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From Health Law Daily, July 24, 2015

Geographic classification statute says what it means and means what it says

By Mary Damitio, J.D.

An HHS regulation ran afoul of the plain language of a statute that allowed urban hospitals to be reclassified as rural for Medicare payment purposes and was therefore unlawful, the Court of Appeals for the Third Circuit ruled in overturning the trial court’s grant of summary judgment. The regulation, which prohibited reclassified urban hospitals from seeking additional reclassification for such reasons as securing a better wage index, was found to be in direct conflict with plain statutory language that required such hospitals to be treated the same as other rural hospitals (Geisinger Community Medical Center v. Secretary, July 23, 2015, Fisher, D.).

Geographic classification. Hospitals disadvantaged by their locations, such as those located in rural areas, can apply to the Medicare Geographic Classification Review Board to have their Medicare reimbursement classification changed to a different wage index. Subsequent to the creation of the Board, Section 401 of the Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999 (P.L. 106-113) enacted provisions to allow urban hospitals to be treated as rural hospitals for Medicare reimbursement (42 U.S.C. §1395ww(d)(8)(E)).

Reclassification regulation. After Section 401 was enacted, the HHS Secretary became concerned that some urban hospitals would take advantage of the reclassification process by first seeking to be classified as rural hospitals and then claim that they were disadvantaged based on their rural status and seek reclassification as urban hospitals for purpose of securing a better wage index, which would result in higher reimbursement payments. As a result, HHS issued a regulation that limited hospitals with the Section 401 status from receiving any additional reclassification on the basis of their rural status (42 C.F.R. Sec. 412.230(a)(5)(iii)).

Lawsuit. Geisinger Community Medical Center, which is located in an urban area and received a Section 401 rural designation, could not obtain a further reclassification due to the regulation. Geisinger sued, challenging the reclassification regulation as violating Section 401. The district court granted summary judgment against the hospital, finding the regulation to be lawful (see Congressional silence and inherent HHS authority makes reclassification regulation reasonable, December 29, 2014)

Congressional intent. Congress’s intent was clear in the unambiguous, plain language of the statute, which required HHS to treat hospitals that achieved Section 401 status in the same manner for the purposes of Board classification as those hospitals that were physically located in rural areas. Section 401 states, “For purposes of this subsection . . . the Secretary shall treat the hospital [with Section 401 status] as being located in the rural area (as defined in paragraph (2)(D)) of the State in which the hospital is located” (42 U.S.C. §1395ww(d)(8)(E)(i)). Therefore, Congress intended Section 401 to treat hospitals as rural for the purposes of reclassification.

The appeals court found that the district court read ambiguity into the statute based on what it did not say, rather than reading its plain language. Additionally, Section 401 never stated that hospitals could not be reclassified as urban. The court acknowledged that the Secretary is authorized to establish guidelines for Board reclassification such as proximity standards, but the Secretary has no authority to disregard the plain language of Section 401, which requires that reclassified urban hospitals be treated as rural.

Dissent. Judge Cowen issued a dissent finding Section 401 to be ambiguous and, as a result, determining that the Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. (U.S., June 25, 1984) two-step analysis required the court to defer to the agency’s reasonable construction of the statute. The dissenter agreed with the district court’s determination that the statute was silent as to whether Section 401 hospitals must be eligible for Board reclassification, and therefore, found the reclassification regulation to be a reasonable interpretation of the statute.

The Case is No. 15-1202

Attorneys: Mary Kay Brown (Brown McGarry Nimeroff) for Geisinger Community Medical Center. Kate L. Mershimer, Office of U.S. Attorney, for Secretary, U.S. Department of Health and Human Services, Marilyn Tavenner, Administrator, Centers for Medicare and Medicaid Services, and Robert G. Eaton, Chairman, Medicare Geographic Classification Review Board

Companies: Geisinger Community Medical Center; U.S. Department of Health and Human Services; Centers for Medicare and Medicaid Services; Medicare Geographic Classification Review Board

MainStory: TopStory IPPSNews RuralNews PartANews PaymentNews DelawareNews NewJerseyNews PennsylvaniaNews

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