Join the QRS Saint Francis Medical Center v. Azar Appeal

The D.C. Circuit’s June 29, 2019 decision in Saint Francis Med. Ctr. V. Azar, No. 17-5098, 2018 BL 232132 eliminated CMS’s so-called predicate facts policy.

What are predicate facts?

Predicate facts are the underlying facts or statistics used to support the amount of CMS payment to hospitals. One example mentioned in the court’s decision, referenced the predicate facts restricting a hospital’s ability to claim graduate medical education reimbursement for more full-time residents than the hospital trained during its most recent cost reporting year ending on December 31, 1996 [U.S.C. 1395ww(d)(5)(B)(v)]. Commonly referred to as the full-time equivalent or “FTE” cap, in this particular example, an error in calculating/reporting the cap in 1996, coupled with failure to appeal the issue on NPR or reopening request – meant that the error was cast in stone. The effect of not appealing the error on NPR, or reopening request, set reimbursement for all future cost reporting periods, even though the reimbursement amounts in later years were inconsistent with regulatory or statutory rules. The hospital can now appeal its current cost report and hope to challenge the FTE cap set erroneously back in 1996.

Immediate implications of Saint Francis v. Azar

Plaintiffs in the Saint Francis case asserted that the present-day standardized rate, used to determine all inpatient hospital payment rates, is understated. This is due to the fact that CMS calculates a “standardized rate” each year by updating the rate that was determined in 1983 when Congress enacted the Inpatient Payment System (IPPS). But the 1983 rate improperly factored transfer cases (for which the hospital was never reimbursed) into the average, thus understating CMS payments for all years going forward. The Saint Francis decision found that the predicate facts regulation does not prevent hospitals from appealing factual determinations to the PRRB, even beyond the three year window for reopening requests. The plaintiffs in Saint Francis, and all other Medicare hospitals, may now pursue an appeal before the PRRB.

Before you join a group appeal…

The Saint Francis decision could have far-reaching implications for US hospitals. There are many examples of provider reimbursements that are determined by reference to a base-year calculation, like the standardized amount mentioned in this decision. If there are factual errors in these calculations, the striking-down of the predicate facts rule, opens these issues to possible appeals. It is important to note, however, that CMS has the right to appeal the Saint Francis decision to the Supreme Court. No one can say if the Court will hear the case. Or if it would overturn the District Court’s decision. In any event, hospitals are encouraged to protest the issue on cost reports in order to protect their rights to appeal, assuming a pro-provider final decision. Given the fact that this issue is still working its way through the legal process, and not a certainty, hospitals might want to think twice before paying any up-front costs in order to join a group appeal.

Why choose the QRS group appeal?

QRS currently has over 300 hospitals in its Standardized Amount appeal, and there are no up-front charges to join the appeal. A contingency fee is charged only if the District Court decision is upheld, and only after the hospital is reimbursed by CMS. By carefully analyzing cost reports from client hospitals, the impact of removing “transfers” from the standard rate calculation average, suggests reimbursements equal to about one percent of DRG for all “open” years. Even though MACs are rejecting amended cost reports that protest the issue, QRS still encourages hospitals to do so, thus showing an attempt to protest – which may be negotiable at time of settlement.

Plans are also in the works to launch a group appeal for all teaching hospitals impacted by the predicate facts rule, limiting the FTE cap.

Let us know if you would like to join the QRS Standardized Amount appeal, or if you would like to get updates on the progress of QRS healthcare litigation, including Predicate Facts/Standardized Amount.

Mike Vana
Healthcare Consultants
Tel. (201) 295-0642
Mobile: 917-592-5802
EMAIL: mvana@qualityreimbursement.com
Internet Address: www.qualityreimbursement.com

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