The settlement agreement was signed April 5.
The CMS declined requests for details regarding the dollar amount or number of completed and expected payments to other hospitals under the deal because, according to an agency official, settlement negotiations with individual providers are ongoing. More than 500 hospitals nationwide were involved in the legal challenges.
The lawsuits challenged the manner in which the CMS calculated the rural floor provision of the Balanced Budget Act of 1997, which addressed the federal program's comparable urban and rural hospital wage indexes within each state.
The settlements followed a ruling by the District of Columbia Circuit Court in one of those cases, Cape Cod Hospital v. Sebelius, that the CMS incorrectly applied the law's budget-neutrality requirement to hospital's rural wage index from fiscal 1999 to fiscal 2011, according to a CMS official. The settlement established the methodology for determining what CMS owes the hospitals stemming from both the lawsuits and “a number” of administrative appeals for rates between fiscal 2007 and fiscal 2011, according to a CMS official. The settlements also resolve appeals to rates paid from fiscal 1999 to fiscal 2006.
Tenet anticipated the favorable resolution of this and other settlements when it raised its 2012 earnings outlook on February 28, 2012, although it limited expected contributions from pending settlements to a maximum of $50 million.
In a separate development, the two large hospital systems will owe a combined $134 million for retroactive Medicare Disproportionate Share Hospital pay cuts.
HCA owes $83 million under revised Supplemental Security Income ratios used for calculating the DSH payments, while Tenet has to pay back $51 million, according to the two companies.
The irregularly updated SSI ratios were revealed in March in a low-key notice on a CMS website. The agency, which last updated the SSI ratios in 2005, will not release national figures for the adjustments, according to an official.
HCA has continued to rely on the last annual round of SSI ratios CMS issued to each hospital when filing its hospital cost reports, according to the company press release. The result was a retroactive adjustment that reduced its Medicare revenues by about $1 million per month from October 2005 through March 2012.
A Tenet official said that company set aside $49 million in reserves for potential SSI adjustments in prior reporting periods.