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Hospitals Lose Outlier Payment and S-10 Audit Litigations

September 13, 2021
For more information about this blog post, please contact Khaled J. KleleRyan M. MageeLabinot Alexander Berlajolli, or Connor Breza.

Appellate Division Dismisses Outlier Payment Case

Lee Memorial Hospital v. Becerra, No. 20-5085 (DC Cir. 2021)

In this case, eight years ago, a number of acute-care hospitals sued the Department of Health and Human Services (“HHS”), challenging the amount of so-called Medicare “outlier” payments they had received from the HHS for the years 2008-2011. Generally speaking, outlier payments are intended to protect healthcare facilities from unexpected losses by providing Medicare reimbursements in instances of rare and costly treatments.

At the commencement of the litigation, the hospitals first argued to the United States District Court for the District of Columbia (“District Court”) that the District Court had jurisdiction to consider their suit and urged the court to render a decision on the merits of the case. Accepting the hospitals’ jurisdictional argument, the District Court subsequently ruled against the hospitals on the merits. In an abrupt change of course, several of the hospitals then appealed that ruling, arguing for the first time that the District Court lacked jurisdiction to entertain their lawsuit after all.

On appeal, the U.S. Court of Appeals, D.C. Circuit declined to accept the hospitals’ about-face. Instead, the Appellate Division ruled that for the hospitals to prevail in showing that the now-final judgment against them was void because the District Court ostensibly lacked jurisdiction to enter it, they would need to show that there was not even an arguable basis for that District Court’s conclusion—at the urging of the hospitals themselves—that jurisdiction existed over their challenge. The hospitals failed to make that showing.

The full appellate opinion can be found here.

Appellate Division Rejects S-10 Audit Litigation

Ascension Borgess Hosp. v. Becerra, No. 20-139 (DC Cir. 2021)

In this case, 48 hospitals eligible to receive uncompensated care payments under 42 U.S.C. § 1395ww(r) sued HHS, claiming Worksheet S-10 audits conducted in 2015 unlawfully reduced or otherwise altered the amounts of payment made by Centers for Medicare and Medicaid Services. The hospitals first appealed those reimbursement decisions to the Provider Reimbursement Review Board (“PRRB”), arguing that HHS’s use of unpublished audit protocols to establish uncompensated care payments violated the notice-and-comment rulemaking requirements of the Administrative Procedure Act. The PRRB determined that administrative review of the uncompensated care payments was barred by 42 U.S.C. § 1395ww(r)'s preclusion provision and, consequently, concluded that it did not have jurisdiction over the issues in the appeals. The hospitals then appealed the PRRB’s final decisions to the U.S. Court of Appeals, D.C. Circuit, challenging the PRRB’s dismissal of their reimbursement appeals for lack of jurisdiction.

The parties filed cross-motions for summary judgment. Ultimately, the D.C. Circuit granted HHS’s motion for summary judgment, while denying the plaintiffs’, holding that the applicable preclusion provision of 42 U.S.C. § 1395ww(r)(3) bars administrative and judicial review of HHS’s decision to use audited worksheet data in calculating the amount of uncompensated care payments to which the hospitals were entitled.

The full appellate opinion can be found here.

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