Health Law Daily Court adds remand considerations in hospital bad debt denial challenge
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Friday, October 18, 2019

Court adds remand considerations in hospital bad debt denial challenge

By Deborah Hammonds, J.D. and Kayla R. Bryant, J.D.

The CMS Administrator must explain why the hospitals were considered not to have billed the state for dual eligibles’ bad debts, and why reports submitted did not meet the exception to the billing requirement.

A court partially granted reconsideration for a large group of California acute care hospitals seeking judicial review of the HHS Secretary’s denial of reimbursement of deductible and coinsurance payments that were not paid by Medicare. The court declined to retain jurisdiction over the case, and remanded for the CMS Administrator to (1) evaluate whether the hospitals had billed the state for the claims as required and (2) further explain why the hospitals’ documentation was not "contemporaneous" as required to meet an exception for the requirement to bill the state (Mercy General Hospital v. Azar, October 17, 2019, Walton, R.).

Bad debts. If Medicare patients do not pay deductible and coinsurance payments, the providers may eventually seek reimbursement from CMS for these bad debts. However, before they can do so, they must engage in reasonable collection efforts and the debts must actually be uncollectable when a provider claims them to be worthless. CMS’ "must-bill" policy requires that providers who seek CMS reimbursement for bad debts associated with patients covered by both Medicare and Medicaid first (1) bill the state Medicaid program, known as the billing requirement; and (2) submit a remittance advice from the state Medicaid program to the Medicare intermediary, known as the remittance advice requirement.

Bad debt moratorium. The bad debt moratorium prohibits HHS from making any changes to its bad debt policies after August 1, 1987, and from requiring providers to make changes to their bad debt policies that were in effect on this date. In this case, the CMS administrator denied the hospitals’ reimbursement claims, finding that the hospitals failed to submit the remittances as required by the must-bill policy. On appeal, the hospitals argued and the court agreed that the Administrator did not provide substantial evidence to support a finding that the remittance requirement predated the moratorium. The court also agreed that the Administrator’s alternative grounds for denying the hospitals’ claims, finding that the hospitals failed to satisfy the billing requirement, was not supported because the Administrator did not find that the states failed to bill the state.

Motion for reconsideration. The hospitals moved for reconsideration of the court’s prior decision, arguing that the court previously found that the hospitals were entitled to relief as to both the billing and remittance requirements of the must-bill policy, but only granted relief as to the remittance policy. The hospitals argued that this ruling would delay a final resolution and require additional judicial review of other issues in the future. The hospitals also argued that the court erred when it did not rule whether a relevant exception to the billing requirement that allows states to submit alternative documentation instead of billing the state applied, or whether certain reports satisfied a billing requirement.

Remand matters. After finding it appropriate to partially reconsider its prior decision, the court concluded that the Administrator’s determination that the billing requirement did not violate the Bad Debt Moratorium was supported by substantial evidence. However, the court affirmed its prior decision to remand the case for the Administrator to evaluate whether the hospital billed the state for the claims at issue. The court also concluded that the Administrator’s interpretation of regulations to require "contemporaneous" documentation of bad debts was not arbitrary or capricious.

Despite supporting the contemporaneous finding, the court remanded for the Administrator to provide further explanation of the reasons for finding that the hospitals’ documentation was not contemporaneous as required by statute. Also, the case was remanded for further explanation of the Administrator’s conclusion that the submitted reports failed to satisfy the contemporaneous documentation requirement. Finally, the court refused to exercise its discretion to retain jurisdiction over this case, noting the hospitals failed to provide a compelling reason to deviate from the norm. Noting the claims have been pending for over ten years, the court urged the Secretary to resolve the matter as expeditiously as possible.

The case is Civil Action No. 16-99 (RBW).

Attorneys: Lori Allison Rubin (Foley & Lardner, LLP) for Mercy General Hospital, Alexian Brothers of San Jose, Inc. f/k/a Alexian Brothers Hospital and Anaheim Memorial Medical Center. Brian J. Field, U.S. Attorney's Office, for Alex M. Azar II.

Companies: Mercy General Hospital; Alexian Brothers of San Jose, Inc. f/k/a Alexian Brothers Hospital and Anaheim Memorial Medical Center

MainStory: TopStory IPPSNews CMSNews BillingNews MedicaidPaymentNews PaymentNews

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