Six Ohio hospitals are suing HHS over a part of the two-midnight rule that would cut inpatient payments to hospitals, following a judge's ruling against HHS in a similar case.
The hospitals want the U.S. District Court in Columbus to vacate a part of the rule, implemented in 2013, that would reduce compensation for inpatient services by 0.2%. That reduction was meant to offset estimated costs to Medicare associated with the rule, which directs CMS payment contractors to presume short-term hospital stays are inpatient admissions rather than outpatient observation visits if they span two midnights.
The hospitals, however, say the part of the rule calling for the payment reductions is “an arbitrary, capricious and unreasonable exercise of authority under the Medicare Act” and that HHS didn't follow the proper rulemaking process in issuing it. The six hospitals stand to lose an estimated $564,106 a year under the rule, they say.
The hospitals include Doctor's Hospital, Grant Medical Center and Riverside Methodist Hospital, all in Columbus; Dublin (Ohio) Methodist Hospital; Grady Memorial Hospital in Delaware,Ohio; and Marion (Ohio) General Hospital.
The U.S. Justice Department declined to comment on the lawsuit.
In September, a federal judge in the District of Columbia partially sided with the American Hospital Association and scores of hospitals and other associations that challenged the rule for the same reasons. The judge in that case, Shands Jacksonville Medical Center v. Burwell, agreed that HHS did not allow for adequate time for public comment on the rule, though he said the decision to reduce payments was within the agency's statutory authority.
In that ruling, the judge stopped short of vacating the rule entirely, instead ordering the HHS secretary to provide better justification for that part of the rule and reopen it for comments. His ruling didn't change the payment reductions but opened the door to changes in the future.
Jim Flynn, a partner with Bricker & Eckler who is representing the Ohio hospitals, said that while his clients agree with the judge's ruling in the Shands case, the new case will allow a different court to review the arguments. In addition, he said it's uncertain whether the Shands decision will result in any change to the 0.2% cut. “Because we don't know that's what's going to happen with Shands, we have to preserve our own rights,” he said.
Michael Clark, special counsel at Duane Morris, said he wouldn't be surprised to see more hospitals sue HHS over the reduction. Other hospitals are in the process of appealing the reduction to the Provider Reimbursement Review Board, an independent panel to which providers can appeal determinations by the CMS or its contractors. Appeals to that board typically must precede a lawsuit.
But he doubts the Ohio hospitals will succeed in getting a federal judge in Ohio to erase the payment reduction entirely. “It's unlikely that a judge would go much further and say that the first judge didn't go far enough,” Clark said.