It's like your college recalculating your grade-point average seven years after graduation.
Thanks to a 1986 law, HHS pays hospitals for Medicare's share of their medical education costs based on hospitals' audited 1984 Medicare cost reports. But HHS waited until 1989 to issue regulations implementing the law. Those rules require HHS to re-audit hospitals to verify their 1984 costs. But many Medicare fiscal intermediaries didn't get to that task until 1991.
Those re-audits have been the subject of three federal lawsuits by hospitals, which were found to have lower reimbursable graduate medical education costs than first claimed.
Until recently, federal courts sympathized with HHS and the agency's need to prevent the perpetuation of overpayments to hospitals.
But in a Jan. 13 ruling, the third federal appeals court to hear the matter essentially told HHS tough luck.
According to the 6th U.S. Circuit Court of Appeals in Cincinnati, the re-audit of 586-bed Toledo (Ohio) Hospital took place after the expiration of the time period in which HHS was legally allowed to take action on the hospital's 1984 cost report.
For Toledo Hospital, the decision means a "couple of million dollars" in back payment, said its attorney, Ronald Sutter of the Washington firm of Powers Pyles Sutter & Verville.
Sutter guessed that 50 to 100 hospitals haven't accepted HHS re-audits of their costs and perhaps $200 million in payments is at stake. The Association of American Medical Colleges didn't respond to a request for information regarding the case's impact.
The court's emphasis on fairness to hospitals also is important, Sutter said. The re-audit occurred after Toledo Hospital no longer was required by law to store 1984 records.
The dispute over the audit policy may end up before the U.S. Supreme Court. St. Paul-Ramsey Medical Center in St. Paul, Minn., which lost its case against HHS, plans to ask the Supreme Court to hear its appeal. Sutter also represents the 325-bed hospital.