A federal court decision in Washington, D.C., last month could open the door to more than $100 million in retroactive disproportionate-share reimbursements for 600 hospitals, healthcare lawyers said.
On March 26, U.S. District Judge Paul Friedman ordered HHS Secretary Tommy Thompson to reopen Medicare reimbursement decisions dating back at least a decade for Springfield, Mass.-based Baystate Health System and 27 other hospitals affecting their disproportionate-share funds. The CMS uses the payments to compensate hospitals that treat a high number of indigent patients.
The Baystate plaintiffs are among 600 hospitals that filed to claim such reimbursements, according to healthcare lawyer Murray Klein of the firm Reed Smith, which represents 120 of those hospitals.
In his decision, Friedman overruled an earlier CMS decision and compelled the agency to reopen past calculations relating to the payments that set the formulas for the disproportionate-share reimbursements.
Then HHS Secretary Donna Shalala in 1997 issued a correction to the formula used to calculate the payments but refused to adjust the money hospitals had received for previous years. Hospitals challenged the refusal, and in 2001, two New York hospitals won a landmark decision that said under Medicare regulations hospitals had up to three years to file for reopening. Friedman cited that case in ruling for Baystate.
A CMS spokesman said the agency is reviewing the decision with the U.S. Justice Department to consider whether it will appeal.
Washington lawyer Christopher Keough of the firm Vinson & Elkins, who tried the Baystate case and represents more than 100 hospitals in the ongoing litigation, said the hospitals do not seek a specific dollar amount but rather the right to reopen their disproportionate-share cases for the fiscal years preceding Shalala's 1997 decision.
Klein said he doubts whether Friedman's ruling will open the door for additional hospitals to seek reopenings, noting that to qualify the hospitals had to file within six years of Shalala's decision, a statute of limitations that expired Feb. 27, 2003.
Vicki Gottlich, a lawyer with the Washington office of the not-for-profit, nonpartisan Center for Medicare Advocacy, said the hospitals relying on disproportionate-share payments are often in rural or urban neighborhoods and need the revenue to treat poor patients.