Supreme Court supports hospital records audit

by Brian Bakst

The U.S. Supreme Court ruled Tuesday that the government did not err when it refigured Medicare reimbursement costs for medical training at a University-affiliated St. Paul hospital.
By a 6-3 vote, the high court said federal regulators acted within the law when they audited Regions Hospital’s records in 1989 and scaled back funding for training future doctors.
From a broader perspective, the ruling essentially invalidates similar claims that could have cost the federal government more than $100 million. Instead, hospitals could be saddled with higher teaching expenses at a time when the government is trying to curb Medicare payouts.
Regions Hospital officials were pursuing $10 to $12 million, which they said was wrongly withheld because the audits were retroactive.
“We’ve lost, but the government has already applied their methodology,” said Washington D.C. attorney Ron Sutter, who represented the hospital. “The decision does not impose additional liability on the hospital.”
University lawyers have yet to pore over the court’s decision, so they declined to comment at length about the impact on the school.
But Keith Dunder, attorney for the Academic Health Center, said last year’s merger of the University Hospital and Clinic with Fairview Health Systems alleviates some concerns.
“The resident reimbursement issues won’t directly involve the University in the future,” he said.
The University trains 800 to 900 medical residents per year and in some programs the school collaborates with Regions. For example, internal medicine students spend a third of their residency at the St. Paul hospital, said Robert Howe, associate dean for faculty and graduate affairs in the Medical School.
The Regions case centered on a reimbursement formula in the Medicare Act that uses 1984 as a base year. In 1986, Congress updated the law and gave the Secretary of the Department of Health and Human Services the authority to recalculate reimbursement levels to more accurately reflect a hospital’s needs.
It could mean higher training costs for the nation’s 1,500 teaching hospitals. Prior to the government’s audit, the per-resident reimbursement for Regions was $70,662; the re-adjusted figure was $49,805.
Justice Ruth Bader Ginsburg, writing for the majority, said the Secretary and her department properly acted on the intent of the 1986 statute. “It enables the Secretary, for open and future years, to carry out her responsibility to reimburse only reasonable costs, and to prevent payment of uncovered, improperly classified, or excessive costs,” Ginsburg wrote.
Before 1986, federal regulators were not able to police costs as closely. Health and Human Services officials worried that hospitals were being reimbursed for activities unrelated to teaching, such as malpractice costs.
Regions Hospital, formerly known as St. Paul-Ramsey Medical Center, had its base level cut to $5.49 million per year from an initial projection of $9.8 million.
The federal government uses the base plus inflation to determine how much each hospital can spend on training doctors. Of that figure, the government picks up 25 percent of the tab, meaning Regions could have been entitled to at least $1 million more per year.
Justice Antonin Scalia, in his dissent, said the court should have made the Secretary stick to the letter of the law and not base her actions on the statute’s intent.
“We obligingly pull her chestnuts from the fire by accepting a reading of the statute that is implausible,” he wrote.