Court Cases

Does Medicare Always Have To Pay A Hospital For Services Provided?

Published on: November 2, 2012 | by David S. Dessen, Esq.

Depending on a doctor’s opinion as to the severity of a patient’s medical condition, a hospital may either provide the patient with services after he or she is admitted to the hospital (inpatient services) or without the patient being admitted (outpatient services). Although many of the services are the same, the hospital is paid more if the patient is admitted than if the services are provided on an outpatient basis.

During the last few years, CMS’ Recovery Audit Contractors (RACs) have determined that millions of dollars paid to hospitals for inpatient treatment should be refunded to CMS because although the patient needed the medical services provided, the services should have been provided on an outpatient basis. Although most people might think that the result of the hospital’s mistaken classification would simply be for the hospital to repay Medicare the difference between the amount it was paid for inpatient services and the amount that it would have been paid for the services on an outpatient basis, CMS has a different view. According to CMS, because the hospital submitted a bill for what was later determined to be unnecessary inpatient services, the hospital is entitled to no payment for its services.

On November 1, 2012, the American Hospital Association and four individual hospitals filed a lawsuit in the United States District Court for the District of Columbia against Kathleen Sebelius, the Secretary of the Department of Health and Human Services, in an attempt to overturn this unreasonable policy and to force CMS to pay hospitals for the legitimate outpatient services provided. While the hospital’s position is undoubtedly fair and reasonable, their lawsuit may not succeed.

Will CMS’ Broad Power to Administer the Medicare Program Defeat the Hospitals?

There is no doubt that Congress has given CMS broad powers to enact rules and regulations governing the operation of the Medicare Program. CMS has used that authority to promulgate thousands of regulations and policies to govern, among other things, who is eligible to participate in the Medicare program, what benefits the program will provide, the amounts to be paid for services and what hospitals and other providers must do to be paid. According to 42 C.F.R. § 424.32(a)(1), in order for a hospital or provider to be paid:

A claim must be filed with the appropriate intermediary or carrier on a form prescribed by CMS in accordance with CMS instructions.

Palomar Medical Center v. Sebelius – Update

Published on: September 11, 2012 | by David S. Dessen, Esq.

In a July 21, 2012 post I discussed the case of Palomar Medical Center v. Sebelius which raised the question of whether the “good cause” requirement set forth in 42 CFR § 405.986(a) governing a RACs reopening of a claim paid more than one year earlier could be challenged by a provider during the administrative appeal process or in federal court. The answer, at least in the Ninth Circuit, is no.

In a unanimous decision filed on September 11, 2012, the Ninth Circuit held that CMS correctly interpreted its regulations that preclude an appeal of a RAC’s decision to reopen a paid claim, that the regulations were reasonable and that because the decision to reopen cannot be appealed, federal courts do not have jurisdiction to review a RAC’s decision to reopen a paid claim. In sum, the Court rejected every argument advanced by Palomar.

In my July 24th post I discussed the decision in St. Francis Hospital v. Sebelius in which a District Court in the Eastern District of New York came to a contrary result. According to the Ninth Circuit, the different result in St. Francis Hospital is based on the Constitutional due process argument advanced by St. Francis but abandoned by Palomar at an earlier stage of the litigation.

Is the “GOOD CAUSE” Fight Over?

As I suggested in my earlier post, I think the argument that the regulations permit a provider to litigate the question of good cause is extremely weak and expect that other Courts that consider the issue will come to the same conclusion as the Ninth Circuit. At this point, I believe that any hope of raising this issue is dependent upon a finding that by denying a provider the right to litigate the good cause requirement, the regulations deny the provider due process, a question not considered or decided by the Ninth Circuit.

Does SECRETARY = MAC – Who Authorizes Statistical Sampling?

Published on: September 5, 2012 | by David S. Dessen, Esq.

In 1991, in the case of Chaves County Home Health Service Inc. v. Sullivan, the Court of Appeals for the District of Columbia Circuit approved the use of statistical sampling and extrapolation by Medicare contractors, currently known as MACs or ZPICs, in conducting post payment reviews. Specifically, the Court held that the Secretary of HHS was authorized to employ statistical sampling and extrapolation as set forth in Health Care Financing Administration (HCFA, now known as CMS) Ruling 86-1 since the Medicare Act did not prohibit statistical sampling and such a procedure was consistent with the Secretary’s duty to prevent overpayments. On January 8, 2001, in Transmittal B-01-01, CMS updated the procedures a contractor was to follow in employing statistical sampling and extrapolation during a post payment review. As in Ruling 86-1, the new procedures imposed no limitation on when the contractor could determine the amount of an overpayment in a universe of claims by extrapolation from an analysis of a sample of the claims in that universe.

In § 935 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Congress added a new subsection (f)(3) to 42 U.S.C/ § 1395ddd. This subsection states:

Limitation on use of extrapolation
A medicare contractor may not use extrapolation to determine overpayment amounts to be recovered by recoupment, offset, or otherwise unless the Secretary determines that–
(A) there is a sustained or high level of payment error; or (B) documented educational intervention has failed to correct the payment error.
There shall be no administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or otherwise, of determinations by the Secretary of sustained or high levels of payment errors under this paragraph.

The meaning of this section became the central issue in the case of Gentiva Healthcare Corp. v. Sebelius.

What’s Wrong with the RAC’s Contingent Fees? – Part 2

Published on: August 17, 2012 | by David S. Dessen, Esq.

