CMS may owe $3 billion

Payments to settle lawsuits in Medicare pay deals

The CMS is expected to owe at least $3 billion to about 2,200 hospitals as part of ongoing Medicare underpayment settlement negotiations, according to parties involved in the deal.

The payments to hospitals will settle several similar years-long federal lawsuits in which those providers alleged CMS officials erred in calculating pay-rate cuts needed to offset an increase for rural hospitals required by a 15-year-old law, according to a CMS official.

The final amount the CMS will pay the hospitals involved in the lawsuits may never be known because the agency is not required to report it to either a court or the public, said experts involved in the case.

The deal was signed April 5 and all payments are expected by June 30, according to hospital and CMS officials.

The lawsuits challenged the manner in which the CMS calculated the rural floor provision of the Balanced Budget Act of 1997, which addressed the federal program’s comparable urban and rural hospital wage indexes within each state. The District of Columbia Circuit Court ultimately agreed with the hospitals’ position in one of those cases, Cape Cod Hospital v. Sebelius, that alleged the CMS incorrectly applied the law’s budget neutrality requirement to hospitals’ rural wage index. Hospitals insisted for years that CMS officials overcompensated with cuts to other hospitals when it tried to offset the law’s increased payments to rural hospitals