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The American Hospital Association v. Burwell

United States District Court, D. Columbia.

September 17, 2014

THE AMERICAN HOSPITAL ASSOCIATION, et al., Plaintiffs,
v.
SYLVIA MATTHEWS BURWELL, in her official capacity as Secretary of Health and Human Services, Defendant

Page 55

For AMERICAN HOSPITAL ASSOCIATION, MISSOURI BAPTIST SULLIVAN HOSPITAL, MUNSON MEDICAL CENTER, LANCASTER GENERAL HOSPITAL, TRINITY HEALTH CORPORATION, Plaintiffs: Catherine E. Stetson, LEAD ATTORNEY, Dominic F. Perella , HOGAN LOVELLS, U.S. LLP, Washington, DC.

For DIGNITY HEALTH, Plaintiff: Catherine E. Stetson, LEAD ATTORNEY, HOGAN LOVELLS, U.S. LLP, Washington, DC.

For KATHLEEN SEBELIUS, in her official capacity as Secretary of Health and Human Services, Defendant: Eric B. Beckenhauer, LEAD ATTORNEY, U.S. DEPARTMENT OF JUSTICE, Civil Division, Federal Programs Branch, Washington, DC.

For HEALTHCARE ASSOCIATION OF NEW YORK, Amicus: James A. Shannon, LEAD ATTORNEY, WILSON ELSER MOSKOWITZ EDELMAN & DICKER LLP, Albany, NY; Laura Nachowitz Steel, LEAD ATTORNEY, WILSON ELSER MOSKOWITZ EDELMAN & DICKER, LLP, Washington, DC.

Page 56

MEMORANDUM OPINION

COLLEEN KOLLAR-KOTELLY, United States District Judge.

Plaintiffs, the American Hospital Association, Missouri Baptist Sullivan Hospital, Munson Medical Center, Lancaster General Hospital, Trinity Health Corporation, and Dignity Health (collectively, " Plaintiffs" ), bring this action against Defendant Sylvia Matthews Burwell, in her official capacity as Secretary of Health and Human Services,[1] asserting claims that Defendant's

Page 57

purported policy applying time limits to the billing of certain Medicare claims is arbitrary and capricious in violation of the Administrative Procedure Act; that defendant is equitably estopped from applying the timely filing limit to certain new Medicare Part B claims; and that the Medicare Act's one-year time limit is equitably tolled. Plaintiffs seek both declaratory and injunctive relief. Presently before the Court is Defendant's [31] Motion to Dismiss for Lack of Jurisdiction and Failure to State a Claim upon which Relief can be Granted. Upon consideration of the pleadings,[2] the relevant legal authorities, and the record as a whole, the Court GRANTS Defendant's motion with respect to the lack of jurisdiction. Accordingly, this action is DISMISSED in its entirety.

I. BACKGROUND

A. Factual Background

When patients are admitted to a hospital, they are treated on an inpatient basis; when patients are treated without being admitted, they are treated on an outpatient basis. Second Am. Compl. ¶ 1. Upon the submission of claims to the Secretary of Health and Human Services, see 42 U.S.C. § § 1395f(a)(1), 1395n(a)(1), Medicare Part A provides reimbursement for inpatient care of patients, and Medicare Part B provides reimbursement for outpatient services. Second Am. Compl. ¶ ¶ 3, 4. Claims for reimbursement must be submitted " no later than the close of the period ending 1 calendar year after the date of service." 42 U.S.C. § § 1395n(a)(1); see also 1395f(a)(1). The Medicare Act charges the Secretary with " prescrib[ing] such regulations as may be necessary to carry out the administration of the insurance programs under this subchapter." 42 U.S.C. § 1395hh(a)(1).

As a means of correcting fraudulent billing, the Secretary of Health and Human Services, operating through the Centers for Medicare and Medicaid Services (CMS), employs private third parties, known as Recovery Audit Contractors (RACs), to review billing decisions. Second Am. Compl. ¶ 2. When a RAC determines that a particular patient should not have been admitted to a hospital to receive inpatient care, it will " claw back" the payments made to the hospital. Id. Decisions by RACs are subject to multiple layers of administrative review: a provider can ask for a determination of a RAC's findings by a Medicare Administrative Processor (MAC); can then seek reconsideration from a Qualified Independent Contractor (QIC), including an independent record review by a panel of healthcare professionals; can receive review of the QIC action by an Administrative Law Judge (ALJ); and can finally appeal the ALJ decision to the Departmental Appeals

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Board Medicare Appeals Council (DAB). Id. ¶ 50. " A decision of the Departmental Appeals Board constitutes a final agency action and is subject to judicial review." 42 U.S.C. § 1395ff(f)(2)(A)(iv).

Plaintiffs allege that, prior to March, 2013, CMS had indicated that Part B compensation was not available for services provided on an inpatient basis where a RAC had clawed back Part A reimbursement because inpatient treatment was not appropriate, except for certain ancillary services. Second Am. Compl. ¶ ¶ 46-48. At the times relevant to the claims in this action, the Medicare Benefits Policy Manual stated, in Chapter 6, § 10, " Payment may be made under Part B for . . . medical and other health services listed below when furnished by a participating hospital (either directly or under arrangements) to an inpatient of the hospital, but only if payment for these services cannot be made under Part A." Id. ¶ 48. The services " listed below" were limited to ancillary services like diagnostic tests, surgical dressings, splints and casts, outpatient physical therapy, and vaccines. Id.

Some hospitals appealed their Part A denials, and, in at least 16 cases between 2005 and 2012, the DAB concluded that a Part B payment was available to hospitals that provided reasonably and medically necessary services on an inpatient basis when the patient could have been treated in an outpatient setting.[3]Id. ¶ 51. But many more hospitals did not seek Part B payment after a Part A denial. Id. ¶ 53. Plaintiffs are in the latter category. Plaintiffs are the American Hospital Association, a national organization representing and serving hospitals and healthcare systems and networks, as well as individual members; three individual hospitals; and two health care systems. Id. ¶ ¶ 14-19. Plaintiffs--and their constituent hospitals--were subject to Part A claw backs because of RAC determinations that the services should have been provided as outpatient care rather than inpatient care.[4]Id. ¶ ¶ 69, 80, 93, 104, 117, 128-130. ...


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