20 Hospitals Challenge Medicare Reimbursement Regulation

A coalition of acute care hospitals have called out a U.S. Department of Health and Human Services (HHS) Medicare rule that determines how hospitals’ geographic location and labor wages impact their reimbursement rate. Last Friday’s District of Columbia District Court civil complaint seeks a permanent injunction preventing the defendants from applying the formula and requiring them to change the way they calculate certain hospitals’ rates.

The filing first describes the statutory backdrop through which hospitals participating in Medicare are repaid for services rendered. For some services, Medicare pays hospitals according to a “wage index” that reflects the difference between the local average of hospital wages and the national average, the complaint states. 

Reportedly, in 1989, Congress created the Medicare Geographic Classification Review Board (MGCRB) to make determinations on geographic reclassification requests made by certain Medicare participating hospitals that want to reclassify to a different wage area in order to receive a higher payment rate. The present suit, representing the views of hospitals from a variety of states, takes issue with the MGCRB’s reclassification method for “Section 401” hospitals, or those that are urban, but qualify to be treated as located within a rural area of a state. 

Because the HHS “requires that the MGCRB compare Section 401 hospitals’ wages to urban hospitals, not rural hospitals as required of all other hospitals treated as rural,” the plaintiffs are allegedly reimbursed less than they are statutorily entitled to. The complaint underscores that Section 401 hospitals are, without justification, treated differently than hospitals that acquire rural treatment by other means.

The plaintiffs argue that this apples-to-oranges comparison causes them to lose “hundreds of thousands or millions of dollars….” They claim that the law violates two provisions of the Administrative Procedure Act, and in turn, seek to compel the HHS to abandon the rule and compare Section 401 hospitals to other rural rather than urban hospitals in determining their eligibility.

The hospitals are represented by The Law Office of Joseph D. Glazer, P.C.