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As is to be expected, reaction to the news that the American Hospital Association (AHA) had filed suit against the U.S. Department of Health and Human Services (HSS) on Thursday was swift and unambiguous.

Four hospital systems, including those in Michigan, Missouri, and Pennsylvania, joined in the suit that accuses HHS of refusing to reimburse hospitals for what it described as “reasonable and necessary care” when the recovery auditors believed that inpatient care should have been provided in an outpatient setting.

“The lawsuit by the AHA challenges CMS’ policy of refusing to reimburse hospitals full Part B reimbursement for short-stay cases that are denied as being provided in the wrong setting—inpatient as opposed to outpatient,” explained healthcare attorney Andrew Wachler, managing partner of Wachler & Associates, in a written statement to RACmonitor. Wachler has been a longtime advocate of full reimbursement for Part B claims.

“After several years of trying to work cooperatively with CMS to ensure that hospitals receive full Part B reimbursement for medically necessary services provided to hospital patients, the AHA has filed a lawsuit in an effort to obtain relief for its hospital members.”

The issue of recovery auditors retrospectively challenging medical decisions made by physicians was another hot-button issue addressed by the AHA in its suit against the government.

“Doctors and nurses provide the best care possible using their medical judgment and training,” said Rich Umbdenstock, president and CEO of the AHA, in a news release issued Thursday and posted on the AHA’s website. “Allowing government auditors to second-guess these difficult medical decisions about where to best treat a patient years later based on a cold record and then refuse to pay for that care is indefensible.”

Providers speaking with RACmonitor were quick to concur with the AHA on what has long been a contentious issue of having claims reviewed by the RACs long after medical services had been provided.

“The Recovery Audit Contractor program should not be permitted to overrule a professional provider’s decision years after the care has been rendered, based solely on a ‘cold paper record,’” Taryn Schraad, RHIT, the audit and appeals specialist for Lawrence Memorial Hospital in Lawrence, Kansas, told RACmonitor in a written statement. “Recouping earned and deserved payment from providers for delivered care and services is unacceptable,” Schraad argued. “Not only does this process cause organizational hardship and burden, but it ultimately deprives hospitals and communities of financial resources necessary for improvements in healthcare facilities and services.”

Retrospective reviews drew the ire of Mike Jamrog, the compliance and privacy officer for McLaren Bay Region in Michigan.

“The concept of coming back in three or four years and reviewing a select group of high-paying procedures and saying they don’t meet inpatient criteria, and taking back full reimbursement, is criminal,” said Jamrog in a written statement to RACmonitor. “CMS wants things both ways,” he argued. “That’s why the administrative Law Judges (ALJ) have been causing CMS such problems by granting Part B reimbursement including observation services.”

The Part A versus Part B issue has been smoldering for quite some time and continues to be a dilemma for providers, prompting this reaction from Wachler:

“It is unclear what CMS’ formal policy really is. In the most recent RAC Statement of Work, the RAC is only supposed to collect the difference between the Part A and Part B reimbursement and is only entitled to a contingency payment on this differential.”

Wachler goes on to note that ALJs, in his words, “regularly award full Part B payment to hospitals that appeal Part A denials as the wrong setting.”

“Additionally,” argues Wachler, “the complaint cites four Medicare Appeals Council cases that support full Part B reimbursement when Part A reimbursement is denied as the wrong setting.”

Wachler notes a memo from CMS dated July 13, 2012: “CMS instructs contractors to honor ALJ orders that require the payment of full Part B reimbursement and has adopted a procedure for hospitals to obtain payment following a favorable ALJ ruling.”

“The lawsuit correctly states that there are no statutes or regulations that would support CMS’ position and there is no binding authority that would contravene the Medicare Act’s requirement to pay for medically necessary hospital services,” said Wachler. “In fact, such a policy would contravene the requirements of the Federal Administrative Procedures Act as any such policy would have to go through formal rulemaking requiring notice and comment before it could be effective. CMS has consistently failed to provide any legal rationale for not reimbursing hospitals full Part B reimbursement when the Part A claim is denied as the wrong setting.”

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Chuck Buck is publisher of RACmonitor.

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Chuck Buck

Chuck Buck is the publisher of RACmonitor and is the program host and executive producer of Monitor Monday.

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