Government

Hospitals sue over Medicare: 27 Indiana providers team up to pursue $15M in payments

June 6, 2005

More than 20 Indiana hospitals have banded together to sue the U.S. Department of Health and Human Services over an estimated $15 million in Medicare payments they claim they should have received years ago.

Clarian Health Partners, St. Francis Hospital & Health Centers and Wishard Health Services, among others, allege that the department and its secretary failed to make the proper percentage of "outlier" payments from 1991 to 1996.

M e d i c a r e makes these additional payments t o h e l p c ove r patients who have s u b s t a n t i a l l y a b ove - ave r a g e stays and costs.

The 27 hospitals named as plaintiffs list amounts owed that vary from a few thousand dollars to nearly $4 million in a complaint and related documents filed last month in U.S. District Court for the Southern District of Indiana. Three of the hospital plaintiffs are from Illinois.

"It's payment for services rendered and resources used that should have been compensated at a higher rate, basically," said Kent Smith, a lawyer for the Indianapolis firm of Hall Render Killian Heath & Lyman who represents the plaintiffs.

A spokeswoman for the Department of Health and Human Services declined to comment.

Clarian tops the list of local providers with an estimated $3.8 million owed. Wishard, which has struggled with multimillion-dollar deficits in recent years, estimates it is owed $332,823.

Smith stressed that amounts listed in court papers were only estimates. If a judge agrees with the hospitals' claim, a third party will figure out what they should receive.

The complaint states that, from 1991 to 1996, Medicare paid for patient services through a prospective payment system, which amounted to fixed rates based on average costs and lengths of stay for a given procedure or illness.

However, Congress recognized that hospitals need more than that, so it created the outlier payments, according to the complaint.

Congress determined that outlier pay ments should make up 5 percent to 6 per cent of total prospective system payments for each federal fiscal year. This com plaint alleges that Medicare fell short those percentages from 1991 to 1996.

"It's just money that the hospital should have gotten under the law," Smith said "How that may have affected their opera tions in any given year, we don't know."

The $1.3 million total St. Francis claims amounts to a "drop in the bucket compared with the $200 million in rev enue the provider pulls in each year according to Dr. Worthe Holt, the Chief Operating Officer.

However, he also added, "We won turn anything down. This is a good for sure, if we can realize this."

If St. Francis receives a windfall, Holt said, the money will probably be devoted to patient safety for things like "smart" intravenous pumps.

The pumps infuse medications and other intravenous fluids into a patient, but also come with safeguards to ensure the patient receives the proper medication and dose. Holt said he spent $2.5 million alone on those pumps last year, and he plans to spend an additional $500,000 this year.

Smith and Keith Barber, another attorney working on the case, said Medicare reached the proper outlier percentage after 1996, possibly because it faced other lawsuits over the payments.

"After several years of litigation, they started getting it right," Smith said.

While cases like these have been filed in other parts of the country, this is the first one for Indiana, they said.

Hall Render started working on it in 1998, Barber said. It took seven years to make it to court because the plaintiffs first had to go through an administrative appeals process with the government agency.

Earlier this year, the Health and Human Services Provider Reimbursement Review Board granted an expedited judicial review, which allowed the hospitals to take the claim to court.
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