On August 3, 2015, a federal judge in the Southern District of New York ruled that the United States’ and state of New York’s complaints in intervention can move forward against a group of hospitals, under the federal False Claims Act (“FCA”) and New York’s FCA corollary. The hospitals allegedly failed to report and return Medicaid overpayments that were brought to their general attention over two years before all of the relevant repayments were made.
The judge’s opinion denying the defendants’ motions to dismiss in Kane v. Health First, et al. and U.S. v. Continuum Health Partners Inc. et. al., should be of particular note to providers because it contains extensive discussion and guidance as to how at least one federal judge interprets the Affordable Care Act’s (“ACA”) “60 day rule.” Specifically, the ACA’s rule requires any provider who receives an overpayment from Medicare or Medicaid to repay such overpayment within 60 days of the “date on which the overpayment was identified.” Further, retention of such an overpayment beyond the sixty-day period can result in liability under the FCA.
Posted by Robert A. Chu
on August 04, 2015
On July 23, 2015, the Third Circuit invalidated, as being contrary to the Medicare statute, the U.S. Department of Health and Human Services’ (HHS) Medicare wage index “reclassification rule,” 42 C.F.R. § 412.230(a)(5)(iii). That rule was designed to prevent (and did prevent) urban hospitals that had strategically reclassified as being rural from being reclassified again (based on their newly acquired rural status) to a particular urban area, to benefit from a higher Medicare standardized amount and wage index.
In Geisinger Community Medical Center v. Secretary United States Department of Health and Human Services, the hospital first reclassified, successfully, as a Section 401 hospital (i.e., an urban hospital that elects to be treated as rural). It then sought to reclassify, based on its newly acquired rural status, to the Allentown urban wage index area. The hospital estimated that such a reclassification would increase its Medicare reimbursements by approximately $2.6 million per year. The Allentown urban area is 27 miles from the hospital. To be reclassified to that area, the hospital had to rely on the relaxed 35 mile maximum distance applicable to rural hospitals; it would not qualify under the maximum 15 mile distance applicable to urban hospitals. The reclassification rule, however, prohibited Section 401 hospitals from reclassifying based on their acquired rural status.
The Third Circuit panel majority, under a Chevron Step One analysis, agreed with the hospital that HHS’ reclassification rule is unlawful. It specifically held that the statutory text of Section 401 unambiguously requires HHS, through broad and mandatory language, to treat Section 401 hospitals like hospitals that are actually located in rural areas. The reclassification rule, therefore, unlawfully prevented the Section 401 hospital from being considered as a rural hospital in its application to reclassify to a different wage index area.