Court Rules That HHS Must Recalculate Hospitals’ Medicare Pay for Training Physicians

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Following a recent federal court ruling, hospitals can expect an increase in Medicare reimbursements for training physicians in their residency programs. 

In Milton S. Hershey Medical Center v. Becerra, No. 19-2680, the United States District Court for the District of Columbia (the “DDC”) ruled that the Department of Health and Human Services (“HHS”) unlawfully changed the statutorily‑assigned weighting factors used to calculate reimbursements to hospitals for resident stipends, supervisory physician salaries, and administrative costs related to training residents and fellows. These reimbursements, known as direct graduate medical education (“DGME”) payments, are, in part, determined by the weighted average number of full-time equivalent (“FTE”) residents employed by the hospital. 

The challenged regulation was originally promulgated in 1997 and operates to reduce the weighted number of FTEs a hospital may claim for reimbursement when that hospital’s unweighted FTE count exceeds the number of FTE residents for the hospital’s most recent cost reporting period ending on or before December 31, 1996 (the “1996 cap”). In other words, when a hospital exceeds the 1996 cap, its weighted FTE count is reduced commensurate with the amount by which the hospital exceeds the cap.

The DDC held that “the text of the statute does not give the Secretary [of HHS] the latitude to decide, under these conditions, to change the weights that Congress assigned to residents and fellows when he calculates the FTE residents for each hospital.” Accordingly, the DDC remanded the matter to HHS to recalculate Plaintiffs’ reimbursement payments consistent with the Court’s opinion.