RECENT COST REPORT APPEAL ISSUES PRRB AND CMS ADMINISTRATOR DECISIONS 2014 REVIEW. Leslie Demaree Goldsmith, Esquire Principal Ober Kaler

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1 RECENT COST REPORT APPEAL ISSUES PRRB AND CMS ADMINISTRATOR DECISIONS 2014 REVIEW Leslie Demaree Goldsmith, Esquire Principal Ober Kaler I. BAD DEBTS A. Similar Collection Efforts The Provider pursued similar collection efforts for its Medicare and non- Medicare bad debts in-house for six months and then used an outside collection agency for at least another six months. Thereafter, however, it treated Medicare and non-medicare accounts differently in sending only non-medicare accounts to a secondary outside collection agency. The Provider Reimbursement Review Board (Board or PRRB) affirmed the Intermediary s disallowance of the Provider s Medicare bad debts as the Provider s collection policies did not meet the Medicare Provider Reimbursement Manual (PRM) provision at 310, which requires that Medicare and non-medicare accounts be treated similarly. The Administrator declined to review. Mountain States Health Alliance 05 Bad Debt Passive Collection CIRP Group v. BlueCross BlueShield Ass n/cahaba Gov t Benefits Admin., LLC, PRRB Hearing Dec. No D6 (March 4, 2013), declined to review, CMS Adm r Dec. (Apr. 24, 2013). II. CAPITAL COSTS The Board affirmed the Intermediary s adjustment. It found that the capital inpatient prospective payment system (IPPS) regulations at 42 C.F.R. Part 412, Subpart M that were in effect at the beginning of the Provider s initial short period that began on August 21, 2002, limited capital amounts solely to the federal capital IPPS rate. The Administrator declined to review. Mountain View Reg l Med. Ctr. v. BlueCross BlueShield Ass n/wis. Physicians Serv., PRRB Hearing Dec. No D20 (July 2, 2013), declined to review, CMS Adm r Dec. (Aug. 23, 2013). III. CHOW DETERMINATION The Board found that it did not have the authority to reverse CMS s determination that a change of ownership (CHOW) had occurred. It further found that the Intermediary properly adjusted the skilled nursing facility s (SNF) prospective payment system (PPS) transition periods, given the Provider s short cost reporting Subsequent court decisions, which may have affirmed, reversed, or modified the final agency decision, are not included in this outline, but should be sought out on any case of import to the reader. 1

2 periods. The Administrator declined to review. Lima Mem l Hosp. v. BlueCross BlueShield Ass n/cgs Admin., LLC, PRRB Hearing Dec. No D8 (Mar. 13, 2013), declined to review, CMS Adm r Dec. (May 6, 2013). IV. DSH A. Calculation Period The Board upheld the Intermediary s use of a single payment period for purposes of calculating a single disproportionate patient percentage (DPP) used in the disproportionate share hospital (DSH) calculation. The Provider argued that two distinct DPP calculations should be made for the cost year at question, one for service dates prior to April 1, 2004, and one for services dates after April 1, The Board found that the applicable regulation at 42 C.F.R permits a single DPP calculation incorporating the Provider s entire 12-month period. The Administrator declined to review. St. Francis Med. Ctr. v. BlueCross BlueShield Ass n/wis. Physicians Serv., PRRB Hearing Dec. No D15 (May 8, 2013), declined to review, CMS Adm r Dec. (June 13, 2013). The Board found that although the two entities had merged to create a single Provider as of November 1, 1998, they continued to bill under their separate provider numbers through the end of the fiscal year at issue, in order to take advantage of one of the entity s rural referral center (RRC) status. The Board agreed with the Intermediary that each hospital s discharges should be consistently treated for both diagnosis related group (DRG) and DSH payment purposes, particularly since the DSH is an addon payment to the DRG payment. Accordingly, the Board upheld the Intermediary s calculation of two separate DSH adjustment calculations, one for each of the two entities. The Board also upheld the Intermediary s estimates in the DSH calculations as the estimates used the best providerspecific data of Medicaid eligible days from the state. The Administrator declined to review. River Region Med. Ctr. v. BlueCross BlueShield Ass n/novitas Solutions, Inc., PRRB Hearing Dec. No D19 (June 5, 2013), declined to review, CMS Adm r Dec. (July 31, 2013). B. Medicare Fraction, SSI The Board upheld the Intermediary s exclusion of days for supplementary security income (SSI) recipients in nursing homes, from the DSH calculation. Under the applicable statute and regulation, SSI benefits to these patients are suspended when the patient is no longer eligible for SSI during the time he/she is a nursing home resident and has sufficient income to reduce the SSI benefit to zero. The Board reasoned that under these circumstances the patient ceases to be entitled to any SSI payments and his/her days therefore are not includable in the DSH calculation. The Administrator declined to review. CampbellWilson 2

