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From Health Reform WK-EDGE, March 5, 2019

Reimbursement for resident costs denied due to expense sharing

By Cathleen Calhoun, J.D.

Hospitals with graduate medical education programs for interns and residents were denied reimbursement for costs of certain rotations because they shared expenses.

Several hospitals with graduate medical education programs for interns and residents shared expenses and had their resident counts reduced to exclude resident rotations spent in non-hospital settings, resulting in a denial of certain costs. The hospitals argued that (1) statutes in place during the reporting periods (ranging from 2001 through 2006) allowed reimbursement, even when the costs were shared; (2) Congress revoked the single hospital policy when it enacted the Affordable Care Act (ACA) (P.L. 111-148); and (3) the reopening of the cost reports for the fiscal years at issue violated the Administrative Procedure Act because proper notice was not given. The Provider Review Reimbursement Board (PRRB) disagreed with the hospital’s argument that because each of them paid a proportional share, they each met the requirement that a hospital incur all, or substantially all, of the costs for the training. The hospitals’ other arguments failed as well because the fiscal years at issue were before the ACA and the medical contractor was within its rights to reconsider those fiscal years (Tulsa Hospitals v. Novitas Solutions , Inc., PRRB Hearing, Dec. No. 2019-D11, Case Nos. 14-3883G, 14-3890G, 14-3894G, 14-3896G,14-3897G, 14-3899G,14-0259 and 14-0266, January 25, 2019).

Background. The hospitals, while not commonly owned, operated graduate medical education (GME) for interns and residents in various specialty areas in affiliation with the University of Oklahoma/University of Oklahoma College of Medicine. The hospitals claimed intern and resident full-time equivalents (FTE) on their cost reports for the fiscal years at issue. The Medicare contractor reexamined prior fiscal year data and denied reimbursement for GME and indirect medical education (IME) costs of certain resident rotations at non-hospital sites. The hospitals appealed.

On appeal. The board found that although each provider hospital could demonstrate that it incurred costs related to a portion of the residents rotating through the training program, none met the requirement that it individually, incurred all or substantially all the costs for the training program. The hospitals’ claim that they could share costs under ACA §5504 failed as well. Although the section allows hospitals to share the costs of residency training programs, the subsections were not applicable to the fiscal years at issue. Also, CMS stated, as part of the preamble to the final rule, that one section of §5504 was not intended to permit the retroactive application of amendments in other sections. Finally, the reopening of the cost reports for the fiscal years 2001 through 2006 at issue did not violate the Administrative Procedure Act because the Medicare provider exercised proper discretion.

Cost reporting period ending 2001-2009.

Companies: St. John Medical Center; St. Francis Hospital; Hillcrest Medical Center; Novitas Solutions, Inc.; University of Oklahoma/University of Oklahoma College of Medicine

AdministrativeDecisions: AgencyDecisions AgencyNews NewsFeed

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