A group of 186 hospitals argued in federal appeals court Thursday that Medicare underpaid hospitals by more than $3 billion in outlier payments for particularly expensive patients. A lawyer for HHS countered that the agency did nothing wrong.
A three-judge panel heard oral arguments at the U.S. Court of Appeals for the District of Columbia Thursday in the case, District Hospital Partners v. Burwell.
Outlier payments are extra payments made to hospitals when the estimated cost of treating a patient exceeds the standard Medicare payment by a certain amount.
The hospitals allege that the HHS secretary employed unreasonable methods in making projections of future Medicare payments for the purposes of setting the threshold after which outlier payments would be made. This led to underpayments to hospitals in 2004, 2005 and 2006, the hospitals say.
“This is an enormous, big deal because it provides payment for the sickest of the patients,” Robert Roth, an attorney for the hospitals, told the judges Thursday. “The process here was flawed.”
The hospitals called the thresholds set by the HHS secretary “arbitrary and capricious” in court documents.
But James Luh, a Department of Justice attorney arguing for HHS, told the judges that projections are implicitly imprecise.
“This court has recognized that projections and forecasts are by nature speculative, inexact and riddled with uncertainty, and that's especially true for outlier payments because outlier payments are intended to address payments that are aberrational,” Luh said. “Predicting outlier payments requires the agency predict the most rare, the most unusual cases.”
A lower court sided with HHS, saying it had used reasonable projection methods and adequately explained those methods.
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