3 Nursing Home Days Groups v. BlueCross BlueShield Ass n/novitas Solutions, Inc./CGS Admins., LLC/Noridian Admin. Servs. c/o First Coast Serv. Options, Inc./Wis. Physicians Serv., PRRB Hearing Dec. No D41 (Sept. 20, 2013), declined to review, CMS Adm r Dec. (Dec. 9, 2013). C. Medicaid Fraction, State Program for Low Income Patients The Board upheld the Intermediary s exclusion of days for patients covered under the Missouri State Plan, from the Medicaid fraction of the Medicare DSH calculation for FYs 1995, , and The Board found the beneficiaries at issue were not eligible for Medicaid and the services provided under the program were not matched with federal funds except under the Medicaid DSH provisions. The Administrator affirmed the Board s ruling. QRS 1995, , Missouri DSH/Gen. Assistance Days Group v. BlueCross BlueShield Ass n/wis. Physicians Serv., PRRB Hearing Dec. No D10 (Apr. 23, 2013), aff d, CMS Adm r (Jun. 20, 2013). The Board upheld the Intermediary s exclusion of Michigan Indigent/Charity Care Program days from the Medicaid fraction of the Medicare DSH calculation for FYs and The Board found the beneficiaries at issue were not eligible for Medicaid and the services provided under the program were not matched with federal funds except under the Medicaid DSH provisions. The Administrator affirmed the Board s ruling. QRS UHMC DSH/Mich. Gen. Assistance Days Group v. BlueCross BlueShield Ass n/wis. Physicians Serv., PRRB Hearing Dec. No D21 (July 25, 2013), aff d, CMS Adm r Dec. (Sept. 25, 2013). The Board upheld the Intermediary s exclusion of Florida Charity Care and Low Income Program days from the Medicaid fraction of the Medicare DSH calculation for FYs The Board found the beneficiaries at issue were not eligible for Medicaid and the services provided under the program were not matched with federal funds except under the Medicaid DSH provisions. The Administrator affirmed the Board s ruling. QRS DSH Fla./Gen. Assistance Days Groups v. BlueCross BlueShield Ass n/first Coast Serv. Options, Inc.-FL, PRRB Hearing Dec. No D23 (July 31, 2013), aff d, CMS Adm r Dec. (Sept. 25, 2013). The Board ruled that the Intermediary properly excluded the Providers California GA program days from the Medicaid fraction of the Medicare DSH calculation for FYs The Board found that the Providers did not meet the criteria in PM A-99-62, as they failed to show a genuine expectation of increased DSH payment based upon erroneous past payments of allowed unpaid GA days or the inclusion of the specific issue 3

4 of unpaid GA days in a jurisdictionally valid appeal for that issue established prior to October 15, The Administrator declined to review. Toyon DSH Gen. Assistance Days Groups v. BlueCross BlueShield Ass n/various, PRRB Hearing Dec. No D40 (Sept. 17, 2013), declined to review, CMS Adm r Dec. (Nov. 11, 2013). The Board upheld the Intermediary s exclusion of Kentucky Hospital Care Program days from the Medicaid fraction of the Medicare DSH calculation for FYs The Board found the beneficiaries at issue were not eligible for Medicaid and the services provided under the program were not matched with federal funds except under the Medicaid DSH provisions. The Administrator affirmed the Board s ruling. LifePoint Hosp DSH Payment-Inclusion of Title XIX Eligible Days CIRP Group v. BlueCross BlueShield Ass n/cgs Admins., LLC, PRRB Hearing Dec. No D24 (Aug. 19, 2013), aff d, CMS Adm r Dec. (Oct. 30, 2013); St. Luke DSH Inclusion of Title XIX Eligible Days CIRP Group v. BlueCross BlueShield Ass n/cgs Admins., LLC, PRRB Hearing Dec. No D36 (Sept. 9, 2013), aff d, CMS Adm r Dec. (Nov. 11, 2013); and Owensboro Med. Health Sys. v. BlueCross BlueShield Ass n/cgs Admins., LLC, PRRB Hearing Dec. No D1 (Nov. 19, 2013), aff d, CMS Adm r Dec. (Jan. 15, 2014). The Board upheld the Intermediary s exclusion of days in the Medically Indigent and General Assistance/Unemployable Programs in Washington State from the Medicaid fraction of the Medicare DSH calculation for FYs The Board found the beneficiaries at issue were not eligible for Medicaid and the services provided under the program were not matched with federal funds except under the Medicaid DSH provisions. The Administrator affirmed the Board s ruling. Washington Gen. Assistance Days Groups v. BlueCross BlueShield Ass n/noridian Admin. Servs. WA/AK/Wis. Physicians Serv., PRRB Hearing Dec. No D38 (Sept. 12, 2013), aff d, CMS Adm r Dec. (Nov. 24, 2013). D. Medicare and Medicaid Fractions, Dual Eligible Days The Intermediary initially included the Providers non-supplemental Security Income (SSI) Type 6 Medicare/Medicaid dual eligible days in the Medicaid fraction when calculating the Providers DSH adjustment payments. The Intermediary subsequently reopened and excluded these days from the DSH payments. The Board determined that, pursuant to 42 U.S.C. 1395ww(d)(5)(F)(vi)(II) and 42 C.F.R (b)(4), these days do not belong in either the Medicaid or Medicare fractions of the DSH calculation, and that the Providers were not entitled to relief under the hold harmless provisions in PM No. A or the without fault provisions at 42 U.S.C. 1395gg. However, the Board struck down some of the Intermediary s reopenings as improper, insofar as they lacked a complete explanation of the circumstances surrounding the purported 4

