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From Health Law Daily, August 12, 2015

No adjustment for bad management, volume drop was within hospital’s control

By Michelle L. Oxman, J.D., LL.M.

A Medicare contractor’s denial of a hospital’s request for a low-volume adjustment was correct because the hospital did not establish that the drop in volume was beyond its control. The hospital board closed its operating room for several months. It attributed the closure primarily to the need for major repairs and to its inability to retain enough physicians for full physician coverage of the operating room. The evidence showed, however, that the operating room was closed much longer than the time required for the roof repair and that the deferral of maintenance of the building and its systems was within the hospital’s control. The hospital did not prove that its inability to recruit physicians was beyond its control because it presented no evidence of the efforts it had made to recruit additional physicians or of the response to those efforts (Tehachapi Valley Hospital v. Noridian Healthcare Solution/Blue Cross and Blue Shield Association, PRRB Hearing, Dec. No. 2015-D12, Case No. 05 1647 June 18, 2015).

Background. Tehachapi Valley Hospital is located in a low-income, rural area. In 1998, state inspectors visited the hospital and cited deficiencies, specifically, a leaky roof in the operating room and inadequate numbers of physicians on call to provide coverage of the operating room 24 hours per day, seven days per week. The hospital board decided to close the operating room for several months. The resulting drop in revenue exceeded 5 percent of the revenue from the previous year. The hospital requested a low-volume adjustment pursuant to Soc. Sec. Act sec. 1886(d)(5)(D)(ii).

Federal requirements. The statute provides for an adjustment for a sole community hospital that experiences a drop in inpatient volume greater than 5 percent due to circumstances beyond its control. The regulation and the Provider Reimbursement Manual provisions in effect in 1998 specified that the decrease in volume must be the result of an unusual situation “externally imposed on the hospital” and beyond its control.

Need for repairs. The Provider Reimbursement Review Board (PRRB) found that the closure of the operating room was the result of the governing board’s previous decisions to defer repair of the roof, which had been leaking for a long time, and its failure to maintain adequate physician on-call coverage for surgery. The state surveyors had not required that the hospital close the operating room. The repair of the roof took only a few days.

The air conditioning system and the humidifier also needed repair, including a redesign of the humidifier, because of deferred maintenance. This project and the need to recruit additional physicians prompted the hospital board to close the operating room. However, the minutes of the board’s meetings reflected that the decision was voluntary.

Inability to recruit physicians. The hospital argued that the hostile political atmosphere in the community toward the hospital made it impossible to recruit physicians. However, the hospital presented no evidence of its efforts to recruit additional physicians or of the reasons any physicians gave for rejecting offers. Therefore, the PRRB could not conclude that the difficulty recruiting physicians was beyond the control of the hospital.

Companies: Tehachapi Valley Hospital

MainStory: TopStory IPPSNews CostReportNews

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