On April 11, 2016, the Ninth Circuit Court of Appeals ruled that a hospital was not entitled to Medicare payments in an assets-only purchase until the Buyer enrolled in the Medicare program because it did not accept the purchased hospital’s Medicare provider agreement.  In Mission Hospital Regional Medical Ctr. v. Burwell, Case No. 13-56264, 2016 WL 1399335 (9th Cir. Apr. 11, 2016), Mission Hospital Regional Medical Center (“Mission”) sought judicial review after the Departmental Appeals Board (“DAB”) of HHS upheld an administrative law judge’s ruling that because Mission only purchased the assets of a new campus, and not the Medicare overpayment liabilities, Mission’s new campus was not accredited and thus not entitled to collect Medicare payments until it was enrolled in the program – creating a gap in Medicare reimbursement.

In June 2009, Mission, a Medicare-approved acute care hospital in Mission Viejo, California, purchased the assets of South Coast Medical Center, another Medicare-approved facility in Laguna Beach, California.  Burwell, 2016 WL 1399335 at *1.  Mission purchased only the assets and presumably refused assignment of the Medicare provider agrieement “to avoid South Coast’s potential liabilities under [its] Medicare provider agreement,” which included potential mandated reimbursement to Medicare for previous overpayments.  Id.  Accordingly, HHS determined that Mission could not bill Medicare for services at its new campus until that new entity had a separate provider agreement – an amount totaling roughly $8.4 million dollars that accrued before Mission’s enrollment application was approved by Medicare in 2010.  Id.  Mission unsuccessfully appealed HHS’s decision, first to an administrative law judge, then to the DAB, and then to the district court.  Id.  The Ninth Circuit affirmed the district court’s decision that Mission was not entitled to the payments, holding that Medicare regulations give CMS discretion about when to grant retroactive coverage, id. at *4, and that because Mission voluntarily refused to assume South Coast’s contractual liability to return the overpayments to Medicare, Mission did not (and could not) take an assignment of South Coast’s provider agreement.  Id. at *3.  As such, until Mission’s new campus became accredited with its own provider agreement, it was not enrolled in Medicare and therefore could not bill for services provided to Medicare beneficiaries during that time period.  Id.

For the full Ninth Circuit Opinion, click here.

Reporter, Katy Lucas, Atlanta, +1 404 572 2822, klucas@kslaw.com.