GW Hospital sues HHS secretary for withholding Medicare funding

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The GW Hospital, along with 185 others, are seeking back pay from the U.S. Department of Health and Human Services for Medicare patients they treated more than a decade ago.

The GW Hospital is among nearly 200 hospitals suing the U.S. Department of Health and Human Services for withholding funding more than a decade ago.

In a 49-page complaint filed in the U.S. District Court for the District of Columbia Friday, District Health Services – doing business as the GW Hospital – and 185 other hospitals claim that Secretary of Health and Human Services Alex Azar did not fully reimburse the hospitals for providing care to Medicare patients. The complaint claims that Azar incorrectly determined the sum of money owed to each hospital for care of more expensive patients in 2004, 2005 and 2006.

Hospitals that admit patients insured by Medicare are compensated by the federal government with a sum predetermined by the patient’s assigned “diagnosis-related group,” with more expensive patients netting the hospital a special outlier payment. The complaint states that more than 100 hospitals “turbo-charged” the government for care, inflating costs to secure higher outlier payments.

The parties in the complaint allege that Azar and the department included data from the turbocharging hospitals to compute the amount of money each hospital was to receive for outlier patients, which lowered the funding amount the hospitals in the complaint received.

“As a result of these shortfalls, a significant amount of the reduction in the DRG-Based Payment rates used to fund the outlier mechanism for FFYs 2004-2006 was not paid back to the IPPS hospitals and was, instead, retained by the Medicare program,” the complaint states.

The parties are also claiming that Azar did not take data showing that hospital costs were increasing at a slower rate into account when determining outlier payments.

“The Secretary also failed to consider relevant data which showed that the rate of increase in hospital costs per discharge was trending downward and that the relationship of hospital costs to hospital charges was changing,” the complaint states.

Azar did not immediately return a request for comment.

Congressional legislation mandates that hospitals must receive outlier payments of at least 5 percent of total diagnosis-related group payments, but not exceeding 6 percent, the complaint states. The complaint alleges that Azar set outlier thresholds at 4.8 percent, 4.9385 percent and 4.85 percent between the federal fiscal years 2004 and 2006, respectively.

“This complaint arises because, for FFYs 2004, 2005 and 2006, the Secretary’s outlier methodology and data caused the threshold to be set too high, which caused all of the outlier payments made during FFYs 2004, 2005 and 2006 to be too low,” the complaint states.

The U.S. Court of Appeals for the District of Columbia Circuit previously determined that a recalculation of outlier thresholds for federal fiscal year 2004 would impact the outlier thresholds for the following two years and ordered Azar to explain his methodology, according to the complaint. The complaint states that Azar failed to adequately explain the threshold calculation following the decision in that case, District Hospitals, L.P. v. Burwell.

The hospitals are seeking the sum of money owed to them in outlier payments between fiscal years 2004 and 2006, legal costs and any other relief “the court deems just and proper,” the complaint states.

GW Hospital spokeswoman Susan Griffiths did not immediately return a request for comment.

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