We want to be sure that all of our Health Headlines subscribers are aware of the approaching January 28th deadline by which to file appeals challenging CMS’s 0.2 percent downward adjustment of the FY 2014 IPPS rates.  We have written about this Medicare reimbursement issue before and of the group appeal that King & Spalding has organized to address it.  We provide more information about the opportunity below and invite your participation.  We also repeat and give emphasis to our advice that hospitals should file such appeals no later than January 28th (180 days after CMS published the FY IPPS final rule on August 2, 2013) in order to preserve their appeal rights for reasons we explain below.  

As you are probably aware, when CMS adopted the FY 2014 IPPS final rule, it instituted a 0.2 percent rate cut. CMS justified this rate cut as necessary in order to ensure that the application of the new “two-midnight” rule did not lead to an aggregate increase in yearly IPPS payments for the Medicare program.  In fact, based on our analysis, there was no substantial evidence to support this conclusion, making the rule legally invalid.  King & Spalding has been engaged to assist several hospital systems in filing IPPS hospital group appeals to seek a reversal of the 0.2 percent rate cut and to seek an increase in IPPS rates.

Here’s the background.  During the notice and comment period for the FY 2014 IPPS rule, King & Spalding was the only party to identify the statistical errors underlying CMS’s calculations that supported the rate cut and submitted detailed comments opposing CMS’s proposal.  CMS justified the rate cut on the basis that the two-midnight rule (which presumes that hospital inpatient stays of two days are longer are medically necessary) would lead to a net increase of 40,000 inpatient cases per year.  We hired FTI, a well-respected healthcare consulting firm, to assist in conducting an analysis of CMS’s own data to determine if the data supported CMS’s conclusions.  They did not.  In fact, our analysis showed that the two-midnight rule would lead to a substantial decrease in inpatient stays and a large increase in outpatient encounters.  (Many hospital systems have analyzed the impact on their own reimbursement and have reached the same conclusion.)  In other words, the financial impact of the two midnight rule on providers should result in a payment increase.  Our group appeals will both challenge the rate cut in Federal court and seek a rate increase.

A summary of the fee structure for this work is as follows:

• A $5,000 per organization upfront fee (plus $1,000 per IPPS hospital in the organization) to partially defray certain initial appeal costs (with discounts for larger hospital organizations);

• No hourly billing for professional fees;

• A 10 percent contingency on any amounts hospitals recover as a result of either the reversal of the 0.2 percent rate cut or a rate increase.

We have attached a memo that provides more detail on the basis for the group appeal and our fee structure.  If you wish to join the group appeal, we will need some basic information from you for your filing, and so some time should be allowed for that work.  If you are not employed by a hospital organization or do not have that direct responsibility, please feel free to pass along this group appeal opportunity to any party you believe may have an interest learning more and possibly joining.

Some hospitals have asked whether they could file an appeal at a later date by listing the rate challenge as a protested item on a future cost report.  While hospitals have been able to pursue rate challenges in this way in the past, there is no guarantee that the government will not take the position that hospitals only have one means of pursuing a rate-making challenge which is to file an appeal within 180 days of the notification of the IPPS rule itself.  Indeed, we are aware of at least one recent circumstance in which a fiscal intermediary has filed a jurisdictional challenge making this very argument in an appeal asserting that Medicare rates were flawed for the reasons identified in Cape Cod v. Sebelius (raising the rural floor/budget neutrality issue).  We have been seeing increasingly aggressive positions taken by CMS and the Department of Justice in healthcare industry litigation in recent years.  The only way to eliminate this possible line of argument is to file no later than January 28, 2014.

If you are in a hospital or hospital system that has not already joined this group appeal, your organization is invited to join this group appeal.  Please do not hesitate to contact Dennis Barry (at dbarry@kslaw.com, +1 202 626 2959) or Mark Polston (at mpolston@kslaw.com, +1 202 626 5540) if you would like to review the full engagement letter, or if you have any questions about this email or the group appeal opportunity.

Dennis Barry and Mark Polston