Supreme Court Denied Review to Medicare Contractor Claims Challenge

The Supreme Court denied a petition for certiorari which challenged a Medicare contractor’s handling of over 15,000 individual medical claims submitted for inpatient rehabilitation services by one provider. This denial was announced without comment after the rehabilitation provider challenged 6,200 adverse decisions and another 8,900 claims that had not proceeded beyond the first level of administrative review for the past 11 years. The provider challenged the lower courts’ decision to foreclose the provider’s opportunity to pursue judicial review of those claims in conjunction with constitutional, federal, and state law claims against the Medicare contractor. The provider also presented the issue of an alleged procedural gap in the Medicare appeals process that resulted in the 11-year delay of the review of his claims.

Factual Background

Dr. James P. Little provides care at the HEALTHSOUTH Rehabilitation Hospital, which is classified as an inpatient rehabilitation facility (IRF) (collectively Southern Rehab.) pursuant to the Medicare program. According to the petition, CIGNA Government Services, LLC began to improperly deny Southern Rehab’s claims for Medicare reimbursement in 2001. Between 2001 and 2006, CIGNA continued to wrongly deny claims. While 6,200 of these claims were carried through to the Medicare Appeals Council and were ultimately denied, Southern Rehab asserted that 8,900 claims “remain stuck at the first level of administrative review,” due to a procedural gap.

Questions and Issues Presented

While Southern Rehab admitted in its petition that this action arises out of “a single provider’s claims for reimbursement,” it also asserted that “the case involves questions of exceptional public importance,” as it has the potential to impact “virtually every Medicare provider and beneficiary, now and hereafter, who traverses the administrative review process.” Specifically, in addition to highlighting the issue of the alleged 11-year procedural gap in the review process, Southern Rehab also presented questions to the Court in the following areas: (1) whether the Medicare statute allows providers to raise “inextricably intertwined” constitutional, federal, and state law violations against Medicare contractors; (2) whether non-Medicare reimbursement claims need to be presented to a government agency; and (3) whether the Medicare statute waives immunity for Medicare contractors in suits by providers claiming constitutional, federal, and state violations.

The Changing Face of Hospice Providers

Hospice services began as a cause, a movement in which volunteers helped patients facing terminal illness. The organizations that provided hospice services were charities, but today the hospice services are big business. According to the March 2014 report of the Medicare Payment and Access Commission (MedPAC), the number of not-for-profit hospices has remained constant from 2000 (1,324) to 2012 (1,313), while the number of for-profit hospices has increased more than 300 percent, from 672 in 2000 to 2,196 in 2012. The number of patients using hospice services also has grown substantially; about 47 percent of deaths now occur while a patient is in hospice care, compared to about 23 percent in 2000.

Hospice services include skilled nursing, nurse aide or home health aide visits, pain management, counseling, spiritual support, and other palliative care.  The Medicare and Medicaid hospice benefits are available to individuals who have been diagnosed as terminally ill with an anticipated life expectancy of six months or less. The services are  provided in a patient’s home, which may be an assisted living facility or nursing home. The benefit includes four levels of care, from routine to 24-hour services in times of crisis.

Longer Stays

As we have discussed previously, the average length of stay in hospice care has increased as use of hospice services has spread from cancer patients to patients with other diagnoses, including Alzheimer’s disease or other dementia, neurological disorders, chronic obstructive pulmonary disease (COPD), or debility. The average length of stay varies by diagnosis; cancer patients spent an average of 51 days in hospice care, while patients with neurological conditions had an average length of stay of 139 days. But much of the variation is related to the form of provider ownership. At not-for-profit  entities, patients spent an average of 69 days in hospice care in 2012, while patients of for-profit entities averaged 105 days. The difference in length of stay between for-profit and not-for-profit hospices varied more dramatically as stays grew longer. At the 50th percentile, for-profit hospice  patients had a length of stay of 21 days compared to 14 days at not-for-profits. At the 75th percentile, the average was 58 at not-for-profits and 97 days at for-profits; at the 90th percentile, patients spent 185 days in not-for-profit hospice care, but 306 days in the care of for-profit hospices.

In an interview on National Public Radio’s Marketplace on April 22, 2014, Fran Smith, co-author of Changing the Way We Die, said that hospice services now are a $17 billion industry. “People are making a lot of money on hospice services,” she said.She added that research shows that for-profit hospices tend to “cherry-pick,” enrolling the healthier patients who will have longer stays. The largest hospice chain in the country, Vitas, is owned by ChemEd, which also owns Roto-Rooter.

