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On November 1,
2012, the AHA, along with four hospitals (collectively the “Plaintiffs”), filed
a lawsuit against HHS in the U.S. District Court for the District of Columbia.
The lawsuit, which names as the defendant Kathleen Sebelius in her official
capacity as the Secretary of HHS, alleges that the Medicare program, through
the Center for Medicare and Medicaid
Services (CMS) has engaged in an unlawful government practice in its refusal to
reimburse hospitals for reasonable and medically necessary services. This
includes full Part B reimbursement where a Part A inpatient admission is denied
by a Recovery Audit Contractor because the inpatient services were provided in
the wrong setting, i.e. the services should have been provided in an outpatient
setting.
RAC Audits, and
particularly CMS' decision to deny payment altogether when it deems that
inpatient criteria has not been met, have been a source of great uncertainty
for hospital patient care and financial planning ever since the RAC
Demonstration Project was implemented in 2005. Visit the Midwest Legal Partners
page on RAC and the audit program by clicking here. The lawsuit cites four
cases - one from each hospital involved in the lawsuit - where CMS did not
dispute that outpatient payment was appropriate, yet continued to deny all
reimbursement through several levels of appeal. Despite at least four decisions
by the Medicare Department Appeals Board Medicare Appeals Council
("MAC") - the final agency decision-maker - holding that payment for
Part B services was appropriate, CMS continues to deny Part B payment after a
denial of reimbursement for Part A-billed services, citing as its Payment
Denial Policy (Medicare Benefit Policy Manual ("BPM") Chapter 6 § 10)
as its only justification. Notably, that provision of the BPM was promulgated
without notice and rulemaking, and with no accompanying explanation.
To obtain an ALJ
order for full Part B reimbursement, a hospital must proceed through the onerous
Medicare appeals process. This 5-step process is also outlined in our RAC page.
This is why the lawsuit recently filed by the AHA is an important step towards
challenging the core of CMS's policy that hospitals are not entitled to full
Part B reimbursement where an impatient admission is denied because the
services were provided in the wrong setting.
The lawsuit filed
by the AHA alleges that CMS's Payment Denial Policy violates requirements of
the Federal Administrative Procedures Act as well as the requirement in the
Medicare Act to pay for medically necessary hospital services. The complaint outlines
CMS's refusal to provide hospitals with full Part B reimbursement and the
effect CMS' refusal has on hospitals and patient care. "CMS simply refuses
to pay hospitals for services that it acknowledges are covered under Medicare
Part B and that it acknowledges were reasonable and necessary in the particular
case." The complaint continues, "both the uncertainty and the actual
loss of Medicare funds ultimately may adversely affect patient care."
Furthermore, AHA's complaint also accurately explains the uncertainty of CMS's
exact justification for its "Payment Denial Policy."
The
aggressiveness of RAC audits, the uncertainty of appropriate reimbursement,
CMS's failure to articulate a justification for its policy, and the effect on
patient care when hospitals do not receive accurate payment, all underscore the
importance of the concentrated efforts to obtain full Part B reimbursement for
hospitals. AHA's complaint is an important step towards highlighting the broad
implications of CMS "Payment Denial Policy" and, hopefully, obtaining
a long-term solution for hospitals and Medicare beneficiaries.
The complaint can be read online at:
It should also be noted that
this complaint was filed just days after AHA sent a letter to the Office of
Inspector General (OIG) Daniel Levinson on October 24, 2012 urging reform of
RACs.
For one, the AHA urges that more provider education is
needed to improve the rates of payment errors. According to the RACTrac survey,
more than half of the respondents indicated that they have received no
education from CMS on avoiding payment errors. The letter stresses that program
integrity could be strengthened with provider education, and that such errors
would be reduced.
According to the AHA's RACTrac survey data, 75%
of appealed RAC denials are reversed. The AHA asserts that because the RACs are
paid on a contingency fee basis, there is a strong financial incentive to deny
more claims and increase contingency payments. While this is hardly old news
and has often been the case, there was less empirical data at the beginning of
this program to justify such a claim. The implication is that RACs are not
monitored effectively and are thus allowed to inappropriately deny claims to
increase contingency payments. Some parts of the letter were more explicit than
implicit in this allegation. "Denying payment for an entire inpatient stay
is far more lucrative for the contractors than identifying an incorrect payment
amount or an unnecessary medical service." This letter, along with the
most recent complaint, as well as the legislation recently proposed on
reforming the RAC program, are the latest developments adding increased pressure
on the government and its hired auditors in the implementation of this program.
