On April 23, 2018, CMS released CMS-1727-R (the Ruling), which announced that it will follow the United States District Court’s decision in Banner Heart Hospital v. Burwell, 201 F. Supp. 3d 131 (D.D.C. 2016). The Banner court held that CMS’s regulation that required hospitals to protest reimbursement items on their cost reports in order for the Provider Reimbursement Review Board (PRRB) to maintain jurisdiction, even when protesting would be futile, violates the law. Accordingly, for appeals of cost reporting periods that ended on or after December 31, 2008, began before January 1, 2016, and were pending or filed on or after April 23, 2018, a provider has a right to a PRRB hearing notwithstanding the provider’s failure to follow the self-disallowance regulation, 42 C.F.R. § 405.1835(a)(1)(ii), as long as the Medicare Administrative Contractor (MAC) was bound by the policy being appealed.
The self-disallowance regulation, 42 C.F.R. § 405.1835(a)(1)(ii), was adopted in 2008 and required providers to protest items on their cost reports that are unallowable under CMS policy in order to challenge the legality of that policy. Under the regulation, the PRRB lacked jurisdiction over any item for which there was not either an audit adjustment or a protest item, ostensibly because the provider could not prove “dissatisfaction” without one of those items. (CMS abandoned its policy that an audit adjustment or protest item is a prerequisite for PRRB jurisdiction for cost reporting periods that began after January 1, 2016; instead, CMS has made it a prerequisite for payment in the first instance.)
In Banner, the district court concluded that, despite the hospital’s failure to comply with the self-disallowance regulation, the PRRB had jurisdiction over the hospital’s challenge to a payment regulation governing outlier payments because protesting the regulation at issue would have been futile. Accordingly, the court held the 2008 self-disallowance regulation may not be applied to appeals raising a legal challenge to a payment regulation or other policy that the MAC cannot address.
Although CMS did not pursue an appeal of the Banner decision, CMS had not generally withdrawn, changed, or addressed the application of the 2008 self-disallowance regulation, prior to releasing the Ruling. Indeed, as previously reported, the District of Columbia rebuked CMS last fall for its failure to acquiesce more broadly to the Banner holding.
Under the Ruling, that has now changed. CMS will now follow the Banner decision, and for cost reports starting prior to January 1, 2016, a provider should not be deterred from appealing a CMS policy just because the provider may not have protested that policy on its cost report.
The Ruling specifically prohibits the PRRB from reopening previous jurisdictional dismissals to apply the new Ruling. In addition, the Ruling only applies where protesting would have been futile. If an item could have been claimed and paid but simply was not due to oversight or error, providers should still expect to receive jurisdictional challenges alleging they have failed to meet the “dissatisfaction” requirement since they were paid exactly what they requested.
To view the Ruling, click here.