5 reopenings and did not afford the Providers the opportunity to comment, object, or submit evidence in rebuttal of the reopening, as required by 42 C.F.R and CMS Pub (A). The Administrator modified the Board s determination, reversing the Board s findings with regard to any reopenings the Board found to be flawed. The Administrator opined that the explanations in the reopenings that broadly identified the subject of the reopenings as related to DSH, without any specificity as to what DSH issue, were adequate. The Administrator further opined that the Providers need not be afforded the opportunity to comment, object or submit additional evidence in the reopening letter, as long as they were at some point afforded that opportunity. Thus, the Administrator found all the reopenings were proper and enforceable. Maine Type 6 Medicaid Dual Eligible Days DSH Groups v. BlueCross BlueShield Ass n/nat l Gov t Servs., Inc., PRRB Hearing Dec. No D9 (Mar. 29, 2013), modified, CMS Adm r Dec. (May 30, 2013). E. Observation Bed Days In determining the Provider s DSH eligibility, the Intermediary excluded outpatient observation days from the available bed count for the FY 03 cost report at issue. The Board reversed the Intermediary s adjustment. The Board determined that all beds are to be included in the calculation unless they are specifically excluded by the language at 42 C.F.R or PRM G. Since observation bed days in a licensed acute care bed are not specifically excluded by these provisions, they must be included. The Administrator reversed the Board s decision. The Administrator found that it was CMS s longstanding policy to exclude such beds from the DSH bed count and that the Board improperly applied the decision of the Sixth Circuit Court of Appeals in Clark Reg l Med. Ctr. v. Shalala. Health Alliance Hosp. v. BlueCross BlueShield Ass n/nhic Corp. c/o Nat l Gov t Servs., Inc., PRRB Hearing Dec. No D42 (Sept. 24, 2013), rev d, CMS Adm r Dec. (Dec. 6, 2013). V. ESRD EXCEPTION REQUEST The Board upheld the Intermediary s denial of the Provider s request for an exception, finding the Provider did not demonstrate that it had an atypical patient mix. Specifically, the Board found that although the Provider s percentage of aged patients, 51.8%, was greater than the national norm, 36.7%, it was not substantially greater than in two cases that were merged with the Provider s case, at 53.8% and 54.4%, which were found not to be substantially atypical. Also, the Board found the Provider s percentage of mortality, 22.8%, was not substantially greater than the national norm, 16%. The Administrator declined to review. Alpena Dialysis Servs. v. BlueCross BlueShield Ass n/wis. Physicians 5

6 Serv., PRRB Hearing Dec. No D17 (May 14, 2013), declined to review, CMS Adm r Dec. (July 2, 2013). VI. HOSPICE CAP The Providers contended that their hospice cap liabilities should be recalculated in light of a monetary settlement entered into by a third hospice involving that third hospice s submission of false claims for certain patients. The Providers in this appeal asserted that they should receive full credit in their hospice cap calculations for any of those beneficiaries who had been first admitted as hospice patients by the third hospice, under the premise that those beneficiaries were not eligible for hospice care at the third hospice and this would result in an increase in the hospice benefit which the beneficiaries could receive from the appealing Providers. This would result in a reduction to the hospice cap overpayments that had been assessed on the Providers. The Board found that the Providers failed to meet their burden of proof to establish that any of the beneficiaries who elected one of the Providers during the cap years at issue and who had made prior elections to the third hospice, were actually ineligible for the care the third hospice furnished. The Administrator declined to review. Hospice Complete, Inc., Hospice Complete, Inc./Southern Care v. BlueCross BlueShield Ass n/palmetto GBA, PRRB Hearing Dec. No D2 (Nov. 27, 2013), declined to review, CMS Adm r Dec. (Jan. 10, 2014). VII. MEDICAL EDUCATION COSTS A. IME Research Full-Time Equivalents (FTEs) In calculating the Provider s allowable indirect medical education (IME) payment, the Intermediary disallowed resident time associated with research activities that did not involve direct patient care. The Board upheld that disallowance, citing section 5505(b) of the Affordable Care Act in support of its determination. The Administrator declined to review. BB&L IME Research FTE Group v. BlueCross BlueShield Ass n/noridian Admin. Servs., PRRB Hearing Dec. No D16 (May 9, 2013), declined to review, CMS Adm r Dec. (June 26, 2013). B. Nursing and Allied Health Education Costs The Board declined to exercise its discretionary jurisdiction under 42 U.S.C. 1395oo(d), as the Provider did not claim the costs at issue on its appealed cost reports. That Board noted that it has consistently declined to use its discretionary power to remedy a provider s failure to claim costs on its cost reports. The Board further noted that even if it had not declined to exercise its jurisdiction over this issue, it would have upheld the Intermediary s disallowance of the Provider s nursing and allied health education costs: (1) as a prohibited redistribution of costs, since these costs had not previously been claimed by the Provider on any prior cost 6

