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 District of Columbia Circuit Court ultimately agreed with the hospitals' position in one of those cases, Cape Cod Hospital v. Sebelius, that alleged the CMS incorrectly applied the law's budget neutrality requirement to hospitals' rural wage index. Hospitals insisted for years that CMS officials overcompensated with cuts to other hospitals when it tried to offset the law's increased payments to rural hospitals from fiscal 1999 to fiscal 2011.
“We are pleased that CMS is remedying its error in accord with the Court of Appeals' ruling and repaying hospitals for the significant underpayments it has been making for years,” Joanna Kim, senior associate director for policy at the American Hospital Association, said in e-mailed comments. “We only regret that CMS chose not to correct these errors sooner.
The AHA and other national hospital associations repeatedly urged the CMS to alter its calculations in comment letters since 2006, she said.
Jon Neustadter, a partner at Hooper, Lundy and Bookman, a Los Angeles firm representing about 500 hospitals in the settlement, said the final cost to the CMS could exceed $3 billion as all of the deals with individual hospitals and systems are finalized.
Three of the nation's publicly traded hospital chains, which will receive a combined $390 million from Medicare, appeared to be the only ones to comment on their involvement with the settlement so far. Nashville-based HCA, the nation's largest for-profit hospital chain, will receive $271 million and Tenet Healthcare Corp., of Dallas, will receive $84 million from the CMS. Universal Health Services told investors the company would receive $35 million.
The settlement established the methodology for determining what the CMS owes the hospitals stemming from the lawsuits and “a number” of administrative appeals for rates between fiscal 2007 and fiscal 2011. The settlements also resolve appeals to rates paid from fiscal 1999 to fiscal 2006.
For Tenet, the good news came the same week the company announced it would pay the U.S. nearly $43 million to resolve False Claims Act allegations.
And in a separate development, the three hospital companies will owe a combined $142 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; Tenet has to pay back $51 million; and UHS calculated an $8 million hit.
