Ruling helps THC
Judge’s ruling allows hospital to recover millions for program
Texas Children’s Hospital should be able to receive millions in denied government funding for the poor and underinsured under a much-awaited new ruling.
Texas Children’s Hospital should be able to receive tens of millions of dollars in denied government funding for the poor and uninsured under a much awaited new ruling by a federal judge.
In a major victory for pediatric hospitals in Texas and other states, U.S. District Judge Emmet Sullivan on Friday annulled a recent Centers for Medicaid and Medicare Services change in rules that allowed the agency to count private insurance payments against hospitals’ reimbursement amounts even when Medicaid doesn’t pay for the child’s care. Hospitals affected by the change characterized the rule as “double dipping” by CMS.
“This is a huge victory for Texas Children’s, with a potential positive impact to our bottom line in 2018 of $40 million,” Texas Children’s President Mark Wallace wrote trustees Monday.
Wallace added that the hospital will be talking this week about next steps, such as “when we expect Judge Sullivan to issue his formal opinion; the impact of CMS appealing the ruling, which seems likely; and our efforts to coordinate with the Texas Health & Human Services Commission.”
Texas HHSC implements the federally funded supplemental program, meant to rectify the difference between what Medicaid pays and actual costs incurred by hospitals that treat a disproportionate percentage of patients who are eligible for Medicaid.
Christine Mann, a spokeswoman for Texas HHSC, said Monday the agency is aware of Sullivan’s order — it was not a party to the suit — and is evaluating its next steps.
It has held back the funding in question to Texas Children’s and other pediatric hospitals since 2014.
Texas Children’s was the nation’s first hospital to contest the CMS reimbursement change. Other hospitals fol-
lowed suit.
In the order, Sullivan wrote that his reasons will be explained fully in a forthcoming opinion.
In a 2014 injunction he granted in favor of affected hospitals, Sullivan wrote that these “are not for-profit entities facing the loss of profit” but “nonprofits for whom lost funds would mean reduced services to children.”
Despite the injunction, CMS subsequently codified the unusual practice into a rule and continued to deny funding.
The rule was challenged in separate lawsuits by Texas Children’s and the Children’s Hospital Association of Texas (CHAT), which was joined by hospitals in Washington, Minnesota and Virginia.
CMS officials did not respond to a request for comment Monday. Susan Harris of Morgan, Lewis & Bockius, Texas Children’s outside legal counsel, said she assumes “CMS will appeal because they’ve appealed every previous ruling, even though it’s clear every judge who’s looked at their practice has found it flawed.”
Change in policy
The dispute dates to 2012, when Texas Children’s officials noticed CMS changed its reimbursement policy on a “frequently asked questions” page of the agency’s website.
The change, which was not preceded by the passage of any new regulation, had already cost Texas Children’s about $15 million at the time, hospital officials determined.
The supplemental program in question was created by Congress decades ago because Medicaid pays hospitals well below the actual cost of care. It was changed in 2010 to account for private insurance, which hospitals say would be appropriate if it were only applied in situations where Medicaid still owed the hospital after a private insurance payment.
Instead, CMS began applying it to every patient “technically eligible” for Medicaid benefits even though private insurance had fully paid for all services provided
In 2013, Texas Children’s sued Texas HHSC over the matter, but a Travis County district judge eventually denied the motion. HHSC leaders said the agency was sympathetic to the concerns raised, but argued that a federal court was the more appropriate venue for them to be settled.
Both Texas Children’s and CHAT subsequently filed suit in federal court. In August 2017, the two sides argued the matter before Sullivan in Washington, D.C.
Funding denied
Children's hospitals shoulder the heaviest burden of the reimbursement change because they have the highest percentage of patients who have private insurance and are also eligible for Medicaid.
Texas Children's, the nation's largest pediatric hospital, is particularly dependent upon Medicaid funding, with about 55 percent of its patients on Medicaid and an additional 7 percent to 8 percent eligible for the program and on private insurance.
Medicaid covers not just children of low-income families, but also children with severe problems, such as prematurity, heart ailments and cancer.
Texas Children’s officials estimated they have been denied roughly $15 million to $20 million annually in recent years.
They also have about $40 million in pre-2014 funding they are holding in reserve and not recognizing as revenue because of the possibility they could have to return it to HHSC.
“We’re thrilled to be vindicated in our claim that CMS reviolated federal in their interpretation of this program,” said Stacey Wilson, the president of the Children’s Hospital Association of Texas. “This means pediatric hospitals should get the funding they’ve been wrongly denied.”
“We’re thrilled to be vindicated in our claim.” Stacey Wilson, president of the Children’s Hospital Associated of Texas