By Victoria Moran, J.D., M.H.A.
The D.C. federal district court declined to adopt a magistrate judge’s recommendation in a matter involving 81 California acute care hospitals and their claims for Medicare reimbursement for unpaid deductibles and coinsurance associated with dual eligible beneficiaries. In its decision, the D.C. Circuit concluded that the Administrator’s finding that a remittance advice requirement existed prior to the Bad Debt Moratorium was not supported by substantial evidence and imposing that requirement would violate the moratorium. The court did not affirm HHS’s denial of the hospitals’ claims on the basis that they failed to provide remittance advices to support the claims and could not affirm denial on any of the alternative grounds argued. The court remanded the case to HHS for further consideration of the claims. The D.C. Circuit granted in part and denied in part the motion for summary brought the hospitals and denied HHS’s cross-motion for summary judgment (Mercy General Hospital v. Azar, September 29, 2018, Walton, R.).
This case involves 81 California acute care hospitals in that participate in Medicare and Medi-Cal. At issue are the hospitals’ claims for Medicare reimbursement of unpaid deductibles and coinsurance associated with dual eligible patients incurred from October 1995 to December 2004. During that time, the hospitals billed Medi-Cal for some of the dual eligibles but stopped because various billing-related factors made the process not cost effective. Beginning in 1992, the hospitals gathered alternative documentation and submitted bad debt lists for claims. In 2007, the hospitals retained EDS Corporation to generate reports to identify bad debt payable by Medicare. The intermediary disallowed the amounts claims because there were no state remittance advices.
The hospitals appealed to the Provider Reimbursement Review Board, which affirmed the intermediary’s disallowance of the claims. The hospitals then filed an action seeking judicial review of the Administrator’s decision, which was referred to a magistrate judge. The magistrate issued a Report and Recommendation affirming HHS’s decision and denying the hospital’s motion for summary judgment and granting HHS’s cross-motion for summary judgment.
Why were the claims denied? The basis for the denial of the claims is HHS’s "must-bill policy." Pursuant to this policy, providers seeking Medicare reimbursement for bad debts of dual eligibles must (1) bill Medi-Cal, and (2) obtain and submit a remittance advice from Medi-Cal to the intermediary. HHS alleges the hospitals failed to satisfy the remittance advice requirement.
The hospitals argue that the must-bill policy was not in place before August 1, 1987, and therefore violates the Bad Debt Moratorium. Alternatively, the hospitals argue that if the must-bill policy is lawful, HHS should be ordered to accept the alternative documentation submitted because it falls under PRM § 1102.3L, which allows providers to submit alternative documentation instead of billing the state. Finally, the hospitals argue that rejecting the EDS reports was improper because they are the equivalent of remittance advices.
Bad Debt Moratorium. The Administrator concluded, and the magistrate agreed, that the must-bill policy did not violate the Moratorium because it had been in effect since before August 1, 1987. In response to arguments, the D.C. Circuit held that the Administrator erred for the following reasons.
Standard of review. The Administrator’s finding that the must-bill policy existed prior to August 1, 1987, is a factual finding and the proper standard of review is the substantial evidence standard; the magistrate applied this standard, and the D.C. Circuit declined to reject the magistrate’s Report and Recommendation on the basis of an incorrect standard of review.
Chapter 3 of the PRM. The plain language of the PRM provisions does not impose a remittance advice requirement or demonstrate that a remittance advice requirement existed prior to the Moratorium. At issue are Sections 310, 312, and 322 of the PRM. While these provisions existed before the Moratorium, Section 310 alone does not establish a remittance advice requirement, and Section 312 exempts providers from complying with Section 310 when seeking reimbursement for dual eligible patients. In addition, Section 312 does not establish requirements for how a provider must make a determination of patient indigence. The court also found that Section 322 does not impose a remittance advance requirement. Regardless of whether the Sections are considered individually or together, they do not create a remittance advice requirement.
Pre-Moratorium PRRB decisions. Two PRRB decisions issued prior to the Moratorium do not support the Administrator’s finding that HHS interpreted regulations and PRM provisions to require the submission of a remittance advice to receive Medicare reimbursement. The decisions did not refer to a remittance advice or requirement that providers must submit such documentation for reimbursement, and a causal relationship between billing and remittance advice requirements would not compel the court to presume the requirements existed.
Post-moratorium Administrator decisions. Post-Moratorium administrative decisions relied on by the Administrator did not support the finding that a remittance advice requirement existed prior to August 1, 1987. The decisions recognized a billing requirement, not a remittance advice requirement, and the post-Moratorium statements about a pre-1987 policy do not show how the policy was applied prior to 1987.
1985 Intermediary Manual. The 1985 Intermediary Manual cited by HHS in its brief to the magistrate cannot be considered because the Administrator did not cite or refer to the Manual in his decision and it was not in the administrative record.
Statements by CMS officials. Statements by CMS officials made a meeting in 1993 are post-Moratorium and cannot be considered because they do not illustrate how the policy was applied before 1987.
Other authority and evidence. The bad debt regulation itself does not demonstrate the existence of a remittance advice requirement prior to August 1, 1987, and the Administrator confused the laws with the Agency’s interpretation of the laws.
The case is No. 1:16-cv-00099-RBW-DAR.
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: Alexian Brothers of San Jose, Inc. f/k/a Alexian Brothers Hospital
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