American Hospital Association Sues U.S. Over Medicare

The American Hospital Association sued the U.S. government for allegedly refusing to pay for “hundreds of millions of dollars” of medically necessary care as required under the Medicare Act.

Private auditors used by the U.S. Department of Health and Human Services are revoking payments made for in-patient treatment under one section of Medicare, even as that treatment qualifies as necessary under a different part of the act, the organization said in a complaint filed today in Washington.

“Federal law requires Medicare to reimburse hospitals for reasonable and medically necessary services,” according to the complaint. The auditors who took the payments back “disagreed only with the setting in which the care was provided.”

The Washington-based organization, which claims a membership of almost 5,000 hospitals and health-care systems and about 40,000 individuals, seeks a court order declaring the practice invalid. It violates the federal Medicare Act and the audit determinations are arbitrary, the group said.

AHA also wants an order that the hospitals be paid in full.

Charles S. Miller, a spokesman for the U.S. Justice Department, declined to comment on the allegations,

Created in 1965, Medicare provides health insurance to Americans who are at least 65 years in age or have collected Social Security for at least two years, as well as the disabled and people with renal disease. Part A covers hospitalization while Part B pertains to doctors’ services and associated costs for diagnostic testing, laboratory work and equipment.

Biggest Buyer

With more than 47 million enrollees, the program is the biggest U.S. buyer of managed care and accounts for 13 percent of the federal budget, according to data compiled by Bloomberg.

The Medicare billing determinations targeted by the complaint arise from work done by Recovery Audit Contractors employed by the HHS Centers for Medicare and Medicaid Services, also known as CMS.

After auditors revoked payments under Part A for disallowed in-patient services, CMS refused to restore the money under Part B, according to the group’s complaint.

“Prolonged uncertainty about whether Medicare will ultimately pay for the services previously provided wreaks havoc on hospital financial planning,” the association alleged.

Joining as plaintiffs in the case are Missouri Baptist Sullivan Hospital in Sullivan, Missouri; Munson Medical Center in Traverse City, Michigan; Lancaster General Hospital in Lancaster, Pennsylvania; and South Bend, Indiana-based Trinity Health Corp.

The case is American Hospital Association v. Sebelius, 12- cv-1770, U.S. District Court for the District of Columbia (Washington).

To contact the reporter on this story: Andrew Harris in Chicago at aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net