Some 2,000 hospitals-psychiatric facilities and others exempt from the prospective payment system-could reap millions of dollars in additional Medicare payments as a result of a new federal court ruling.
The decision said that Medicare must adequately compensate PPS-exempt providers for the cost of treating low-income patients.
The ruling by U.S. District Judge Charles L. Brieant in New York City rejected many of the arguments made by Rye (N.Y.) Hospital Center, which sought to overturn several Medicare reimbursement provisions and regulations. However, the decision "breathed new life into the (rate) adjustment process," said Frederick A. Nicoll, a New York attorney who represented Rye in the case.
Until now, HHS has been rigid about providing rate relief under its exceptions and adjustments process, Mr. Nicoll said. The new ruling makes it clear that "all of this ought to be addressed in the adjustment," he said.
The ruling said HHS must-for the first time-take into account the additional costs incurred by PPS-exempt hospitals in treating a disproportionate share of low-income patients, Mr. Nicoll said.
In a 35-page written decision, Judge Brieant said, "Hospitals providing inpatient services to Medicare-eligible patients are entitled to have their reimbursements reviewed to ensure that such payments for necessary services are fair and reasonable."
The ruling, announced last week, was handed down in a class-action suit filed by 41-bed Rye Hospital Center in June 1992 (July 6, 1992, p. 4). The original complaint sought damages of $930,000, some of which has since been recovered through rate appeals. Now, Mr. Nicoll said, Rye is owed at least $295,619.
Rye executives said the decision could be worth millions for private psychiatric hospitals and other PPS-exempt facilities, such as rehabilitation, children's and long-term-care hospitals as well as distinct psychiatric and rehabilitation units of acute-care facilities. However, there was no precise estimate of the amount that might be owed.
HHS attorneys were reviewing the decision late last week and hadn't said whether the government would appeal.
In the suit, Rye alleged that HHS effectively froze Medicare rates by using a formula based on hospitals' 1982 costs, with only minimal adjustments. It said HHS misinterpreted Congress' intent when it implemented PPS in 1984.
Judge Brieant rejected these arguments and said that hospitals must use existing appeals channels to seek rate relief.