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From Health Law Daily, March 21, 2019

Hospitals entitled to interest payments following rescission of Medicare rate reduction

By David Yucht, J.D.

Hospitals that had challenges of an HHS Medicare rate reduction pending before HHS issued a regulation rescinding this reduction were entitled to interest. Hospitals that did not have a challenge pending prior to the rescission were not entitled to interest payments.

A federal district court sitting in Washington, D.C. ruled that hospitals that had challenges of an HHS Medicare rate reduction pending on or before August 2, 2016, the date HHS issued a regulation abandoning this rate reduction, were entitled to payments of interest. However, hospitals that did not have a challenge pending on that date were not entitled to interest payments pursuant to 42 U.S.C. § 1395oo(f)(2)). Moreover, 42 U.S.C § 1395g(d) did not authorize the judiciary, in the first instance, to award interest to a prevailing party; the statute, instead, imposed the payment obligation on the Secretary. Because interest was never requested from HHS under this statute, there was no administrative determination for the court to review (Shands Jacksonville Medical Center, Inc. v. Azar March 15, 2019, Moss, R.).

HHS rescinds regulation reducing payments. Over 1000 hospitals filed suit challenging a regulation issued by HHS imposing a 0.2 percent reduction in inpatient Medicare rates used to compensate hospitals. After a prior court hearing resulting in a remand for further administrative proceedings, on August 2, 2016, HHS decided to rescind the rate reduction. What remained for resolution were motions seeking the award of interest on the amount in controversy for fiscal years 2014 through 2016. The hospitals contended that they were "prevailing parties" under federal statute (42 U.S.C. § 1395oo(f)(2)) (some also argued that they were entitled to interest under a different section, § 1395g(d)) and as such were entitled to interest. HHS opposed the award of interest to the extent specific hospitals had not challenged its Medicare payment rate on or before the day the HHS rescinded the 0.2 percent reduction.

Interest awards. HHS agreed that hospitals that had challenges of the rate reduction pending on or before August 2, 2016, the date HHS rescinded this rate reduction, were entitled to interest. Section 1395oo(f)(2) authorized the courts to award interest in matters such as the one being considered. The court noted, however, that over two-and-a-half years had passed since HHS agreed to pay interest on those claims, but HHS had not yet paid any interest. Under these circumstances, the court concluded that the application for interest for those years that HHS had committed to pay continued to present a live case or controversy. The court, accordingly, granted the pending motions for those hospitals that had pending claims prior to August 2, 2016.

In contrast, the claims for interest payable to providers that had not brought suit before August 2, 2016 were denied. To the extent these claims were filed after August 2, 2016 and sought relief HHS had provided in Fiscal Year 2017, those claims were moot. Accordingly, these hospitals lacked Article III standing to bring a challenge seeking relief that they had already been accorded. The court also denied interest to hospitals which sought relief pursuant to § 1395g(d). The court noted that Section 1395g(d) differed from § 1395oo(f)(2) in that § 1395g(d) imposed a duty on HHS to pay interest, while § 1395oo(f)(2) authorized the courts to award interest. Although the court was empowered to award interest under § 1395oo(f)(2) in the first instance, it was HHS and not the court, that was charged with making payments of interest under § 1395g(d). In appropriate circumstances, the court may review HHS’s actions or inactions, but the concept of judicial review was premised on the notion that the agency had acted unlawfully or had declined to act in a manner required by law. Judicial review did not contemplate seeking relief from a court in the first instance. Because interest had not previously been requested from HHS under this statute, there was no administrative determination for the court to review.

The case is No. 1:14-cv-00263-RDM.

Attorneys: Robert L. Roth (Hooper Lundy & Bookman, PC) and Christopher L. Keough (Akin Gump Strauss Hauer & Feld LLP) for Shands Jacksonville Medical Center, Inc. d/b/a UF Health Jacksonville, Shands Teaching Hospital and Clinics, Inc. d/b/a UF Health Shands Hospital and Adirondack Health Services, Inc. d/b/a Glens Falls Hospital. Daniel Edward Bensing, U.S. Department of Justice, for Alex Azar.

Companies: Shands Jacksonville Medical Center, Inc. d/b/a UF Health Jacksonville; Shands Teaching Hospital and Clinics, Inc. d/b/a UF Health Shands Hospital; Adirondack Health Services, Inc. d/b/a Glens Falls Hospital

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