Ron Connelly and Susan Philp Win 7th Circuit Judgment Requiring Research Time to Be Included in IME FTE Count

By August 25, 2010No Comments

On August 25, 2010, Powers attorneys Ronald S. Connelly and Mary Susan Philp obtained an important judgment from the Seventh Circuit Court of Appeals on behalf of the University of Chicago Medical Center.  Univ. of Chicago Med. Ctr. v. Sebelius, No. 09-3429 (7th Cir. Aug. 25, 2010).  The case involves Medicare payments for indirect medical education (“IME”).  The court held that the recent health reform law, the Patient Protection and Affordable Care Act (“PPACA”), requires the Secretary of Health and Human Services to include research time in the count of interns, residents, and fellows when calculating IME payments.

The Medicare program pays teaching hospitals for the direct and indirect costs of training physician interns, residents, and fellows.  The IME payment is determined, in part, by the count of full-time equivalent interns, residents, and fellows (“FTEs”).  In 2001, the Secretary amended Medicare regulations to remove research from the IME FTE count.  Since 2001, the Secretary has also contended that even prior to 2001, only direct-patient-care activities may be included in the IME FTE count, and any research that did not involve the care of individual patients could not be included in the count.  After several federal district courts invalidated the Secretary’s policy, the First Circuit Court of Appeals deferred to the Secretary’s interpretation that Medicare regulations forbid including research.  Rhode Island Hospital v. Leavitt, 548 F.3d 29 (1st Cir. 2008).

When calculating The University of Chicago Medical Center’s IME payment for fiscal year 1996, the Secretary removed research time from the IME FTE count.  GME Solutions, LLC believed that the Secretary’s position was not consistent with the pre-2001 regulation and recommended  an appeal.  After the Secretary upheld the agency’s initial decision, The University of Chicago Medical Center appealed to the U.S. District Court for the Northern District of Illinois.  Mr. Connelly and Ms. Philp contended that the plain language of both the Medicare IME statutory provision and the IME regulation require the Secretary to include educational research in the FTE count.  On August 3, 2009, the district court held that the plain language of the pre-2001 IME regulation determines the FTE count based upon the residents’ location, not on the functions that they perform. Thus, so long as residents are assigned to allowable physical locations of the hospital, their research time must be included.  The court also found the reasoning of the First Circuit unpersuasive.

The Secretary appealed to the Seventh Circuit. While the case was pending at the Seventh Circuit, President Barack Obama signed PPACA into law.  Section 5505(b) of PPACA requires the Secretary, retroactive to 1983, to include in the IME FTE count “all the time spent by an intern or resident . . . in non-patient care activities, such as didactic conferences and seminars . . . that occurs in the hospital.”  From October 1, 2001 onwards, PPACA also removed from the IME FTE count “all the time spent by an intern or resident . . . in research activities that are not associated with the treatment or diagnosis of a particular patient.” PPACA § 5505(b), (c)(3).  PPACA mandated that this latter provision, “shall not give rise to any inference as to how the law in effect prior to such date should be interpreted.”  PPACA § 5505(c)(3).

Mr. Connelly and Ms. Philp argued that the research at issue is a subset of “non-patient care,” and Section 5505(b) therefore requires the Secretary to include this time from 1983 until 2001, when PPACA explicitly removed it from the count.  Because the “no inferences” language referred only to periods after October 1, 2001, the court was free to interpret Section 5505(b) as requiring the inclusion of research between 1983 and 2001.

The Seventh Circuit agreed.  Because research is a subset of non-patient care activities, the court held that PPACA requires the Secretary to include research time for The University of Chicago Medical Center’s fiscal year 1996.  In addition, the court noted that its decision “is contrary to the First Circuit’s opinion [in Rhode Island Hospital], but the First Circuit did not have the opportunity to consider Congress’s health-care legislation, and we believe that legislation is dispositive.”

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