Teaching hospitals' hopes for as much as $100 million in extra Medicare payments were crushed last week as the U.S. Supreme Court sided with federal regulators in a dispute over graduate medical education reimbursements.
St. Paul-Ramsey Medical Center in St. Paul, Minn., now known as Regions Hospital, sued HCFA in federal court in 1994, challenging the legality of the agency's recalculation of the amount Medicare pays for hospitals' GME costs.
The court, voting 6-3, said the federal government may re-audit 1984 GME costs as a base year for determining subsequent Medicare payments. A 1986 law changed the Medicare payment methodology for GME costs.
Justice Ruth Bader Ginsburg wrote the opinion, stating the re-audit rule is authorized by the Medicare Act and is not unfairly retroactive to hospitals. Ginsburg also noted that HCFA was not seeking to recoup overpayments made in 1984 but to prevent future overpayments.
Regions, a 409-bed facility, argued in its complaint that HCFA should use the GME costs already recognized for 1984, not the re-audited figures. The re-audit dropped Regions' 1984 allowable costs by 45% to $5.5 million from $9.9 million.
The hospital lost its challenge to the validity of the 1989 regulation that authorized the recalculation in federal district court in Minnesota in 1995 and again in federal appeals court in 1996.
"We're disappointed," said Robert Dickler, senior vice president of the Association of American Medical Colleges, which has been watching the case. "We thought we had a good case, and we did. The split decision in the (Supreme) Court . . . (is) indicative of the real confusion and the valid points on both sides of the argument."
"Obviously, we would have preferred to win the case," said Ronald Sutter, an attorney with Powers Pyles Sutter & Verville in Washington, who represented the hospital. "We've got to accept the decision. We are pleased that we had three votes."
Justices Antonin Scalia, Sandra Day O'Connor and Clarence Thomas dissented.
Sutter called the court's decision narrow, saying it is unlikely to have much of an effect on other similar cases.