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had not been reviewed by the administrative body charged with doing so, the Provider Reimbursement Review Board, Dirr says, so the hospital association dropped the suit and took it up with the review board. A group appeal was filed with the board Feb. 11 requesting expedited judicial review, which would move the dispute back into federal court, where the association thinks it belongs, he says. “It’s a legal matter” and not something that the review board would normally be deciding, Dirr says. But for procedural reasons, the board needs to review the dispute before it goes to court, he says.
Among the arguments raised by the KHA in its initial suit and by others opposing the revision is that the CMS is changing its policy and not issuing a clarification, as the CMS rule called it. By calling it a clarification, “it precluded the public comment routine,” Slabach says.
Moreover, they argue that the move goes against the spirit of having a critical-access hospital designation in the first place. “This change in policy, which HHS erroneously describes as a ‘clarification’ in the final rule … will have a serious negative economic impact on each of the (critical-access hospital) members of the KHA, and will deprive the low-income, mostly rural populations they serve of access to the healthcare services currently provided by these KHA members,” according to the lawsuit.
“It’s really an about-face from what they’ve done in the past,” Dirr says. “They’ve always allowed the full amount of these provider taxes,” he says.
Two provider groups in the state of Wisconsin make a similar argument in a letter to the CMS opposing the agency’s interpretation.
“The CMS policy is not a clarification,” according to a June 16, 2010, letter to the CMS signed by the Wisconsin Hospital Association and the Rural Wisconsin Health Cooperative. “CMS has never described these taxes as nonreimbursable, nor that amounts received from the state must be offset against the amount of the taxes, in the (Medicare provider reimbursement manual) or in any other guidance,” the groups write. “And although the CMS has had opportunities to do so in the past when addressing provider tax issues at the Provider Reimbursement Review Board and through administrator review, it has never articulated a policy akin to what is being proposed here.”
No change at CMS
The CMS remains unswayed. “We believe that this provision, as articulated in the proposed rule, is a clarification of our current, longstanding policy which requires that ‘reasonable costs’ claimed by providers must be ‘actually incurred,’ ” the CMS wrote in its final inpatient prospective payment rule.
“We believe that it is consistent with the current and long-standing principles of cost reimbursement, as set forth in the statute and regulations, to remind both providers and our contractors, that although a particular tax may be an allowable cost, the amount of that tax that providers may claim for reasonable cost purposes, must reflect the amount of these assessed taxes that are actually incurred,” the CMS rule states.
CMS officials could not be reached for comment.
Despite the steadfast nature of the CMS’ response in the final rule, Alan Morgan, president of the National Rural Health Association, raised the issue in a meeting with Berwick this month, which was a follow-up to the CMS administrator’s speech before the NRHA’s policy institute. But the NRHA’s Slabach says the matter was discussed at broad levels and did not get into the detail necessary to negotiate substantive changes.
The American Hospital Association, meanwhile, is likely to push to get legislation passed that would require the CMS to include Medicare provider taxes in cost calculations for critical-access hospitals. Such a bill was introduced in the House last year, and the AHA would like to try to get a similar bill introduced in the current Congress, says Joanna Kim, senior associate director for policy at the AHA.
But for now, critical-access hospitals that previously included state provider taxes on their Medicare cost reports are dependent on the interpretation from their fiscal intermediary, as instructed by the CMS. Caldwell Medical Center, a 25-bed facility in Princeton, Ky., paid a provider tax of about $258,000 and received Medicaid disproportionate-share hospital payments of $156,000 for the fiscal year ended June 30, 2009, says Shane Whittington, chief financial officer.
The CMS fiscal intermediary disallowed all $258,000 of the tax claimed, resulting in the hospital writing a check for about $100,000, he says.
The risk of uneven application of the rules that could come from different intermediaries particularly irritates Caldwell’s CEO, Charles Lovell Jr. “The fact that it’s not being handled evenly across the board, that’s the frustrating part,” Lovell says.