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From Health Law Daily, July 15, 2016

Strict application of pleading rules necessary for smooth appeals process

By Patricia K. Ruiz, J.D.

The strict application of rules and regulations related to bringing an appeal before the Provider Reimbursement Review Board (PRRB) is reasonable and necessary for the smooth operation of the PRRB’s appeals process. The Eastern District of New York held that Lutheran Medical Center (Lutheran) did not properly plead its appeal before the PRRB by leaving key arguments out of its final position papers. The court granted a motion to dismiss in favor of the government (Lutheran Medical Center v. Burwell, July 13, 2016, Block, F.).

FTE calculation. Medicare reimburses approved teaching hospitals, such as Lutheran, for certain costs associated with graduate medical education, including salaries and benefits for residents and interns. The amount of the reimbursement is based partly on the number of resident and intern full-time equivalents (FTEs) in the hospital’s training program. The count is equal to the average of the weighted FTE count for the payment year cost reporting period and the previous two cost reporting periods.

The Medicare administrative contractor (MAC) in this case calculated that Lutheran had been underpaid $646,868 and $643,750 for fiscal years 2001 and 2002. Lutheran filed hearing requests before the PRRB for both fiscal years, disputing, among other things, the MAC’s FTE calculation. For its 2001 hearing request, Lutheran identified five issues for the PRRB to consider—the first three relating to the calculation of disproportionate share adjustments and the other two alleging miscalculations of the FTE and Medicare settlement data. For 2002, Lutheran identified four issues—the first three relating to the MAC’s calculation of disproportionate share adjustments and the other relating to the calculation of Medicare settlement data.

Lack of specificity in final position papers. In its final position paper for 2001, Lutheran argued that the MAC counted time interns and residents spent at "non-provider settings" and lumped the issue of settlement data with its discussion of disproportionate share adjustments, failing to specifically identify what Medicare settlement data was at issue outside of its disproportionate share adjustments arguments. In its final position paper for 2002, Lutheran identified the Medicare settlement data and the entirety of its substantive argument related to disproportionate share adjustments, but the hospital did not specify the Medicare settlement data with which it took issue. In a letter to the MAC setting forth its major points, the hospital argued that for both fiscal years that the FTE count should be adjusted based on the outcome of their appeal for fiscal year 2000 ("carryover issue"). However, because the hospital did not mention the carryover issue in its position papers, the PRRB held that it did not have jurisdiction over it and that its consideration of FTE issues was limited to what was specifically briefed in the position papers—specifically, FTE counts as they relate to residents who rotated to non-provider settings. The PRRB also held that it did not have jurisdiction over the settlement data issue because the hospital did not state which data adjustments were in dispute. The hospital appealed.

The court held that, even assuming Lutheran would prevail if the carryover issue was considered on the merits, the hospital failed to comply with the strict requirements set forth regarding putting the issue properly before the PRRB. Because the regulations and rules "are reasonable and necessary for the smooth functioning of the PRRB’s appellate process, the PRRB’s strict application of the rules to Lutheran was not arbitrary, capricious, an abuse of discretion, or contrary to law. Furthermore, the hospital failed to reference any particular Medicare settlement data in its position papers, so the PRRB did not have jurisdiction over that argument, either.

The case is No. 1:14-cv-00731-FB-RML.

Attorneys: Courtney Alexandra Rogers (Gardunkel Wild & Travis PC) for Lutheran Medical Center. Kathleen Anne Mahoney, U.S. Attorney’s Office, for Kathleen Sebelius.

Companies: Lutheran Medical Center

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