Seeking Medicare Payments, UCM Sues Department of Health and Human Services

The lawsuit hinges on pending Medicare reimbursements from fiscal year 2007.

By Oren Oppenheim and Miles Burton

University of Chicago Medicine (UCM) filed a lawsuit on October 12 against the United States Department of Health and Human Services (HHS), the latest volley in an eight-year-long effort to compel Medicare payments for costs associated with medical residencies.

The lawsuit names Alex Azar, HHS secretary, as defendant. A related summons names U.S. Attorney General Jeff Sessions.

The issue raised in the lawsuit is related to UCM’s Medicare reimbursement for fiscal year 2007, which is affected by certain adjustments teaching hospitals can claim. UCM argues that a separate lawsuit against HHS, which was decided in UCM’s favor in 2010, entitles it to additional payments.

The case is tied to the Medicare Inpatient Prospective Payment System (IPPS), a program adopted by Congress to disburse Medicare funds for coverage.

Under IPPS, when a patient is discharged, their diagnosis is recorded, which places them within a diagnosis-related group. The patient’s diagnosis then determines how much the hospital will receive as federal reimbursement. The payment is subject to additional adjustments, some of which form part of the basis of the University’s lawsuit.

The Indirect Medical Education (IME) adjustment and Direct Graduate Medical Education (DGME) payment allow teaching hospitals to recoup costs associated with medical residents. IME focuses on the indirect costs for teaching hospitals who have medical students on residency, while DGME covers the direct costs hospitals pay for medical residents, such as salary and benefits.

Both of these adjustments rely on knowing the number of “full-time equivalent” residents (FTEs) at a hospital. This number is the average of the number of residents at that hospital in a given year and the preceding two years. The number of FTEs a hospital can claim is capped by the Balanced Budget Act of 1997 at the number of FTEs it had in fiscal year 1996. Ronald Connelly, an attorney who represented UCM in a previous case, wrote in 2014 that the payments are still capped at the 1996 count, and that barring any further Congressional action, funding for graduate medical education will remain stagnant.

At the end of each cost reporting period, a hospital must submit a Medicare cost report to its Medicare Administrative Contractor (MAC), which decides the reimbursement the hospital is entitled to receive. This determination can be appealed to the Provider Reimbursement Review Board (PRRB), which is part of HHS.

According to the current lawsuit, UCM is asking to adjust the number of FTEs it had in fiscal year 1996, because this number affects all reimbursement calculations in subsequent years.

UCM’s complaint also involves Medicare bad debts, which are accrued when a hospital determines that a Medicare beneficiary cannot pay certain Medicare fees, and then can claim those debts as Medicare reimbursements.

In February 2007, UCM and its MAC, National Government Services, Inc., settled part of an appeal by UCM to the PRRB regarding its fiscal year 1996 FTE count. Based on that settlement, UCM’s FTE cap was raised.

In November 2007, UCM filed a Medicare cost report in which it claimed all reimbursements and adjustments for fiscal year 2007. In September 2009, the MAC notified UCM of its Medicare payments that year. Since then, UCMC and the MAC have argued before the PRRB over the reimbursements and the FTE count, leading to a decision on July 14, 2014 in favor of UCM that threw out the MAC’s claims.

However, UCM was unsatisfied by the decision, arguing in the new lawsuit that the ruling is inconsistent with another case against HHS that UCM won in 2010. That case, University of Chicago Medical Center v. Sebelius, involved a dispute over about $2.8 million in Medicare payments based on UCM’s 1996 FTE count. (Kathleen Sebelius served as HHS secretary at the time; Connely represented UCM.) The decision ruled that medical residents conducting “pure research” (research unrelated to the care of Medicare patients) could be counted toward UCM’s FTE count.

“This Complaint challenges the PRRB’s July 14, 2014 decision,” UCM’s lawsuit says, “to the extent it dismissed and did not subsequently reinstate the following four Medicare payment claims from the Hospital’s FY 2007 appeal: (1) DGME and IME new program FTE caps, (2) Prior Year IME FTE count, (3) Prior Year IME resident-to-bed ratio, and (4) additional dual-eligible [patients eligible for both Medicare and Medicaid] Medicare bad debts.”

UCM is being represented by Robert Roth of Hooper, Lundy & Bookman, PC. Roth previously served as an attorney for the HHS, and has experience in healthcare litigation. Roth forwarded The Maroon’s request for comment to a UCM representative.

In a statement to The Maroon by e-mail, a UCM spokesperson said, “The University of Chicago Medical Center’s lawsuit seeks to get back additional Medicare payments from the U.S. Department of Health and Human Services related to UCMC’s extensive medical education program for residents and fellows. The payments are to reimburse for the costs incurred in 2007 in operating the medical education program. UCMC has spent eight years trying to resolve this matter by providing a substantial amount of information to justify the additional amounts sought. This lawsuit is the next step in the Medical Center’s efforts to get reimbursed.”

The HHS declined to comment on the ongoing case.

Euirim Choi contributed reporting.