What’s Next in the Allina Medicare Payment Litigation Saga?

Medicare attorneys are wondering what the HHS will do next after the U.S. Court of Appeals for the District of Columbia Circuit invalidated the prevailing Medicare rule on how disproportionate share hospital (DSH) payments are calculated.

The issue in dispute involves how the DSH payment calculation accounts for managed care beneficiaries, and is worth potentially hundreds of millions of dollars to hospitals nationwide.

The appeals court rebuffed the HHS’s request for a rehearing, and the Department of Health and Human Services has until Feb. 27—or longer if an extension is granted—to petition the Supreme Court for review.

Supreme Court review is one route that the HHS can take, with no guarantee that the high court will agree to hear the case, or of victory if it does. Kenneth Marcus, an attorney with Honigman Miller Schwartz and Cohn LLP in Detroit, told me that the Supreme Court likely would decide whether to grant any petition in Allina during its current term, and if granted, would probably consider the case during the next one.

A Supreme Court decision in Allina could decide whether the Medicare Act allows for interpretive rulemaking, which doesn’t require a public notice and comment period.

However, if the HHS decides against Supreme Court review, the agency will have to decide whether to continue to litigate the many similar cases brought by hospitals that are working their way through the administrative appeals process, or acquiesce to the D.C. Circuit’s ruling.

Acquiescence would mean paying significant Medicare reimbursements to hospitals with pending appeals, Marcus said, a route the HHS took in another DSH dispute, resulting in settlement with hundreds of hospitals in 2016.

“CMS may be reluctant to take that approach,” Marcus said, given the financial cost of complete acquiescence, though he added that administering relief to hospitals nationwide will “consume a lengthy period of time” if the D.C. Circuit ruling stands.

Medicare attorneys will be watching closely as Feb. 27 draws near to see which approach the HHS, and perhaps a newly appointed secretary Alex Azar, will take.

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