7 VIII. OUTLIER PAYMENTS report, and (2) as contrary to the community support principle, since the costs were being supported by the community. The Administrator modified the Board s ruling. It found that the Board incorrectly declined to exercise jurisdiction, as the earlier court order in this case required only that the Board issue a decision on the merits. Thus, the Administrator found only the Board s determination on the merits properly at issue. On that matter, the Administrator: (1) rejected the Provider s argument that the nursing school, allied health school and hospital, all operated as a single entity and, therefore, the nursing and allied health education programs were provider operated; and (2) agreed with the Board s determination that the education costs could not be allowed pursuant to the prohibition against redistribution of costs and the community support principle. UMDNJ Univ. Hosp. v. BlueCross BlueShield Ass n/cahaba Safeguard Admins., LLC, PRRB Hearing Dec. No D13 (Apr. 25, 2013), modified, CMS Adm r Dec. (June 26, 2013). The Board ruled that it had jurisdiction under 42 U.S.C. 1395oo(a) over the outlier payments at issue that were appealed as part of the Notice of Program Reimbursement (NPR) in which the Provider s outlier payments were determined. The Board further determined that if mandatory jurisdiction under 1395oo(a) were overturned, it would exercise its discretionary jurisdiction under 1395oo(d), as supported by prior case law. With regard to the merits, the Board reversed the Intermediary s calculation of the Provider s outlier payments. It found the Intermediary failed to use the best available data, as it used an erroneous DSH factor when the correct factor was available to the Intermediary at the time the outlier claims were processed and calculated. The Board ordered the Intermediary to recalculate the Provider s outlier payments to include the correct DSH data. The Administrator declined to review. St. Francis Hosp., Inc. v. BlueCross BlueShield Ass n/palmetto Gov t Benefits Admin., PRRB Hearing Dec. No D14 (May 2, 2013), declined to review, CMS Adm r Dec. (May 30, 2013). IX. QUALITY REPORTING The Board found that the Providers, home health agencies, failed to timely submit quality data for one period and failed to designate their quality vendors with CMS. The Board ruled that it does not have the authority to grant the Providers exceptions to the filing requirements or any equitable relief. Accordingly, the Board upheld the 2 percentage point reduction in the Providers annual market basket percentage updates, as required by the applicable statute. The Administrator declined to review. Medical Professionals for Home Care, Inc. v. BlueCross BlueShield Ass n/palmetto Gov t Benefits Admin., PRRB Hearing Dec. No D25 (Aug. 21, 2013), declined to review, CMS Adm r Dec. (Oct. 1, 7

8 2013); and Spectrum Home Care, Inc. v. BlueCross BlueShield Ass n/nat l Gov t Servs., PRRB Hearing Dec. No D29 (Aug. 27, 2013), declined to review, CMS Adm r Dec. (Oct. 1, 2013). The Board found that neither the Providers, home health agencies, nor the vendors with whom the Providers contracted, timely submitted the Providers quality data to CMS. The Board ruled that it does not have the authority to grant the Providers exceptions to the filing requirements or any equitable relief. Accordingly, the Board upheld the 2 percentage point reductions in the Providers annual market basket percentage updates, as required by the applicable statute. The Administrator declined to review. CMK Home Health Agency, Inc. v. BlueCross BlueShield Ass n/palmetto GBA, PRRB Hearing Dec. No D26 (Aug. 22, 2013), declined to review, CMS Adm r Dec. (Oct. 1, 2013); Inteli Home Healthcare, Inc. v. BlueCross BlueShield Ass n/palmetto GBA, PRRB Hearing Dec. No D27 (Aug. 22, 2013), declined to review, CMS Adm r Dec. (Oct. 1, 2013); Sun City Home Care, Inc. v. BlueCross BlueShield Ass n/palmetto Gov t Benefits Admin., PRRB Hearing Dec. No D28 (Aug. 26, 2013), declined to review, CMS Adm r Dec. (Oct. 1, 2013); LivinRite Home Health Servs. v. BlueCross BlueShield Ass n/cgs Admins., PRRB Hearing Dec. No D30 (Aug. 27, 2013), declined to review, CMS Adm r Dec. (Oct. 1, 2013); All Care Home Health % Reduction CIRP Group v. BlueCross BlueShield Ass n/cgs Admins., PRRB Hearing Dec. No D31 (Aug. 28, 2013), declined to review, CMS Adm r Dec. (Oct. 1, 2013); Carinosa Healthcare, Inc. v. BlueCross BlueShield Ass n/palmetto GBA, PRRB Hearing Dec. No D32 (Aug. 28, 2013), declined to review, CMS Adm r Dec. (Oct. 1, 2013); MS Healthcare Ctr., Inc. v. BlueCross BlueShield Ass n/palmetto GBA, PRRB Hearing Dec. No D33 (Aug. 28, 2013), declined to review, CMS Adm r Dec. (Oct. 1, 2013). X. REOPENINGS The Intermediary initially included the Providers non-ssi Type 6 Medicare/Medicaid dual eligible days in the Medicaid fraction when calculating the Providers DSH adjustment payments. The Intermediary subsequently reopened and excluded these days from the DSH payments. The Board determined that, pursuant to 42 U.S.C. 1395ww(d)(5)(F)(vi)(II) and 42 C.F.R (b)(4), these days do not belong in either the Medicaid or Medicare fraction of the DSH calculation, and that the Providers were not entitled to relief under the hold harmless provisions in PM No. A or the without fault provisions at 42 U.S.C. 1395gg. However, the Board struck down some of the Intermediary s reopenings as improper, insofar as they lacked a complete explanation of the circumstances surrounding the purported reopenings and did not afford the Providers the opportunity to comment, object, or submit evidence in rebuttal of the reopening, as required by 42 C.F.R and PRM 2932(A). 8

