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From Health Law Daily, December 9, 2013

Hospital cannot benefit from both rural and urban classification

By Greg Hammond, JD

A hospital’s motion for preliminary injunction, seeking to prevent CMS, HHS, and the Medicare Geographic Classification Review Board (MGCRB) from acting on its reclassification application, was denied by the District of Connecticut, as it would benefit from being classified as both rural and urban. The court determined that although the hospital demonstrated irreparable harm, it was unable to demonstrate a likelihood of success on the merits (Lawrence & Memorial Hospital v Sebelius, December 6, 2013, Arterton, J).

Background. The Medicare program allows hospitals to be reclassified from urban to rural, and to be reclassified to a different Core based Statistical Area (CBSA), which changes reimbursement rates under the inpatient prospective payment system for Medicare Part A and the outpatient prospective payment system for Medicare Part B. The MGCRB reviews applications to relocate geographical areas for purposes of determining wage index and reimbursement rates. However, 42 U.S.C. 1395ww(d)(8) (Section 401) offers urban classified hospitals a mechanism to reclassify as rural for reimbursement purposes. The ability to reclassify back and forth has raised concern that hospitals can reap the benefits of being both urban and rural.

Lawrence & Memorial Hospital (Lawrence) has been reclassified as a rural referral center (RRC), but has also submitted an application to be reclassified to the Nassau-Suffolk, NY CBSA, which would provide Lawrence with a higher wage index. Lawrence believed that its application would be denied since 42 C.F.R. 412.230(a)(5)(iii) forbids a re-designated rural hospital to additionally be reclassified to a separate urban CBSA for the purposes of getting a higher wage index. As such, Lawrence filed a motion for preliminary injunction to prevent the MGCRB from acting on Lawrence’s application, pending the court’s decision on whether the laws governing the MGCRB violate the Medicare Act and Administrative Procedures Act.

Discussion. In order to be granted preliminary injunction, a petitioner must demonstrate (a) irreparable harm, and (2) a likelihood of success on the merits. To establish a likelihood of success on the merits, courts will determine: (1) whether “Congress has directly spoken to the precise question at issue;” and (2) if the statutes is ambiguous or silent, whether the answer is based on a “permissible construction of the statute.”

Since Lawrence would lose between $3 and $5 million if its application was denied or withdrawn, the court determined that Lawrence established irreparable harm. However, according to the court, Lawrence failed to demonstrate a likelihood of success on the merits since: (1) it is not clear whether section 401 would violate the Medicare Act; and (2) the Secretary of HHS has determined that Section 401 does not allow a hospital to be treated as rural and urban, as it would receive “inappropriate Medicare reimbursements.”

The case number is 3:13cv1495

Attorneys: Joseph D. Glazer (Law Office of Joseph D. Glazer, PC) for Lawrence & Memorial Hospital. Carolyn Aiko Ikari, U.S. Attorney's Office, for Kathleen Sebelius, Secretary of Health and Human Services.

Companies: Lawrence & Memorial Hospital

MainStory: TopStory IPPSNews CMSNews MedicaidNews PartANews PartBNews MedicaidPaymentNews PaymentNews ConnecticutNews

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