HHS Secures Summary Judgment in Hospital’s Medicare Reimbursement Challenge

On Thursday, Judge Mary Geiger Lewis of the District of South Carolina sided with Secretary Xavier Becerra of the Department of Health and Human Services (HHS) in a case alleging that the federal agency improperly denied an acute care hospital’s Medicare Act reimbursement claims. The case came to the district court when Lancaster Hospital Corporation, formerly doing business as Springs Memorial Hospital (Springs), appealed from a final decision made by the HHS’s Provider Reimbursement Review Board (PRRB).

The opinion and order explained that Springs operates an inpatient rehabilitation facility (IRF) and skilled nursing facility (SNF) that provide medical services to Medicare beneficiaries. Medicare reimbursed IRF and SNF providers for their reasonable costs in providing services during the relevant timeframe. The dispute arose after Springs submitted costs for reimbursement for 1997 through 2000 and was dissatisfied with the result.

The HHS contractor responsible for reviewing Springs’ claims reportedly denied them in large part. Subsequently, Springs asked the PRRB to review the contractors’ decision. The parties settled one cost period dispute and the PRRB remanded as to two others after finding “sufficient auditable documentation existed to allow at least some of Springs’s costs to be reimbursed.” As to financial year (FY) 1997, the PRRB wholly denied Springs’ reimbursement claim for providing IRF services.

In cross motions for summary judgment, Springs requested that the court set the PRRB’s FY 1997 decision aside, while the HHS requested that the court affirm it. Judge Lewis first explained that “[t]o deem an agency action arbitrary and capricious, its decision must be ‘so implausible that it could not be ascribed to a difference in view or the product of agency expertise.’” The court further elucidated that annual provider costs submitted to the HHS for reimbursement “must be capable of verification by qualified auditors.”

Springs argued that it provided voluminous information sufficient to support the reasonableness of its reimbursement requests. The court disagreed, finding that for FY 1997, Springs failed to summarize and synthesize the information into an auditable form for use by the HHS contractor. In turn, the court declined all of Springs’ arguments, instead finding that the PRRB’s decision was not arbitrary and capricious, contrary to law, or unsupported by substantial evidence.

Springs is represented by Barnwell Whaley Patterson & Helms LLC and King & Spalding LLP, and the HHS by the United States Attorney’s Office.