9 The Administrator modified the Board s determination, reversing the Board s findings with regard to any reopenings the Board found to be flawed. The Administrator opined that the explanations in the reopenings that broadly identified the subject of the reopenings as related to DSH, without any specificity as to what DSH issue, were adequate. The Administrator further opined that the Providers need not be afforded the opportunity to comment, object or submit additional evidence in the reopening letter, as long as they were at some point afforded that opportunity. Thus, the Administrator found all the reopenings were proper and enforceable. Maine Type 6 Medicaid Dual Eligible Days DSH Groups v. BlueCross BlueShield Ass n/nat l Gov t Servs., Inc., PRRB Hearing Dec. No D9 (Mar. 29, 2013), modified, CMS Adm r Dec. (May 30, 2013). XI. SAMPLING & EXTRAPOLATION The Intermediary audited the Provider s outpatient bad debts and settlement data, and made some disallowances to both based on its audit. The Medicare Program Safeguard Contractor (PSC) later audited the Provider and, finding a general lack of documentary support by the Provider, concluded that 100% of the Provider s costs be disallowed and that outpatient prospective payment system (OPPS) payments be recouped. The Intermediary accepted and implemented the PSC s audit findings. The Board affirmed the Intermediary s disallowances of bad debt and settlement data which were based on the Intermediary s audit, but reversed the Intermediary s adjustment in which it accepted the PSC s audit. The Board found the Intermediary could not support this 100% disallowance of the Provider s costs. The Administrator vacated the Board s decision and remanded for a determination of whether the Provider, a Community Mental Health Clinic, is a provider of services entitled to a hearing before the Board. The Phoenix Clinic v. Wis. Physicians Serv., PRRB Hearing Dec. No D4 (Jan. 31, 2013), vacated and remanded, CMS Adm r Dec. (March 20, 2013). The Intermediary conducted a comprehensive medical review (CMR) through a post-payment review of the Provider s Part B therapy claims to determine whether the services were reasonable and necessary, adhered to program and coverage requirements, and were supported by proper documentation. The Intermediary employed a sampling and extrapolation methodology, finding errors in 93 out of the 100 claims sampled. The Intermediary did not send the Provider any revised determinations on the individual claims sampled, but recouped the extrapolated overpayment through an adjustment to the Provider s cost report. The Provider was ultimately able to obtain an appeal before an administrative law judge (ALJ) of 20 claims, which resulted in a reversal of approximately 25% of those claims. The Board found that although it did not have jurisdiction to determine the medical necessity of the individual claims reviewed by the Intermediary, it did have jurisdiction over the overpayment placed on the Provider s cost report. The Board found the Intermediary s extrapolation fatally flawed. Specifically, the Intermediary did not consult with a statistical expert when developing the 9

