitals' Medicare rate calculation.

The high court resolved a years-long fight between the Health and Human Services Department and the hospital industry by ruling the agency appropriately interpreted Medicare law when it changed a formula for calculating safety-net payments in 2005.

Hospitals won't lose money from the ruling, but they also won't gain extra funds they argued they're entitled to, said Allison Hoffman, a law professor at the University of Pennsylvania.

The 5-4 decision, authored by Justice Elena Kagan, reverses a decision from the U.S. Court of Appeals for the 9th Circuit.

"HHS's regulation correctly construes the statutory language at issue. The ordinary meaning of the fraction descriptions, as is obvious to any ordinary reader, does not exactly leap off the page.... The text and context support the agency's reading: HHS has interpreted the words in those provisions to mean just what they mean throughout the Medicare statute," Kagan wrote.

"[T]he point of the statute is not to pay hospitals the most money possible; it is to compensate them for serving a disproportionate share of low-income patients," Kagan wrote.

"HHS's misreading of the statute has significant real-world effects: It financially harms hospitals that serve low-income patients, thereby hamstringing those hospitals' ability to provide needed care to low-income communities," Kavanaugh wrote.

Disproportionate share hospital payments offset costs for hospitals that treat large numbers of low-income patients. DSH payments are determined by a complex equation that measures how many of a hospital's patients are eligible for Medicaid, but not Medicare, and how many are entitled to both Medicare Part A and Supplemental Security Income benefits from Social Security.

The Centers for Medicare and Medicaid Services decided the Medicare component of the formula should include the patient days of anyone enrolled in Medicare Part A, regardless whether the program paid for or covered services provided during those days. This change resulted in lower DSH payments for most safety-net hospitals.

Empire Health Foundation, an organization that acquired the assets of Spokane, Washington-based Valley Hospital Medical Center, now known as MultiCare Valley Hospital, challenged the regulation in court over fiscal 2008 reimbursements on the hospital's behalf. Empire Health Foundation argued the rule's treatment of Medicare beneficiary patient days not covered by Medicare didn't conform to the law.

The U.S. District Court for the Eastern District of Washington vacated the regulation in 2018 and ruled that HHS didn't comply with notice and comment procedures when promulgating the regulations.

Two years later, the U.S. Court of Appeals for the 9th Circuit held that HHS did follow appropriate procedures but that the policy itself nevertheless was unlawful. The 2005 rule uses different phrases, "eligible for" and "entitled to," interchangeably in the DSH calculation. Medicaid law uses the phrase "eligible for" benefits, while Medicare uses "entitled to." Congress intended them to mean different things, the appeals court ruled.

The Supreme Court decided Medicare law is explicit: Everyone who meets the basic statutory criteria is entitled to hospital benefits under Medicare Part A.

"If 'entitled to benefits' instead boreEmpire's meaning, Medicare beneficiaries would lose important rights and protections, such as the ability to enroll in other Medicare programs," Kagan wrote.

Empire Health Foundation and its lawyer Daniel Hettich, a partner at law firm King & Spalding, didn't immediately respond to requests for comment.

Prior to the opinion's release, Heittech said the impact of a ruling in favor of HHS would mean a continuation of the status quo for hospitals. "There's no further appeal," he said. "Essentially, on this issue, it would be 'game over.'

Hospitals contend that the revision to DSH payment calculations disadvantaged hospitals treating the patients the program is meant to serve and are disappointed by the decision, said Chip Kahn, president and CEO of the Federation of American Hospitals, which represents for-profit health systems.

"This is really shortchanging those vulnerable patients by giving CMS the opportunity, in a sense, to shortchange providers," Kahn said. The financial impact of the ruling is difficult to assess given how significantly DSH payments vary from hospital to hospital, he said.