N.J. Hospitals Sue HHS Over Charity Program Exclusion

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By Eric Topor

Oct. 6 — A group of nine New Jersey hospitals filed a lawsuit Oct. 1 challenging the exclusion of patient treatment days provided through the New Jersey Charity Care Program (NJCCP) from the hospitals' Medicare disproportionate share hospital (DSH) adjustment payment (Cooper Hosp. Univ. Med. Ctr. v. Burwell, D.D.C., No. 15-cv-01603, complaint filed 10/1/15).

The hospitals alleged in their complaint that the Medicare regulation promulgated by the Department of Health and Human Services in 2000 (42 C.F.R. § 412.106), which excluded patients treated through low-income but non-Medicaid eligible patient programs like NJCCP, is a violation of the equal protection clause and the Administrative Procedure Act.

The hospitals argued that the NJCCP, which receives operating funds through Medicaid DSH payments, should be treated the same as low-income assistance programs from states under Section 1115 waivers, which are included in Medicare DSH adjustments.

The hospitals said patient populations in states with Section 1115 waivers from the HHS are similar to those non-Medicaid eligible patients receiving assistance through the NJCCP, and therefore NJCCP patient days should be included in Medicare DSH adjustments.

Access to Care Issue

John Z. Jackson, an attorney with McElroy, Deutsch, Mulvaney & Carpenter LLP and counsel for the plaintiffs, told Bloomberg BNA Oct. 6 that the NJCCP and Section 1115 waivers serve “virtually identical” purposes: “to expand access to medical care by low-income patients beyond traditional Medicaid.” He said the regulation's effect “infringes on patient access to health care, which is clearly emerging as an important if not fundamental right in the United States.”

Jackson illustrated the alleged “arbitrary distinction and lack of fundamental fairness” in the regulation by comparing its effects on an NJCCP patient versus a low-income patient in a Section 1115 waiver state such as Iowa. Jackson said “the Iowa hospital is permitted to include those patient days in its Medicare DSH calculation but the New Jersey hospital is not.”

Challenges From Other Hospitals

The secretary's exclusion of low-income patient days from Medicare DSH adjustments in states without Section 1115 waivers has been the subject of recent court decisions in other jurisdictions.

The U.S. District Court for the Western District of Kentucky ruled in favor of the secretary in a Sept. 15 decision in a hospital's lawsuit that made similar equal protection arguments as the New Jersey hospital plaintiffs in Owensboro Health, Inc. v. Burwell, 2015 BL 297383, W.D. Ky., No. 4:14-cv-00023-JHM-HBB, 9/15/15 (184 HCDR, 9/23/15).

A group of 26 hospitals in Washington state also challenging the differential treatment of Washington state low-income assistance programs versus those in Section 1115 waiver states was rebuffed in a Sept. 1 decision (Verdant Health Comm'n v. Burwell, 2015 BL 283363, W.D. Wash., No. 3:14-cv-05108-RBL, 9/1/15). The U.S. District Court for the Western District of Washington acknowledged that its ruling against the hospitals merely set up a second try to overturn the regulation in the U.S. Court of Appeals for the Ninth Circuit (173 HCDR, 9/8/15).

McElroy, Deutsch, Mulvaney & Carpenter LLP is representing the plaintiff hospitals.