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From Health Law Daily, August 19, 2013

Court upholds inclusion of contested beds in calculating medical center’s IME adjustment, rejects exclusion of research time

By Anthony H. Nguyen, JD

A training hospital’s motion for summary judgment contesting the calculation of its indirect medical education (IME) adjustment factor and exclusion of residents’ time in certain research-related activities was denied as to the former and granted as to the latter (Rush University Medical Center v Sebelius, August 15, 2013, Lefkow, J). The hospital failed to provide evidence that beds at its facility were unavailable because of omission from room and board lists, turnaround time to service, or construction. Residents’ research-related time was improperly excluded from medical education adjustment calculations because the district court was bound by precedent.

Background. Rush University Medical Center (Rush) filed administrative appeals of its fiscal year (FY) 1993, 1994, and 1996 Notices of Program Reimbursement (NPR) relating to reimbursement amounts before the Provider Reimbursement Review Board (PRRB) contesting whether the intermediary had accurately determined Rush’s bed count. Moreover, Rush contested the intermediary’s determination excluding research rotations of residents participating in approved medical education programs when calculating Rush’s IME adjustment. The PRRB ruled in Rush’s favor on the bed count issue, but against Rush regarding the resident research issue.

The CMS Administrator (Administrator) reviewed the PRRB’s decision and found that the intermediary had ruled correctly on all of the disputed issues but reversed the PRRB’s decision on bed count. The Administrator noted that, in other cases where beds had been deemed unavailable, providers had supported their positions with additional evidence that Rush omitted. In addition, the Administrator concluded that without supporting documentation showing that Rush used beds for observational purposes, Rush failed to carry its burden of showing that its bed total should be lowered for the number of beds used for observational purposes. The Administrator also affirmed the Board’s decision that research time of the residents not associated with patient care was properly excluded from the IME adjustment.

Rush raised three issues regarding the Administrator’s calculation of its IME adjustment factor: (1) whether the calculation improperly included unavailable beds; (2) whether the calculation improperly included observational beds; and (3) whether the calculation improperly excluded time spent by residents on research unrelated to patient care.

FY 1993 beds. The Administrator rejected Rush’s argument that the omission of beds from a master room and board index for FY 1993 meant the beds were unavailable. The Administrator considered the room and board indices but noted at the time of the determination that the information only reflected budget and utilization information; such information did not accurately reflect whether a bed was available under 42 C.F.R. sec. 412.105(b), or as further defined in the Medicare Provider Reimbursement Manual sec. 2405.3.G, and was considered inaccurate. The district court agreed and held that the Administrator was not in error determining that the room and board indices were only a snapshot of the floor at a discrete point in time and not indicative of whether the beds were unavailable over the entirety of the FY. The district court also noted that the burden is on providers, such as Rush, to exclude beds from the IME adjustment count as unavailable.

FY 1994 beds. Additionally for FY 1994, Rush provided contradictory evidence that a bed should be considered unavailable under the IME adjustment count if the bed could not be returned to service within 72 hours. However, Rush’s own documentation indicated that beds in otherwise occupied areas were able to be immediately placed in service upon request. The court held that the Administrator’s conclusion of the bed status for Rush in 1994 was in accord with the definition of an available bed because the deciding factor was not whether the beds were actually in service but whether they could be placed into service in a short period of time. As Rush eventually placed all the beds into service during FY 1994, the beds were presumed to be available during the entire cost reporting period.

FY 1996 beds. For FY 1996, Rush argued that the Administrator improperly counted beds in areas of the hospital that were under construction. The Administrator did not dispute that the beds in a floor under construction would be excluded; however, the beds at issue were made unavailable five months prior to the start of construction. Rush did not provide evidence that the beds could not be placed back into service before the construction began. Although the district court noted that Rush’s argument had merit, the court held that Rush had the burden of closing any evidentiary gap by showing that the beds were unavailable. Rush failed to do so and the court held that the Administrator’s decision to include these beds as available was appropriate based on the evidence presented.

Observational beds. The district court agreed that Rush did not have proper documentation to bill Medicare for the costs associated with observational beds. In addition, the court agreed that the days Rush claimed as observation days on paperwork submitted in connection with its cost reports did not reflect observation days. The court held that the Administrator’s decision was not arbitrary and capricious.

Residents’ time. Under 42 U.S.C. sec. 1395ww(d)(5)(B), the IME adjustment formula does not specify the types of resident activities that are included in the calculation as reimbursable. Instead, 42 C.F.R. sec. 412.105 delineates the reimbursable activities. In 2010, the Patient Protection and Affordable Care Act (P.L. 111-148) amended sec. 1395ww(d)(5)(B) to include in the IME adjustment count “all the time spent by an intern or resident in an approved medical residency training program in non-patient care activities, such as didactic conferences and seminars, as such time and activities are defined by the Secretary, that occurs in the hospital” for the years between 1983 and 2001.

For the time periods after October 1, 2001, PPACA also provided that residents’ time spent in research activity not for treatment of patients was excluded. However, Congress specifically stated that the exclusion only applied to cost periods after October 1, 2001, and that no inference should be made as to the law in effect prior to that date. In response, regulations were promulgated that excluded times spent by residents conducting pure research as compensable.

The district court noted that the Seventh Circuit had already determined in University of Chicago Medical Center v Sebelius that under PPACA pure research was a reimbursable non-patient care activity prior to 2001. The district court held that it was bound by the Seventh Circuit’s reading of the PPACA even though it was inconsistent with the later issued promulgation. Thus, the Administrator improperly excluded research time from the IME adjustment for FYs 1993, 1994 and 1996.

The case numbers are 12 C 4672 and 12 C 4673.

Attorneys: James F. Flynn (Bricker & Eckler) for Rush University Medical Center. Katherine Ellen Beaumont, U.S. Attorney’s Office, for Kathleen Sebelius, Secretary of the U.S. Department of Health and Human Services.

Companies: Rush University Medical Center; U.S. Department of Health and Human Services

MainStory: TopStory CaseDecisions IMENews CostReportNews

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