Academic journal article
By Chue, Jessica
American Journal of Law & Medicine , Vol. 32, No. 1
Medicare: The Home Office of Medicare Providers May Not Rely on the Approval of an Alternative Cost Allocation Approved by a Medicare Fiscal Intermediary-Mercy Home Health v. Leavitt, 2006 WL 259609 (3rd Cir. Feb. 3, 2006).
Physician Assisted Suicide: Supreme Court Strikes Down Federal Rule Blocking Physician-Assisted Suicide-Gonzalez v. Oregon, 2006 WL 89200 (2006).
Mental Health: District Court Could Revoke Release of a Mentally 111 Prisoner for Failing to Comply with Non-Treatment Related Requirements-United States v. Franklin, 2006 WL 167889 (8th Cir. (Mo.) Jan. 25, 2006).
Medicare: The Home Office of Medicare Providers May Not Rely on the Approval of an Alternative Cost Allocation Approved by a Medicare Fiscal IntermediaryMercy Home Health v. Leavitt1-The United States Court of Appeals for the Third Circuit upheld the secretary of Health and Human Services' ("the secretary") decision to disallow the use of an alternative cost allocation method for home office costs that had previously been approved by a Medicare fiscal intermediary.2 The Plaintiff, Mercy Home Health ("Mercy") is a subsidiary of Mercy Home Health Services ("Home Office"), the home office of four health care providers.3 Pursuant to § 2150.3(D)(2)(b) of the Provider Reimbursement Manual ("PRM"),4 which sets out the procedure a home office should follow if it wants to depart from the default cost-to-total cost allocation method of reimbursement,5 the Home Office requested permission to use an alternative method from its fiscal intermediary, Independence Blue Cross.6 Based upon the Home Office's claim that the default method would inappropriately place large allocations on its medical equipment subsidiary, Independence Blue Cross approved the request.7 Home Office thus used the alternative method throughout the fiscal year 1996, but on June 26th 1996, Independence Blue Cross notified Home Office that it would no longer accept the use of the alternative method beginning in 1997.8 Subsequently, Home Office implemented a new alternative method, similar to the first, without Independent Blue Cross' permission.9 That same year, Independence Blue Cross terminated its contract with Home Office.10 In 1998, Independent Blue Cross' successor reopened and adjusted the cost reports of Mercy and Home Office for fiscal years 1995-1996 (under the approved alternative) and 1997-1999 (under the second unapproved alternative)." Using the default method prescribed in the PRM, the successor intermediary reduced Mercy's allowable costs by $272,000 in 1995 and reduced Medicare reimbursement by $495,868 in 1996.12
Mercy appealed the adjustments to the secretary's Provider Reimbursement Review Board (the Board). The Board reinstated the adjustments to the 1997-1999 cost reports under the unapproved method, but reversed the disallowance for 19951996, finding that Mercy reasonably relied on Independent Blue Cross' written approval of its alternative method.13 The parties sought review of the Board's decision. On behalf of the secretary, the Acting Deputy Administrator of the Centers for Medicare and Medicaid Services ("the Administrator") rejected Mercy's reliance argument for two reasons.14 First, the Administrator found that prior approval could not negate the clear dictates of the Medicare program under § 186 l(v)( I)(A), which limits reimbursement to Medicare patient costs and prohibits cross-subsidization of costs.15 Furthermore, the Administrator found that Mercy had failed to articulate a valid rationale supporting its methodology, and hence, disallowance was proper.16 On appeal, the district court granted summary judgment in favor of the Administrator.17 Recognizing the congressional directive to provide retroactive corrective adjustments of prior cost reports under § 1395x(v)(I)(A), the district court also rejected Mercy's reliance claim, and concluded that substantial evidence supported the Administrator's rejection of the alternative allocation method. …