186 hospitals, including GW, sue government over Medicare payments

GW Hospital is suing the federal government.

GW Hospital, along with 185 other hospitals across the country, is suing the secretary of the U.S. Department of Health and Human Services for underdistributing Medicare reimbursements from fiscal year 2004 through 2006. Officials from the hospitals claim they did not receive money they deserved for the treatments they provided – and is an example of a broader conflict between hospitals and the government over reimbursements for treatment.

Sylvia Burwell, the secretary of the department, distributed Medicare reimbursements to hospitals in a manner that was “arbitrary, capricious and in violation of the Medicare Act,” according to court documents filed in the U.S. District Court late last month. Burwell, who became HHS’s secretary in 2014, is listed on the documents because of her current position. She did not return a request for comment.

A spokeswoman from GW Hospital did not return multiple requests for comment.

The complaint alleges that HHS underpaid all of the hospitals nationally in the specific Medicare program by $1.4 billion for the 2004 fiscal year, $1.1 billion for the 2005 fiscal year and $650 million for fiscal year 2006, according to the document.

Patients qualify for Medicare benefits if they are 65 or older, are disabled or have an end-stage kidney disease. HHS reimburses health care providers for services to Medicare patients after considering the costs of specific types of treatments, and then adding costs for “outlier” patient treatments. The outlier costs cover cases in which hospital services exceed costs compared to what would be considered “the norm for patients with similar diagnoses,” according to the complaint.

But the hospitals in the complaint said the government failed to properly evaluate their costs and would not listen to objections – leaving them with smaller payments than they deserved, according to the complaint.

The hospitals in the lawsuit demand that the federal government admits fault, according to the complaint. The complaint also demands proper reimbursement, along with interest payments and any punitive damages the court “deems just and proper.” The complaint does not list a total cost the hospitals seek.

The complaint centers around a controversial practice called turbocharging – in which hospitals raise their prices to increase “outlier payments,” according to the complaint.

HHS’s “flawed methodology” included failing to account for the 123 hospitals who were guilty of turbocharging in calculating the reimbursements, according to the complaint. The hospitals argue that including the turbocharging hospitals skewed the reimbursement payments, causing them to be too low, according to the complaint.

To combat the inflation from turbocharging, which the federal government considers fraud, HHS increased the threshold for hospitals to qualify for outlier payments in 2003, according to the complaint.

The federal government failed to change the requirement once turbocharging had ceased in 2003, which meant hospitals did not receive the full amount of money they were entitled to, according to the complaint.

“By ignoring the flaws in her methodology, the Secretary failed to act reasonably in calculating the amounts of outlier payments to which the hospitals are entitled,” the complaint states.

According to the complaint, the offices did not account for turbocharging hospitals or the resulting inflation of those hospitals’ prices. The department then created “outlier thresholds that were too high, which caused the hospitals’ outlier payments to be too low,” the complaint reads.

Bookman, PC, a D.C. firm that specializes in health care law, represents all of the hospitals in the complaint. GW Hospital is the only D.C. hospital that is part of the lawsuit.

John Hellow, one of the lawyers from the firm representing the hospitals, said in an email that the result of another lawsuit will probably end up in the D.C. Circuit Court and that the decision will determine the results for the case involving GW Hospital.

“That result will control our case,” Hellow said.

This lawsuit is the most recent chapter in a history of legal battles between hospitals and the Department of Health and Human Services. GW Hospital was involved in two similar cases in 2008 and 2013.

A May 2015 decision by the D.C. District Court sided with the hospitals, but did not compensate them, according to the decision document. Instead, the court ordered the Burwell and her department to come up with a solution in line with the court’s thinking.

Burwell responded to the complaint in January, writing that her department failed to properly account for “the distorting effect that turbocharging hospitals had.”

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