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AHA sues HHS for refusal to pay millions in valid Medicare claims

By Jennifer Bresnick

The American Hospital Association (AHA), in conjunction with Missouri Baptist Sullivan Hospital, Lancaster General Hospital, Trinity Health Corporation, and Munson Medical Center, has brought a lawsuit against the Department of Health and Human Services (HHS) alleging HHS has withheld millions of dollars of valid claims on the grounds of their questionable payment denial policy.

When a patient is scheduled for a surgical procedure, the treating physician must decide whether the procedure is best conducted in an inpatient or outpatient setting.  Patients who are prone to complications or undergoing complex procedures may be best served by being admitted to the hospital, which naturally incurs a higher cost of care.

However, HHS and the Center for Medicare and Medicaid Services (CMS) have started to employ private third parties known as recovery audit contractors (RACs) to determine whether there was truly a necessity for inpatient care.  These contractors are paid based on how much Medicare money they can recover from hospitals by overruling the attending physician’s decision, determining from a medical record weeks, months, or years after the fact, that the patient should not have been admitted.

Medicare is divided into four parts, with Part A covering inpatient care and Part B covering outpatient treatment, ensuring reimbursement payments for services rendered no matter what the setting.  However, the AHA declares that after CMS denies a Part A claim, they then withhold payment under Part B, using their payment denial policy as justification.

This policy prohibits Part B payments for services originally billed under Part A, effectively negating Part B all together, even after CMS acknowledges the claims as valid and necessary.  In some cases, CMS will make the payments and then demand them back after an RAC determination rules the reimbursement was wrongly made.  Federal law that states Medicare is required to make payments for services determined to be medically necessary, irrespective of the setting in which the services occurred.  The hospitals assert that instead, they are receiving no reimbursement whatsoever.

The AHA claims that this illegal policy has cost hospitals hundreds of millions of dollars in necessary care costs, and that hospitals are unable to conduct sound financial planning due to prolonged uncertainty over Medicare payments.  The Association is asking the court to set aside the invalid payment denial policy, and is also suing for the repayment of all funds unjustly taken from them by CMS.

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