On February 3, 2016, the Secretary of HHS withdrew her appeal of a United States District Court for the District of Columbia decision invalidating CMS’s policy that a Medicare bad debt cannot be claimed while non-Medicare accounts of like amount remain outstanding at a collection agency.  See Mountain States Health Alliance v. Burwell, No. 13-cv-00641 (D.D.C. Sept. 10, 2015).  In the now-final district court decision, the district court held that CMS’s disallowance of Medicare bad debts that had been returned from a collection agency simply because non-Medicare accounts remained at the collection agency violated the bad debt moratorium.  This was an issue of first impression in D.C. and the health system, Mountain States Health Alliance, was represented by this author.

The principle announced in this case, while not binding on other district court judges, is a benefit to any provider that has had its Medicare bad debt disallowed prior to the sunsetting of the bad debt moratorium for failure to treat the account identically at all stages of collection to non-Medicare bad debts of like amount.  While the bad debt moratorium expired on October 1, 2012, it still binds CMS for all cost-reporting periods preceding that date.  And since Medicare reimbursement appeals are often delayed by several years, any current appeal of this issue is likely to be encompassed by the moratorium and all hospitals in the nation have recourse to the D.C. District Courts for Medicare reimbursement disputes. 

On a broader level, the Mountain States decision shows that the bad debt moratorium still has clout and that courts will not automatically accept the Secretary’s contention that her current bad debt policies are consistent with pre-1987 policies.  It therefore bolsters any provider arguments that invoke violations of the bad debt moratorium. 

Reporter, Daniel J. Hettich, Washington, D.C., +1 202 626 9128, dhettich@kslaw.com.