Health Reform WK-EDGE HHS must make retroactive adjustments to Medicare disbursements for cancer hospital outpatient services
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Thursday, July 26, 2018

HHS must make retroactive adjustments to Medicare disbursements for cancer hospital outpatient services

By David Yucht, J.D.

A federal district court in Washington, D.C. determined that HHS failed to comply with a clear statutory mandate under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) to raise Medicare disbursements for cancer hospital out-patient services for the 2011 fiscal year. Contrary to the argument of HHS, the court found that this matter was appropriate for judicial review because it involved allegedly unauthorized agency action. Consequently, the district court entered summary judgment in favor of a cancer hospital and remanded the case to HHS to make appropriate adjustments (H. Lee Moffitt Cancer Center and Research Institute Hospital, Inc. v. AzarJuly 18, 2018, Kelly, T.).

Outpatient Medicare payments to cancer hospitals. The Balanced Budget Act of 1997, Pub. L. No. 105-33, created the Outpatient Prospective Payment System (OPPS), which requires Medicare payments for outpatient hospital care to be made based on preset rates. The statutory provision governing OPPS, codified at 42 U.S.C. § 1395l(t), imposes a number of requirements with which HHS must comply in setting prospective rates for outpatient services. Subsection (t)(2)(E) also provides HHS a broad discretionary authority to make "adjustments" to those rates which must be made in a budget neutral manner. Section 3138 of the ACA, enacted in March 2010, required HHS to determine whether H. Lee Moffitt Cancer Center and Research Institute Hospital, Inc. (Moffitt) and certain other cancer hospitals’ costs for delivering outpatient services exceeded other hospitals’ costs. If HHS made an affirmative finding, it was required to provide for an appropriate Medicare adjustment to reflect those higher costs for services provided on or after January 1, 2011.

As a result of a 2010 study, HHS determined that the cancer hospitals did in fact have significantly higher costs. It was HHS’s opinion that under statute, any increases to the cancer hospitals must be made in a budget neutral manner, meaning that any increases would need to be offset by decreases to other hospitals. Faced with numerous comments and concerns about its proposed formula for making this adjustment, HHS did not issue its final rule increasing payments until November 2011 and made the increase effective January 1, 2012. HHS rejected the cancer hospitals’ request that it extend the payments retroactively to cover services furnished in 2011.

Jurisdiction. Contrary to the argument of HHS, the court found that this matter was appropriate for judicial review. The court noted that Congress generally exempted the OPPS development of rates and "other adjustments" from administrative or judicial review. However, the jurisdictional bar did not preclude review of adjustments to the extent that they allegedly exceeded agency authority. The court had jurisdiction to hear this claim because it was alleged that HHS committed a facial violation of the statute and consequently acted in an unauthorized manner.

Retroactive Medicare adjustments. The court then ruled in favor of Moffitt, requiring HHS to provide for an appropriate Medicare adjustment to reflect higher costs for services provided on or after January 1, 2011. The court found that the statute plainly required a 2011 adjustment. HHS’s argument that Congress included the effective date on the implicit assumption that HHS would make the adjustment by January 1, 2011, and was silent about what would happen if HHS failed to act by that date had no basis whatsoever in the text of the statute, which clearly mandated that an adjustment be "effective for services furnished on or after January 1, 2011." Because the statute did not contain a deadline for agency action, the only "silence" in this case was one that HHS manufactured to justify its deviation from Congress’s command. The court was not convinced by any additional arguments HHS made in support of its interpretation, including those involving negative effects on budget neutrality, the prospective nature of OPPS, and the presumption against retroactive regulations. All these arguments required a showing that the statute was silent or ambiguous, notwithstanding its plain text. HHS was unable to make such a showing.

The case is No. 1:16-cv-02337-TJK.

Attorneys: Christopher L. Keough (Akin Gump Strauss Hauer & Feld LLP) for H. Lee Moffitt Cancer Center and Research Institute Hospital, Inc. Jason Lee, U.S. Department of Justice, for Alex M. Azar II.

Companies: H. Lee Moffitt Cancer Center and Research Institute Hospital, Inc.

MainStory: TopStory CaseDecisions AgencyNews MedicarePartANews OutpatientFacilityNews ProviderPaymentNews DistrictofColumbiaNews NewsFeed

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