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Lancaster General Health joins lawsuit against HHS

By , - Last modified: November 2, 2012 at 2:58 PM

Lancaster General Health has joined the American Hospital Association and three other hospital systems in suing the U.S. Department of Health and Human Services over a Medicare reimbursement policy they say is unlawful.

Medicare has two parts: A, which covers inpatient care, and B, which covers outpatient care. The Centers for Medicare and Medicaid Services employs third parties to review its payments after the fact, and sometimes those recovery audit contractors find that inpatient care wasn’t justified and require the providers to return all Part A reimbursement.

The plaintiffs take issue with the after-the-fact second-guessing of their determinations and say that when they pursue administrative appeals, the denials are overruled 75 percent of the time overall and 86 percent of the time at Lancaster General.

However, the focus of the lawsuit is on the fact that, once Part A reimbursement has been withdrawn, CMS then refuses to pay even Part B reimbursement for those services. The hospitals say that when audits find that only the inpatient setting of the care was wrong, they should be paid at the lower outpatient rate for the care.

“Since April 2011, the RAC has asked Lancaster General to turn over 4,089 patient records,” the lawsuit says. Based on review of paper records years after the fact, the RAC determined that 645 patients should not have been admitted as inpatients and therefore required Lancaster General to repay Medicare $3.8 million.

“For all of those Part A denials, Lancaster General has not received any Part B payments, despite the fact that the RAC nearly always concludes that the care provided was medically necessary,” the suit said.

Lancaster General reported having six staff members who work full- or part-time responding to RAC requests and appeals; hiring a vendor at more than $100,000 a year to respond to medical records requests; hiring an external physician consulting company to handle medical necessity appeals; and spending more than $150,000 per year on software to track the status of RAC requests and appeals.

The lawsuit asks the U.S. District Court to overrule the nonpayment policy and require CMS to reimburse hospitals that have been denied payment in the past. The other three health systems in the suit are Missouri Baptist Sullivan Hospital, Munson Medical Center of Michigan, and Trinity Health Corporation of Michigan.


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