Hospitals Must Receive Extra Medicaid Funding for Experimental HHS Projects Regardless of Services Specified, Rules D.C. Circuit

An appellate panel of the D.C. Circuit Court of Appeals, comprised of Chief Judge Srinivasan, Circuit Judge Katsas and Senior Circuit Judge Ginsburg, ruled that the federal government must reimburse hospitals providing any in-patient care for covered patients via experimental Medicaid “demonstration projects” approved by the Secretary of Health and Human Services. 

The opinion, authored by Judge Ginsburg, explained the pertinent facts as follows: A demonstration project is a project of regulatory creation that is intended to expand Medicaid services to populations traditionally ineligible, at-risk, often low-income, on limited days — often calendared-in-advance — with certain hospitals. If a hospital participates, said hospital receives a per-person increase in Medicaid funding reimbursement for each person per day treated with inpatient care falling under an experimental project. In the underlying litigation, the plaintiffs, a group of hospitals led by Bethesda Memorial Hospital, sought reimbursement for participation in the “Florida’s Low Income Pool (FLIP).” Through the project, “the State of Florida and the federal government jointly reimbursed hospitals for care provided to uninsured and underinsured patients.” However, when the plaintiffs applied for reimbursement under the FLIP project, the federal government denied the claims for reimbursement “on the ground that the patients were treated out of charity rather than as designated beneficiaries of a demonstration project.” The federal government, the defendant in the underlying litigation, averred that the “text of the regulation allows hospitals to include days of care provided under a demonstration project only if the project entitles specific patients to specific benefit packages.” 

The plaintiffs subsequently sued the defendant to mandate reimbursement. The district court ruled, and the appellate panel affirmed, against the defendant, holding that the text of regulation only requires a patient under the demonstration project to have received some form of in-patient care, with no additional specificity required. The appellate court explained that “eligible for inpatient services” means that the “demonstration project enabled the patient to receive inpatient services, regardless of whether the project gave the patient a right to those (specific) services.”

The appellate panel concluded by noting that the defendant tried this exact argument in the 5th Circuit, with no similar success. In the 5th Circuit case, the court explained, the demonstration project concerned Katrina victims who were given access to all in-patient services but not a list of specific in-patient services. Like here, the court noted, the defendant “made arguments nearly identical to those he presents here, but the Fifth Circuit held the ‘plain regulatory text demands that such days be included — period.’ ”

The plaintiffs are represented by King & Spalding.