Health Law Daily CMS could not impose must-bill policy on non-Medicaid providers without rulemaking
News
Friday, August 23, 2019

CMS could not impose must-bill policy on non-Medicaid providers without rulemaking

By Nicole D. Prysby, J.D.

CMS’ change to the must-bill policy required a notice-and-comment rulemaking, because it substantively changed the the eligibility criteria for reimbursement under the Medicare Act for dual-eligible patients to require provider participation in the state Medicaid program.

CMS was required under the Medicare Act to conduct notice-and-comment rulemaking before subjecting long-term care hospitals, as non-Medicaid-participating providers, to the "must-bill" policy and State Remittance Advice (RA) requirement, held a federal district court in the District of Columbia. The RA requirement changed the eligibility criteria for reimbursement under the Medicare Act for dual-eligible patients, by requiring provider participation in the state Medicaid program. Requiring providers to contract with third parties is a substantive change for which notice-and-comment rulemaking is required (Select Specialty Hospital-Denver, Inc. v. Azar,August 22, 2019, Howell, B.).

Background. Seventy-five long-term care hospitals (LTCHs) sought $20 million in reimbursement for 2005 through 2010, for patients eligible for both Medicare and Medicaid. Beginning in 2007, CMS began denying reimbursement to LTCHs for dual-eligible patients’ bad debt unless the LTCHs: (1) billed state Medicaid programs for a formal determination of how much of that bad debt would be covered by state Medicaid programs and (2) received a State RA document from those state Medicaid programs to prove that the state Medicaid programs were not liable for any portion of the debt. The LTCHs claimed that CMS could not change the requirements for Medicare bad debt reimbursement, at least as to non-participating Medicaid providers, without conducting notice-and-comment rulemaking, as required by the Medicare Act, 42 U.S.C. § 1395hh(a)(2).

RA requirement. The court agreed with the LTCHs, holding that CMS was required to conduct notice-and-comment rulemaking before subjecting the LTCHs to the must-bill policy and RA requirement. To bill state Medicaid programs and obtain RAs, providers must now participate in state Medicaid programs, even though Medicaid participation is not a condition of participation or payment for purposes of Medicare reimbursement. As a result of CMS’s implementation of the must-bill policy and RA requirement, CMS changed not just the steps that existing LTCHs must take to be reimbursed, but whether such entities must form contracts with third parties, the state Medicaid programs.

The RA requirement has essentially changed the eligibility criteria for reimbursement under the Medicare Act for dual-eligible patients, by requiring provider participation in the state Medicaid program. This change makes the RA requirement substantive. The agency has not argued that these requirements are compelled by the Medicare Act itself. Rather, CMS is filling a "gap" as to how best to administer the Medicare program. CMS cannot evade its notice-and-comment obligation under § 1395hh(a)(2), just because the agency is changing a gap-filing policy.

The case number is No. 1:10-cv-01356-BAH.

Attorneys: Jason M. Healy (Law Office of Jason M. Healy, PLLC) for Denver, Inc., Fort Smith, Inc. and Jefferson Parish, Inc. Brian J. Field, U.S. Attorney's Office, for Alex M. Azar, II.

Companies: Denver, Inc.; Fort Smith, Inc.; Jefferson Parish, Inc.

MainStory: TopStory CaseDecisions CMSNews LTCHNews MedicaidNews EligibilityNews MedicaidPaymentNews PaymentNews PartANews DistrictofColumbiaNews

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More
Health Law Daily

Health Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on health legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.

Free Trial Learn More