Michigan Hospital Pressing for Nursing Program Reimbursement

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By Matt Phifer

Clinical programs for nurses are facing funding threats from Medicare—just as the demand for clinicians and clinical training sites increases.

That looming issue was put on display when the U.S. District Court for the Eastern District of Michigan ordered a Michigan hospital and the U.S. Department of Health and Human Services to come together later in April to determine how to move forward in a case in which the hospital was suing for two years of Medicare reimbursement it claimed it was owed. In doing so, Judge Robert Cleland chastised both parties for not arguing how the court should interpret the agency’s regulations, but instead focusing on how the court should not interpret them.

William Beaumont Hospital–Royal Oak alleges that the Centers for Medicare & Medicaid Services changed the standard for determining the reimbursement of clinical nursing programs without legal or regulatory justification. An HHS victory could hamper the ability of clinical hospitals around the U.S. to be reimbursed by Medicare for their clinical nursing programs.

The Well Went Dry

The hospital’s Medicare administrative contractor, an intermediary acting on behalf of the CMS, suddenly declined to reimburse the hospital for two years of its clinical nursing program after continually providing reimbursement for 17 years. The 2010 decision on the hospital’s 2005 and 2006 programs cost the hospital over $850,000.

The CMS claimed it was merely enforcing longstanding Medicare statutes and regulations that the hospital violated by not providing time sheets. The hospital pointed out that those time sheets had never been required for previous reimbursements.

Cleland wrote in the ruling that it was reasonable for Beaumont to believe that it had provided appropriate cost data. He declined to defer to the CMS’s interpretation of the regulations because those do not require a hospital to create “contemporaneous” records of the costs of clinical training programs.

“Those are the kind of shifts that if they happen and they don’t get challenged, they can be a real big problem to a lot of hospitals,” James Flynn, a managing partner at Bricker & Eckler in Columbus, Ohio, told Bloomberg Law April 11.

Mounting Pressure

Anne Murphy, a partner at Hinckley Allen in Boston and a former general counsel at a university hospital, told Bloomberg Law that clinical programs at universities are facing increasing pressure to demonstrate cost-effectiveness and efficiency. “To the extent that those institutions are bearing the increased overhead cost associated with providing clinical education, getting fair reimbursement for that is increasingly important in terms of demonstrating their cost effectiveness in the larger health-care system,” Murphy explained.

The demand for clinical education programs is increased due to an aging population combined with retirements in the industry. But on the other hand, Medicare is trying to control its spending by focusing on value-based purchasing. “The overall demand of the country’s health-care system is that care be delivered in an efficient manner, so academic medical centers must show they are meeting that value proposition,” Murphy told Bloomberg Law.

Medicare reimbursement for physician clinical programs operates under a different system and has been a frequent focal point for auditors. Challenges to nursing programs, however, are relatively new, according to Flynn. He pointed out that time studies, breakdowns of the amount of time teaching versus providing care, are required for clinical physician programs. “What was troubling with the case is that without any notice, the CMS auditors shifted that requirement over to a nursing program,” Flynn told Bloomberg Law.

Still, Flynn said hospitals should be encouraged by the court’s decision because it shows that the courts will not necessarily defer to the CMS’s reimbursement decisions and that the appeals process can be used to effectively fight for reimbursement on issues beyond clinical nursing programs. “It could give hospitals reprieve on the path through the appeals process, where hospitals have historically been getting beaten up,” Flynn said.

The attorneys for plaintiffs William Beaumont Hospital-Royal Oak declined to comment, saying the litigation is ongoing.

This case is William Beaumont Hosp. — Royal Oak v. Price, 2018 BL 112057, E.D. Mich., No. 16-13528, 3/29/18.

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