10 sampling methodology; it was unclear whether the sampling methodology had an acceptable level of sampling error; and the apportionment methodology used to divide the overpayment between the appealed year and another year was flawed. Accordingly, the Board reversed the extrapolation and reduced the overpayment adjustment to that portion of the overpayment that the Intermediary assessed on the sampled claims for the year under appeal and to the overpayment assessments on the claims that were not subsequently reversed by an ALJ. The Administrator declined review. Holy Redeemer Hosp. and Med. Ctr. v. BlueCross BlueShield Ass n/highmark Medicare Servs., PRRB Hearing Dec. No D22 (July 31, 2013), declined to review, CMS Adm r Dec. (Sept. 10, 2013). XII. SOLE COMMUNITY HOSPITAL A. Low Volume Adjustment The Board found that the Provider, a sole community hospital, was entitled to a low volume adjustment as it experienced more than a five percent decrease in its total number of inpatient cases due to circumstances beyond its control. The Board ruled that the Provider did not need to prove what caused the circumstances but only that the circumstances were externally imposed and beyond its control. The Provider, through a consultant, ruled out a number of possible causes for the decreased volume that would have been within its control. The Board rejected the Intermediary s position that the Provider was not entitled to the adjustment, because it had not supplied specific information supported by auditable documentation as to the specific facts that resulted in the volume decrease, as the Provider is not required to explain the reason for the decrease. The Administrator declined to review. Porter Hosp. v. Blue Cross and Blue Shield Ass n/nat l Gov t Servs., PRRB Hearing Dec. No D34 (Aug. 29, 2013), declined to review, CSM Adm r Dec. (Oct. 1, 2013). B. Status The Intermediary denied the Provider s application to be classified as a sole community hospital. The Intermediary determined that only admission data pertaining to like hospitals located within a 35-mile radius of the Provider should be included in the denominator of the no more than 25 percent test as required by the applicable regulation. The Administrator declined to review. Maine Coast Mem l Hosp. v. Blue Cross Blue Shield Ass n/nhic, Corp c/o Nat l Gov t Servs., Inc., PRRB Hearing Dec. No D5 (Feb. 21, 2013), declined to review, CMS Adm r Dec. (Apr. 11, 2013). 10

11 XIII. SNF ROUTINE COST LIMITS EXCEPTION The Board found that CMS s methodology for determining the Providers exceptions to the hospital-based SNF routine cost limits was improper, and that the Providers were entitled to all of the costs above the limit rather than just those that exceeded 112 percent of the peer group s mean per diem cost. The Administrator reversed. The Administrator ruled that the exception guidelines in PRM Chapter 25, which limit an exception to those amounts over 112 percent of the peer group s mean per diem cost, are reasonable, appropriate and consistent with applicable law. Blumberg Ribner SNF 112% Peer Mean Group v. BlueCross BlueShield Ass n/palmetto GBA, PRRB Hearing Dec. No D18 (May 16, 2013), rev d, CMS Adm r Dec. (July 9, 2013). XIV. WAGE INDEX A. Acceptance of Time Study, Allocation of Administrative Costs The Board found the Intermediary s disallowance was inconsistent with the language of its own prior approval of the Provider s time study forms and their adequacy. The Board further found that the Provider had properly allocated its total administrative costs among hospital and nonreimbursable cost centers, consistent with the 2005 Final Rule. The Board, therefore, rejected the Intermediary s disallowance which would require allocating the Part A administrative costs between hospital and non-reimbursable costs centers before entering the costs on Worksheet S-3. The Administrator declined to review. Cleveland Clinic Hosp. v. BlueCross BlueShield Ass n/cgs Admins., LLC, PRRB Hearing Dec. No D35 (Sept. 6, 2013), declined to review, CMS Adm r Dec. (Nov. 7, 2013). B. Exclusion of Aberrant Data Four Providers in a particular wage index area appealed the inclusion of a fifth provider s data in the wage index calculation for that area. The appealing Providers established that CMS failed to abide by its own informal process for identifying and excluding aberrant data from the wage index calculation. Accordingly, the Board ruled that the data for the fifth provider be excluded from the wage index calculation for the geographic area at issue. The Administrator declined review. Battle Creek, MI MSA FY 2006 Wage Index Group v. BlueCross BlueShield Ass n/wis. Physicians Serv., PRRB Hearing Dec. No D12 (Apr. 25, 2013), declined to review, CMS Adm r Dec. (June 20, 2013). C. Pension Costs The Board upheld the Intermediary s adjustments to the Providers pension costs from earlier years which were included in the Providers federal fiscal years (FFYs) 2007 and 2008 wage index calculations. The 11

12 Board found that prior to the years at issue, i.e., until 2005, CMS did not restrict the inclusion of pension costs to those costs actually paid or liquidated within one year. Rather, in those earlier years, pension costs only had to be accrued but not actually paid in order to be included in the wage index calculation. CMS amended that rule in its August 2005 Final Rule, which adopted the liquidation of liability requirement for wage index purposes. The Board asserted that it was bound by the new rule and, therefore, without authority to rule on whether the change in policy constituted prohibited retroactive rulemaking. The Board further held that certain of the Providers pension costs should be modified to amortize gains and losses over five years. The Administrator declined to review. HLB Wage Index Pension and Post Retirement Cost Groups FFY 2007 and 2008 v. BlueCross BlueShield Ass n/palmetto GBA; Palmetto GBA c/o First Coast Serv. Options, Inc.; Wis. Physicians Serv. and Novitas Solutions, Inc., PRRB Hearing Dec. No D7 (Mar. 12, 2013), declined to review, CMS Adm r Dec. (Apr. 27, 2013). The Board upheld the Intermediary s adjustments to the Providers pension cost data from earlier years which were included in the Providers FFYs 2007 and 2011 wage index calculations. The Board found that prior to the years at issue, i.e., until 2005, CMS did not restrict the inclusion of pension costs to those costs actually paid or liquidated within one year. Rather, in those earlier years, pension costs only had to be accrued but not actually paid in order to be included in the wage index calculation. CMS amended that rule in its August 2005 Final Rule, which adopted the liquidation of liability requirement for wage index purposes. The Board asserted that it was bound by the new rule and, therefore, without authority to rule on whether the change in policy constituted prohibited retroactive rulemaking. The Administrator declined to review. Hall Render Pension/Post Retirement Wage Index Appeals FFY 2007 through 2011 v. BlueCross BlueShield Ass n/various, PRRB Hearing Dec. No D37 (Sept. 11, 2013), declined to review, CMS Adm r Dec. (Nov. 7, 2013). XV. BOARD JURISDICTION A. D and non- D Decisions The Board makes jurisdictional rulings in both D decisions and non- D decisions (or letter rulings). It is within the PRRB s discretion to determine whether to issue a jurisdictional decision as a D decision or a non- D decision. The PRRB began posting non-d jurisdictional decisions online in August The CMS Administrator does not post its jurisdictional decisions online. The non-d jurisdictional decisions since August 2013 far outnumber the D decisions: 12

