CMS stands by calculations for 2004 Medicare outlier payments

The CMS will not recalculate payments made to hospitals in 2004 for particularly expensive patients, despite hospitals’ objections. The agency published a clarification Friday in response to a court decision last year.

A federal judge ordered the CMS to better explain its calculations in a May decision in District Hospital Partners v. Burwell (PDF).

In that case, 186 hospitals alleged that Medicare underpaid them by more than $3 billion in outlier payments. Outlier payments are extra payments made to hospitals when the estimated cost of treating a patient exceeds the standard Medicare payment. They alleged HHS didn’t properly account for hospitals that “turbocharged,” a practice in which hospitals would improperly manipulate their charges to receive additional outlier payments.

The CMS, however, is standing by its calculations.

Stephen Nash, a partner with Squire Patton Boggs who is representing dozens of hospitals that have filed lawsuits similar to the one decided in May, said he’s disappointed.

“They have failed to address the underpayments they’ve made to almost every hospital in the country for the last 20 years,” Nash said.

Part of the reason the case has taken so long is because the hospitals had to exhaust their administrative remedies before bringing the issue to court, he said. He predicted that hospitals will continue to push their point in court.

In the May decision, a three-judge panel of the D.C. Circuit Court of Appeals disagreed with a lower court over the 2004 payments, saying HHS’ secretary had better explain those calculation methods. The panel also, however, at that time rejected the hospitals’ arguments that the thresholds were “arbitrary and capricious” and led to underpayments in 2005 and 2006 as well.

The District Court for the District of Columbia in a separate case (PDF) in September came to a similar ruling regarding the 2004 payments, also saying the calculations needed more explanation.