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From Health Law Daily, September 18, 2014

Clock stops on hospitals’ Medicare time limit challenge

By Bryant Storm, JD

A district court dismissed the lawsuit of a group of hospitals alleging that HHS’s time limit policy related to rebilling rejected Part A claims as Part B claims was arbitrary and capricious on the grounds that the court lacked jurisdiction to hear the case. The court held that there was no jurisdiction under the Medicare Act because the hospitals were not appealing a hearing or final decision. Similarly, the court determined that there was no jurisdiction under the doctrine of federal question jurisdiction because federal question jurisdiction could not be used to supersede the Medicare Act’s jurisdictional requirements (The American Hospital Association, et al., v Burwell, September 17, 2014, Kollar-Kotelly, C).

Claims. Under 42 U.S.C. secs. 1395f(a)(1) and 1395n(a)(1), the Medicare Act provides reimbursement for inpatient care under Part A of Medicare and for outpatient care under Part B of Medicare. Under those same provisions, claims for Medicare reimbursement must be submitted within one year of the date of service. Medicare contracts with third party entities known as Recovery Audit Contractors (RACs) to “claw back” improperly paid Medicare reimbursements. In instances where RACs claw back Part A payments, some hospitals rebill the claims as Part B claims or appeal the denials.

RAC decisions. The American Hospital Association represented several hospitals, who were also named parties in the lawsuit, that were denied reimbursement for Part A services that RACs indicated should have been provided as outpatient rather than inpatient care. The hospitals did not initially seek Part B payment through appeal or rebilling after they received Part A denials. Instead, the hospitals filed suit challenging what they called CMS’s “Payment Denial Policy.” Only after filing suit did the hospitals begin to file Part B claims for the denied Part A payments. Some of those refiled claims were paid as proper Part B claims.

CMS response. One month after the suit was filed, CMS issued an interim policy designed to address rebilling after Part A denials and then issued a proposed rule to more permanently address the problem. Following additional pleadings and briefings to address the new policies, CMS issued a final rule addressing CMS’s stance on the rebilling process. In response to the court’s questions of the effect of the rule on the case, the parties filed additional briefings, which specified the hospitals’ position. The hospitals challengedCMS’s refusal to allow them to amend their prior denied Part A claims into Part B claims and the refusal of CMS to extend the one year time limit on claim filings so that the denied claims could be refiled as Part B claims. HHS responded with a motion to dismiss the hospitals’ challenges by arguing that there was no basis for federal court jurisdiction in a case that broadly challenged general HHS policies.

Medicare Act. Under 42 U.S.C. sec. 1395ff(b)(1)(A), the Medicare Act provides jurisdiction for some challenges to HHS determinations. Specifically, the statute allows final decisions and decisions made after a hearing to be challenged. The statute expressly grants the HHS Secretary the authority to decide which specific kinds of decisions are appealable to federal court. The hospitals challenged two CMS policies under the Medicare Act: (1) the requirement that new claims were subject to the original one year filing time requirement and (2) the requirement that Part A denials must be refiled as new Part B claims instead of amending the Part A claims. The court reasoned that the court had no authority to reach the legitimacy of those policies because the hospitals could not point to a hearing or final decision that gave rise to either of them.

Specifically, the court held that the “non-exercise of the agency’s discretion” to create an extension so that hospitals could refile denied Part A claims did not constitute a hearing or final decision necessary for the court to have jurisdiction. The court similarly rejected the second part of the hospitals’ argument by finding that the policy the hospitals were attacking was a general policy and not one the hospitals were able to tie to a specific hearing or final decision. The court reasoned that the policy requiring refiling was nothing more than the agency’s interpretation of its own regulations and therefore it was not an action that granted the hospitals a right of appeal.

Federal question. Despite the fact that the hospitals raised the argument in a footnote of a pleading, the court exercised its discretion to review the hospitals’ argument that the court had jurisdiction because the hospitals’ claims were entitled to an exception from the general limitations on federal court jurisdiction under 42 U.S.C. sec. 405(h). The court reasoned that because there were hearings and final decisions regarding the initial denial of the Part A claims that the hospitals could have appealed but chose not to, the hospitals bypassed the appropriate time to challenge the HHS policies.

Subsequently, the court declined to subvert the purpose of 42 U.S.C. sec. 405(h) by allowing the hospitals to have their claims heard in federal court through federal question jurisdiction, under 28 U.S.C. sec. 1331, merely because they failed to follow other procedures available to them. The court decided that federal question jurisdiction would only have arisen if Medicare regulations had foreclosed judicial review. In light of the fact that the hospitals had previous appeal rights that they chose not to exercise, the court declined to make an exception.

The case number is 12-1770 (CKK).

Attorneys: Catherine E. Stetson (Hogan Lovells) for American Hospital Association, Missouri Baptist Sullivan Hospital, Munson Medical Center, Lancaster General Hospital, Trinity Health Corp., and Dignity Health. Eric B. Beckenhauer, United States Department of Justice, for Sylvia Matthews Burwell.

Companies: American Hospital Association; Missouri Baptist Sullivan Hospital; Munson Medical Center; Lancaster General Hospital; Trinity Health Corp.; Dignity Health; United States Department of Health and Human Services

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