13 Comparison of PRRB s D Decisions and Letter Decisions Posted on Website MONTH D DECISIONS LETTER DECISIONS August September October November December January Information not available February Information not available TOTAL: The vast majority of the non-d decisions result in the dismissal of issues. There are more determinations being made in these letter decisions than in formal D decisions, so it is important to be familiar with what the Board is doing in these letter decisions. B. D Decisions 1. Dissatisfaction The Board declined to exercise its discretionary jurisdiction under 42 U.S.C. 1395oo(d), as the Provider did not claim the costs at issue on its appealed cost reports. The Board noted that it has consistently declined to use its discretionary power to remedy a provider s failure to claim costs on its cost reports. The Board further noted that even if it had not declined to exercise its jurisdiction over this issue, it would have upheld the Intermediary s disallowance of the Provider s nursing and allied health education costs: (1) as a prohibited redistribution of costs, since these costs had not previously been claimed by the Provider on any prior cost report, and (2) as contrary to the community support principle, since the costs were being supported by the community. The Administrator modified the Board s ruling. It found that the Board incorrectly declined to exercise jurisdiction, as the earlier court order in this case required only that the Board issue a decision on the merits. Thus, the Administrator found only the 13

14 Board s determination on the merits properly at issue. On that matter, the Administrator: (1) rejected the Provider s argument that the nursing school, allied health school and hospital, all operated as a single entity and, therefore, the nursing and allied health education programs were provider operated; and (2) agreed with the Board s determination that the education costs could not be allowed pursuant to the prohibition against redistribution of costs and the community support principle. UMDNJ Univ. Hosp. v. BlueCross BlueShield Ass n/cahaba Safeguard Admins., LLC, PRRB Hearing Dec. No D13 (Apr. 25, 2013), modified, CMS Adm r Dec. (June 26, 2013). The Board ruled that it had jurisdiction under 42 U.S.C. 1395oo(a) over the outlier payments at issue that were appealed as part of the NPR in which the Provider s outlier payments were determined. The Board further determined that if mandatory jurisdiction under 1395oo(a) were overturned, it would exercise its discretionary jurisdiction under 1395oo(d), as supported by prior case law. With regard to the merits, the Board reversed the Intermediary s calculation of the Provider s outlier payments. It found the Intermediary failed to use the best available data, as it used an erroneous DSH factor when the correct factor was available to the Intermediary at the time the outlier claims were processed and calculated. The Board ordered the Intermediary to recalculate the Provider s outlier payments to include the correct DSH data. The Administrator declined to review. St. Francis Hosp., Inc. v. BlueCross BlueShield Ass n/palmetto Gov t Benefits Admin., PRRB Hearing Dec. No D14 (May 2, 2013), declined to review, CMS Adm r Dec. (May 30, 2013). The Board held that the Provider did not have a right to a hearing on the initially appealed issues (ambulatory surgery costs and organ acquisition costs). The Provider received reimbursement for the related items and services as claimed on its as-filed cost report and, therefore, there was no adjustment for either of these issues. Accordingly, the Provider has not met the dissatisfaction requirement for Board jurisdiction under 42 U.S.C. 1395oo(a). The Board further ruled that since none of the originally filed issues afforded the Board jurisdiction under section 1395oo(a), the Board cannot exercise its discretion under section 1395oo(d) over the two remaining issues now before it. The Board dismissed the appeal. The Administrator declined to review. St. Vincent Hosp. & Health Ctr. v. BlueCross BlueShield Ass n/wis. Physicians Serv., PRRB Hearing Dec. No D39 (Sept. 13, 2013), declined to review, CMS Adm r Dec. (Oct. 25, 2013). 14

