- A group of specialty long-term care hospitals sued HHS in the U.S. District Court for the District of Columbia Tuesday, claiming the government's failure to reimburse them for Medicaid patients' bad debts is arbitrary and capricious and violates the Administrative Procedure Act.
- The hospitals want the court to reverse the Provider Reimbursement Review Board's decision denying reimbursement for unpaid Medicare cost-sharing amounts (known as bad debts) relating to fiscal year 2011. They want the court to require HHS to reimburse them in the amount of $997,143, and also award them interest, fees and other costs.
- Among other claims, the hospitals say CMS abruptly changed its policy in reimbursing the hospitals for dual eligible bad debts without going through the required notice and comment rulemaking.
At the heart of the long-term care hospitals' complaint is they weren't able to bill and receive remittance advices because they didn't participate in their respective state Medicaid programs. RAs are documents summarizing payment or denial of payment from the applicable states when the hospitals provided services to patients eligible for both Medicare and Medicaid.
In 2007, CMS' fiscal intermediaries (now called Medicare Administrative Contractors) started to deny all dual eligible bad debts submitted without Medicaid RAs, a document the LTCHs were unable to obtain because they didn't participate in Medicaid. They also required the LTCHs to bill Medicaid in order to confirm the states will not pay the Medicare cost-sharing amounts on behalf of the dual eligible policy beneficiary (known as CMS' "must bill" policy).
The LTCHs, primarily subsidiaries of Select Medical in various states, call the situation a "classic Catch-22." That's because the state Medicaid programs will not issue RAs — which CMS requires to reimburse the bad debts— in a form that CMS will accept and the Medicare providers either are not enrolled in Medicaid or in some states are ineligible to enroll in Medicaid. That's because LTCHS aren't considered a recognized Medicaid provider type in those states.
This isn't the first time the LTCHs have sued HHS over dual eligible payments. Many of the same plaintiff LTCHs sued HHS in 2010 to get reimbursed for their Medicare cost reporting periods between fiscal years 2005-2010. The U.S. District Court for the District of Columbia struck down the agency's decisions, finding CMS was required to conduct notice-and-comment rulemaking before making the plaintiffs as non-Medicaid participating providers subject to the must-bill requirement and the RA requirement.