In Part 1 of this post, I provided a brief history of the evolution of the Medicare and Medicaid RAC programs and highlighted provider concerns with the contingent fee part of the program. In this post, I will discuss why I believe that the contingent fee process developed by CMS does not comply with the Fifth Amendment to the United States Constitution and why, if this argument is presented in a proper case, there is a significant possibility that a Federal Court will issue an injunction stopping the program and order the return of the money paid to CMS in response to RAC demands.

The Fifth Amendment to the United States Constitution

Among other protections afforded by the Fifth Amendment to the United States Constitution is the guarantee that the Federal Government may not deprive any person of life, liberty, or property, without due process of law. A basic tenet of due process is conceptualized in the Latin phrase “nemo iudex in causa sua” which translates to “no one should be a judge in his own cause.”

The United States Supreme Court has considered on a number of occasions the circumstances under which the receipt of money by a judge or other decision maker violates due process. It has held that a litigant’s right to due process is violated when the mayor of a town receives a portion of the fines he imposes while acting as a judge. It has also held that a litigant’s right to due process is violated where fines imposed by a mayor while acting as a judge represent a significant portion of his town’s revenue, even though the mayor did not directly receive any part of the fine. In a recent decision, the Court held that due process required a justice of the West Virginia Supreme Court to not participate in an appeal involving a company in which the company and its CEO had contributed significant amounts of money to the justice’s campaign for election to the court. This quotation from the Supreme Court’s opinion in Tumey v. Ohio succinctly sums up why money perverts due process:

Every procedure which would offer a possible temptation to the average man as a judge to forget the burden of proof required to convict the defendant, or which might lead him not to hold the balance nice, clear, and true between the State and the accused denies the latter due process of law.

Why the Contingent Fee Arrangement between CMS and the RACs Violates Due Process

The structure of the program created by CMS gives to the RACs the sole and unreviewable authority to create, from a previously paid claim, a provider overpayment and the right to demand payment from the provider. It is through these actions, taken solely by the RACs, that the RACs create their income. If they want to make more money, they create more overpayments; if they want to make less, they find fewer overpayments. In my opinion, this direct link between the RAC’s income and its decision as to whether a specific claim was improperly billed might lead them not to hold “the balance nice, clear, and true between the State [CMS] and the accused [provider]” as the Tumey Court noted and why the RAC program denies the latter due process of law.

A Court Agrees to Consider the GOOD CAUSE Issue – St. Francis Hospital v. Sebelius

Published on: July 24, 2012 | by David S. Dessen, Esq.

In an earlier post, I discussed the case of Palomar Medical Center v. Sebelius presently pending before the Ninth Circuit Court of Appeals. In Palomar, the District Court agreed with CMS that pursuant to the regulations governing administrative appeals, Palomar could not raise and an ALJ could not decide whether “good cause” existed for the RAC to reopen a claim paid more than one year earlier. After hearing oral argument, the Ninth Circuit issued an order inviting the submission of amicus (friend of the court) briefs on the questions of (1) whether the regulations bar administrative review of a RACs compliance with the “good cause” standard and (2) if the regulations do bar administrative review, may the federal courts enforce RAC compliance with the “good cause” requirement. According to CMS, the response to the second question is no because a federal court can only review a “final decision” of an agency and there has been not yet been a final decision on this question. The amicus brief submitted by the AMA and supplemental briefs submitted by the parties may be found on this webpage established by the Ninth Circuit.

St. Francis Hospital v. Sebelius

As part of the RAC demonstration project, Connolly Consulting reopened 225 paid claims submitted by St. Francis Hospital and then demanded, through St. Francis’ fiscal intermediary, Empire Medical Services (now NGS), repayment of $1.2 million dollars. St. Francis appealed each claim and as of the time it filed its Complaint in federal court, had won 104 of its appeals with 15 appeals still pending before an ALJ. Like Palomar, St. Francis sought to raise before the ALJ and the Medicare Appeals Council the RAC’s compliance with the “good cause” standard and like in Palomar, the ALJ and Medicare Appeals Council refused to consider this issue based on 42 CFR 926(l).

Does “GOOD CAUSE” mean anything? – Palomar Medical Center v. Sebelius

Published on: July 21, 2012 | by David S. Dessen, Esq.

Palomar Medical Center v. Sebelius involves a claim paid more than one year before it was reopened during a RAC audit. After losing the first two appeals, the hospital convinced an ALJ that the RAC had not shown it had good cause to reopen the claim. However, when the Medicare Appeals Counsel (MAC) reviewed the ALJ’s decision, it concluded, based on its interpretation of the relevant regulations, that the ALJ had no authority to review the RAC’s decision to reopen the claim.

The relevant regulations, which are not easy to make sense of, appear in Title 42 of the Code of Federal Regulations (CFR). 42 CFR § 405.980(b) provides that:
A contractor may reopen an initial determination or redetermination on its own motion–

(1) Within 1 year from the date of the initial determination or redetermination for any reason.
(2) Within 4 years from the date of the initial determination or redetermination for good cause as defined in §405.986.
(3) At any time if there exists reliable evidence as defined in §405.902 that the initial determination was procured by fraud or similar fault as defined in § 405.902

.
According to 42 CFR § 405.986(a), “good cause” is established when:

(1) There is new and material evidence that–
&nbsp&nbsp&nbsp(i) Was not available or known at the time of the determination or decision; and
&nbsp&nbsp&nbsp(ii) May result in a different conclusion; or
(2) The evidence that was considered in making the determination or decision clearly shows on its face that an obvious error was made at the time of the determination or decision.

42 CFR § 405.980(a)(5) provides that:

The contractor’s, QIC’s, ALJ’s, or MAC’s decision on whether to reopen is binding and not subject to appeal.