15 The Intermediary made no adjustment to the Provider s claimed Medicaid eligible days for the FY 2005 cost report. The Provider appealed its Medicaid eligible days used for DSH calculation purposes. The Board found that it lacked jurisdiction over the appeal under 42 U.S.C. 1395oo(a), and it declined to exercise its discretionary jurisdiction under 1395oo(d). The Board dismissed the appeal. Danbury Hosp. v. BlueCross BlueShield Ass n/nat l Gov t Servs., Inc., PRRB Hearing Dec. No D3 (Feb. 11, 2014) (no Administrator ruling at time outline completed). 2. Provider Type The Intermediary audited the Provider s outpatient bad debts and settlement data, and made some disallowances to both based on its audit. The PSC later audited the Provider and, finding a general lack of documentary support by the Provider, concluded that 100% of the Provider s costs should be disallowed and that OPPS payments should be recouped. The Intermediary accepted and implemented the PSC s audit findings. The Board affirmed the Intermediary s disallowances of bad debt and settlement data which were based on the Intermediary s audit, but reversed the Intermediary s adjustment in which it accepted the PSC s audit. The Board found the Intermediary could not support this 100% disallowance of the Provider s costs. The Administrator vacated the Board s decision and remanded for a determination of whether the Provider, a Community Mental Health Clinic, is a provider of services entitled to a hearing before the Board. The Phoenix Clinic v. Wis. Physicians Serv., PRRB Hearing Dec. No D4 (Jan. 31, 2013), vacated and remanded, CMS Adm r Dec. (Mar. 20, 2013). 3. Subject Matter The Intermediary conducted a CMR through a post-payment review of the Provider s Part B therapy claims to determine whether the services were reasonable and necessary, adhered to program and coverage requirements, and were supported by proper documentation. The Intermediary employed a sampling and extrapolation methodology, finding errors in 93 out of the 100 claims sampled. The Intermediary did not send the Provider any revised determinations on the individual claims sampled, but recouped the extrapolated overpayment through an adjustment to the Provider s cost report. The Provider was ultimately able to obtain an appeal before an ALJ of 20 claims, which resulted in a reversal of approximately 25% of those claims. 15

16 4. Timely Appeal The Board found that although it did not have jurisdiction to determine the medical necessity of the individual claims reviewed by the Intermediary, it did have jurisdiction over the overpayment placed on the Provider s cost report. The Board found the Intermediary s extrapolation fatally flawed. Specifically, the Intermediary did not consult with a statistical expert when developing the sampling methodology; it was unclear whether the sampling methodology had an acceptable level of sampling error; and the apportionment methodology used to divide the overpayment between the appealed year and another year was flawed. Accordingly, the Board reversed the extrapolation and reduced the overpayment adjustment to that portion of the overpayment that the Intermediary assessed on the sampled claims for the year under appeal and to the overpayment assessments on the claims that were not subsequently reversed by an ALJ. The Administrator declined review. Holy Redeemer Hosp. and Med. Ctr. v. BlueCross BlueShield Ass n/highmark Medicare Servs., PRRB Hearing Dec. No D22 (July 31, 2013), declined to review, CMS Adm r Dec. (Sept. 10, 2013). The Board determined that the Provider failed to timely file its request for a low volume adjustment, which must be filed with the Intermediary within 180 days of the applicable NPR. The Provider had received an NPR and two revised NPRs. The second NPR was the applicable NPR as it was the one which revised the effective date of the Provider s sole community hospital status. The Administrator declined to review. Marion Gen. Hosp. v. BlueCross BlueShield Ass n/nat l Gov t Servs., Inc., PRRB Hearing Dec. No D11 (Apr. 23, 2013), declined to review, CMS Adm r Dec. (June 10, 2013). C. Letter (non- D ) Decisions Recurring themes: 1. Late Filing No equitable tolling, Sebelius v. Auburn Reg l Med. Ctr., 133 S.Ct. 817 (2013). Good cause exception for appeals within 3 years of NPR. 2. Revised NPRs Must prove issue adjusted in RNPR. 16

17 3. DSH/SSI Realignment No jurisdiction to appeal if realignment has not actually been requested. See 42 C.F.R (b)(3). 4. Rural Floor Budget Neutrality (RFBN) Expedited Juridical Review (EJR) requested; Board must have jurisdiction to grant EJR. Board ruled it had no jurisdiction because found the issue of budget neutrality is not subject to appeal. Administrator reversed. Cases in court via EJR. CMS revised the relevant regulation at 42 C.F.R (a) in a December 10, 2013 Federal Register. Previously, the regulation had provided that there was no administrative or judicial review of any budget neutrality adjustment in the prospective payment rates. Now, the regulation excludes review only of the budget neutrality adjustment in the prospective payment rates required under section 1886(e)(1) of the Social Security Act. 5. Protested Amounts for FYEs 12/31/08 and After Per changes in regulation at 42 C.F.R. 1835(a)(1)(ii), one prerequisite to Board jurisdiction for cost reporting periods ending 12/31/08, is that the Provider include any self-disallowed cost as a protested amount on its cost report. Many RFBN appeals dismissed. Expect appeals challenging regulation as contrary to 42 U.S.C. 1395oo. See Brooklyn Hosp. Ctr. et al. v. Sebelius, D.D.C., No (BAH) (filed Dec. 20, 2013). 17