GW Hospital sues HHS secretary for policy reversal that inflated Medicare debt

Media Credit: File Photo by Lillian Bautista | Senior Photo Editor

The hospitals request Azar to reverse his decision to uphold the disallowance of bad debts and reimburse them with interest for the debt payments in question.

The GW Hospital joined a nationwide network of hospitals in suing Health and Human Services Secretary Alex Azar for allegedly raising the hospitals’ debt payments by more than $1 million through an unlawful policy reversal.

In a 26-page complaint filed in the U.S. District Court for D.C. last week, District Hospital Partners – GW Hospital’s majority owner – and 45 other hospitals pressured Azar to reverse a 2006 HHS decision that requires hospitals to pay what they were trying to claim as “bad debts,” unpaid debt that usually goes uncollected, for fiscal years 2006 through 2009. The hospitals allege the ruling – upheld in August by a Medicare appeals panel – violates a moratorium that restricted the HHS secretary from altering policy related to bad debts before 2012.

The lawsuit states Azar decided to disallow counting the debts as bad debts and enforce their collection because they were still pending at “outside collection agencies” when the hospitals wrote them off. The hospitals allege Azar’s decision is unlawful and “arbitrary and capricious.”

“The final Decision upholding the disallowance of the Medicare bad debts at issue on the ground that they were still pending at an outside collection agency at the time they were written off is arbitrary and capricious, an abuse of discretion or unsupported by substantial evidence,” the complaint reads.

The hospitals request Azar to reverse his decision to uphold the disallowance of bad debts and reimburse them with interest for the debt payments in question, according to the lawsuit. The case marks the third lawsuit that the GW Hospital filed against Azar in 2020, all of which related to Medicare financial issues.

GW Hospital spokesperson Susan Griffiths and Azar’s office did not return requests for comment.

The lawsuit states the hospitals’ Medicare Appeals Contractors, who distribute Medicare payments to health care providers on behalf of the HHS secretary, reversed a policy in 2006 that allowed hospitals to claim bad debts that were still pending at outside agencies. As a result, the MACs disallowed bad debts from fiscal years 2006 to 2009, meaning the hospitals would instead need to pay the nearly $1.4 million of debt they amassed during those years, according to the complaint.

The complaint states the hospitals claimed bad debts for unpaid Medicare patient deductibles and coinsurance costs “only after reasonable collection efforts were made, the account was determined uncollectible, sound business judgment established there was no likelihood of recovery at any time in the future and all efforts were documented.”

Azar disallowed the bad debts since they were still pending at outside collection agencies when they were claimed, but the hospitals allege that the secretary’s ruling violates a moratorium that went into effect in 1987. The lawsuit states that the ban, known as the Medicare Bad Debt Moratorium, restricts the government from making any changes to policy relating to bad debts until 2012 – six years after MACs started disallowing the hospitals’ bad debts.

The lawsuit notes a previous District Court ruling in 2013 when the District Hospital Partners sued then-HHS Secretary Kathleen Sebelius for similar appeals related to reimbursement for Medicare bad debts. The ruling found that Sebelius’ policy preventing reimbursement violated the Medicare bad debt moratorium since it was created within the restricted period between 1987 and 2012, according to the lawsuit.

The Hatchet has disabled comments on our website. Learn more.