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High court quashes hospitals' hopes of recouping underpayments


By Joe Carlson
Posted: January 22, 2013 - 3:45 pm ET
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In a unanimous, decision the U.S. Supreme Court on Tuesday dismissed hospitals' and health systems' hopes of recouping millions in Medicare underpayments made between 1987 and 1994.

Providers had asked the high court to give them the same extra time to find underpayments in Medicare reimbursement that the government gave its outside contractors to find overpayments. The ruling rejected the equity argument, noting the dozen or so private companies that manage Medicare claims have an extremely difficult job in looking for errors among claims from thousands of U.S. hospitals, while hospitals, in contrast, have only their own claims to worry about.

The dispute began at 659-bed Baystate Medical Center in Springfield, Mass., which successfully appealed its 1993-96 disproportionate-share payments from Medicare after the Provider Reimbursement Review Board found that the CMS had used a “flawed process” to determine how much the Massachusetts hospital's Medicare payments should have been increased to account for the expensive, low-income residents it served in those years.

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Baystate's legal victory came in 2006, the same year that it became public information that the CMS had been using bad data in its secretive disproportionate-share system. That revelation came after the three-year limit hospitals face to appeal Medicare underpayments from the 1980s and 1990s.

Other hospitals moved quickly to take advantage of the lower court ruling. A group of hospitals owned by not-for-profit North Shore-Long Island Jewish Health System, Great Neck, N.Y., and investor-owned Universal Health Services sued HHS within 180 days of the Baystate decision becoming public. They argued that the limitation on appeals should apply from the time that they learned about the flawed process—a legal concept known as “equitable tolling.”

The U.S. District Court in Washington disagreed with the hospitals and tossed out their case, but the U.S. Court of Appeals for the District of Columbia Circuit reinstated it. On Tuesday, the Supreme Court ended the debate by ruling 9-0 that the hospitals have only three years from the time of payment to appeal, regardless of when flaws in the process become known.

“For nearly 40 years the secretary has prohibited the board from extending that deadline, except as provided by regulation,” the decision, written by Justice Ruth Bader Ginsburg, said (PDF). “And until the D.C. Circuit's decision in this case, no court had ever read equitable tolling” in the law governing Medicare appeals.

The American Hospital Association, in a brief supporting the hospitals' argument, said such a decision would be unfair to hospitals because it denies them the ability to file appeals to recoup money legally owed to them. The harm was notable especially given the complexity of the law and the much wider latitude that Medicare contractors have to look for overpayments.

“The Medicare act has been called 'among the most completely impenetrable texts within human experience,' ” AHA attorneys wrote, quoting past case law (PDF). “But among all of its complexities, one thing in the act is perfectly clear: Congress intended for there to be, at the end of Medicare's administrative labyrinth, an opportunity for judicial review.”

The original hospitals seeking redress at the Supreme Court in Sebelius v. Auburn, 11-1231 were: Auburn Regional Medical Center, Chalmette Regional Medical Center, Doctors Hospital of Staten Island, Edinburg Regional Medical Center, Forest Hills Hospital, Franklin Hospital, Hackensack University Medical Center, Inland Valley Regional Medical Center, Long Island Jewish Medical Center, McAllen Medical Center, Northern Nevada Medical Center, River Parishes Hospital, Southside Hospital, Staten Island University Hospital, UHS of New Orleans, Valley Hospital Medical Center and Wellington Regional Medical Center.


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