Hospitals Lose Medicare Underpayment Battle in Supreme Court

Article excerpt

WASHINGTON -- Hundreds of hospitals lost a Supreme Court fight to force the federal government to make up more than $340 million in Medicare underpayments.

America's highest court Tuesday rejected the hospitals' appeal seeking review of a lower-court ruling that threw out lawsuits demanding bigger Medicare payments.

An appeals court ruled that federal law doesn't let the hospitals file lawsuit claims about Medicare payment disputes unless they first go through an administrative Medicare appeals process. The hospitals said they couldn't pursue an administrative channel because the Department of Health and Human Services didn't release important spending figures until years after the appeals deadline had passed. In their unsuccessful high court appeal, the hospitals said the lower-court ruling violated their constitutional rights by effectively taking away any possible way to challenge Medicare payment decisions worth hundreds of millions of dollars. The dispute at the high court involved a collection of separate claims filed by 305 different hospitals that treat patients under the federal Medicare health insurance program for the elderly. The group includes dozens of hospitals owned by Columbia/HCA Healthcare Co., Tenet Healthcare Corp., Universal Health Services Inc., and OrNda Health Corp., along with a large number of independent facilities. The hospitals claimed that about 5,500 hospitals were short- changed on Medicare reimbursements for at least two years during the 1980s. The fight centers on a Medicare policy known as "outlier payments" -- which are designed to provide extra money to make up for the fact that some patients require care that's more extensive and more expensive than the average cost that Medicare will pay for a particular procedure. Federal law requires HHS to set each fiscal year's nationwide outlier payments at no less than 5 percent, and no more than 6 percent, of total Medicare spending on covered hospital procedures. Before the start of each fiscal year, HHS designs its budget using estimates of what total spending will be. The agency sets each year's outlier payments at between 5 percent and 6 percent of the year's estimated spending. HHS, however, does not adjust that outlier figure if actual payments don't wind up matching the projections. The hospital lawsuits grew from charges that, in fiscal 1985 and 1986, nationwide year-end outlier spending actually came in at less than the legal minimum of 5 percent. Total federal underpayments during those two years were at least $341 million, they said. The hospitals said they only learned about the nationwide underpayments in 1992, when HHS for the first time released details about real outlier spending in some earlier years. …