On May 17, 2021, Powers principal Ron Connelly won an important federal court case for several teaching hospitals that should result in significant Medicare repayments to those hospitals.  The U.S. District Court for the District of Columbia agreed that a Medicare regulation unlawfully under reimbursed those hospitals because they trained post-graduate fellows rather than residents within their initially residency period.

The Medicare statute reimburses teaching hospitals for direct graduate medical education (DGME) costs.  The statute sets a cap on the number of full-time equivalent (FTE) residents that a hospital may claim that is equal to the number that it trained in 1996.  The statute also sets “weighting” factors for residents.  Residents who are in the first five years of training, known as the “initial residency period,” are weighted at 1.0, meaning that all of their training time is counted in the payment calculation.  Residents who are training beyond the five-year initial residency training are weighted at 0.5, meaning that only half their time is included in the payment calculation.  These latter trainees are usually participating in post-residency fellowship programs.

The Centers for Medicare & Medicaid Services (CMS) issued a regulation that reduces the statutory weighting factors and prevents hospitals from reaching the 1996 cap when they train fellows (or any other resident who is beyond the initial residency period).  Powers argued that the regulation is unlawful because it violates the statutory cap and weighting factors.  The D.C. District Court agreed that the regulation invalidly reduces the weighting factors:  “Simply put, the text of the statute does not give the Secretary the latitude to decide, under these conditions, to change the weights that Congress assigned to residents and fellows when he calculates the FTE residents for each hospital. Rather, the statute is clear: the Secretary’s rules ‘shall provide, in calculating the number of full-time-equivalent residents in an approved residency program,’ that residents be weighted at 1.0 and fellows at 0.5.”

The decision is Milton S. Hershey Medical Center v. Becerra, No. 1:19-cv-2680-TJK, and is available here.  The case was spearheaded by Powers’ client, GME Solutions, LLC, which is a national GME consulting firm.  GME Solutions discovered that CMS’s regulation underpaid providers, and Powers identified how the regulation unlawfully deviates from the Medicare statute.  Powers filed the case in September 2019 on behalf of Milton S. Hershey Medical Center and numerous other GME Solutions clients.

The decision may impact any teaching hospital that is both over its DGME FTE cap and that trains residents who are beyond the five-year initial residency period.  These teaching hospitals should consider contesting their DGME payments by protesting this issue when filing their cost reports and by appealing to the Provider Reimbursement Review Board when they receive a Notice of Program Reimbursement.  The reimbursement impact of this decision can be substantial.  Each hospital will be impacted differently depending upon how many residents they train and how many of those residents are beyond their initial five year residency period.

For more information, contact Ron Connelly at (202) 872-6762 or Ron.Connelly@PowersLaw.com.

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