Marketing Efforts, Whistleblower Actions

Marketing of hospice services also appears to be a growth industry. Consultants now sell data analysis services to help hospices increase their referrals by “connecting patients to the physicians who treated them before they entered hospice care” so that the hospice can “target primary care physicians” who have many patients in hospice services. Some for-profit hospice providers have settled whistleblower actions by former employees who were directed to keep the patient population up by selling the services, even to people who were not terminally ill.

In 2012, Odyssey Healthcare, Inc.  settled a whistleblower action for $25 million, according to the Milwaukee Journal Sentinel. The specific allegations remained under seal, but Odyssey settled similar suit brought by another Wisconsin employee for $12.5 million in 2006, the newspaper reported. In May 2013, the U.S. Justice Department joined in a whistleblower action and brought another action independently against Vitas, alleging that Vitas enrolled patients in hospice who were not terminally ill, billed for more intensive services than actually were provided, and compensated employees based on the number of patients admitted and the length of their stays. The government also alleged that Vitas took adverse employment action against employees who failed to meet admission goals.

Hospice of the Comforter, Inc., an Orlando, Florida hospice company, agreed to pay $3 million to the Department of Justice and entered into a corporate integrity agreement. The government’s complaint alleged that it knowingly admitted patients who were not terminally ill and directed employees to falsify medical records to make the patients appear eligible for hospice care.  In March 2014, the parent company of Hospice Compassus, which formerly operated in Alabama, agreed to pay $3.92 million to the government as part of a settlement agreement to resolve allegations that it presented claims for services furnished to patients who were not eligible for hospice services. And on April 23, 2014, Amedisys, Inc. and its affiliates, who provide home health and hospice services, agreed to pay $150 million to the federal government to resolve seven actions under the False Claims Act. Amerisys was alleged to have provided and billed for medically unnecessary services for which patients did not qualify and to have entered into improper financial relationships with physicians and an oncology practice.

Patient Satisfaction

Still, Fran Smith says that hospice services are usually very successful; patients and their surviving families are usually very satisfied with the services they receive.  Often, the social worker will ask patients to consider what they want to do with their remaining time. Some patients use the time in hospice care to fulfill unmet goals or do things, such as travel, that they had always planned to do “some day.” She also  noted that many people choose hospice services too late to derive the full benefit of the service and regret that they did not choose to start earlier.

ACA’s Changes to Medicaid and Medicare Could Drastically Alter the Practice and Financing of Medicine

By: Neil Issar, Vanderbilt Law School-

The Patient Protection and Affordable Care Act (ACA) incentivizes adoption of a model in which healthcare providers reduce costs by shifting to value-based reimbursement, such that delivery of the highest quality outcomes at the lowest possible cost becomes the public standard.

One of the ACA’s most significant efforts to control costs is the creation of the Independent Payment Advisory Board (IPAB), an entity housed within the executive branch of government and consisting of 15 full-time members appointed by the President and confirmed by Senate. The creation of the IPAB has been trumpeted as a critical mechanism for slowing increases in healthcare spending, but it is also controversial due to concerns about its unrestricted power and its potential to arbitrarily limit patient access to necessary care.

Beginning in 2015, if healthcare expenditure growth exceeds set targets, the IPAB will make obligatory recommendations to cut spending in Medicare. The recommendations made by the IPAB will then be sent to Congress, and if Congress does not agree with the recommendations, it must pass alternative cuts of the same proportion within a narrow time frame. If Congress does not move to pass legislation, the Secretary of the Department of Health and Human Services is legally required to implement the IPAB’s recommendations.

The IPAB’s lack of public accountability and its intention to curb Medicare spending have been points of concern. For example, if the IPAB recommends reducing physician reimbursement rates to decrease Medicare expenditures, it could create a sizeable gap between private rates and Medicare rates, possibly driving physicians out of Medicare and exacerbating the access problem. This could be especially alarming for surgeons, and the American Academy of Orthopaedic Surgeons (AAOS), for example, is concerned about the impact that IPAB-directed cuts will have on patient access to musculoskeletal care and about the ability of the Board to focus on long-term delivery system reforms due to the yearly spending targets that must be met.

While the IPAB’s methods are limited by other ACA provisions, including restrictions on rationing of healthcare, raising costs of beneficiaries, modifying eligibility criteria, or cutting payments to hospitals or hospices before 2020, orthopaedic surgeons and other specialists are concerned about drastic changes to their clinical practices as the first of IPAB’s recommendations are produced in 2014, with implementation to start in 2015.

The ACA also includes provisions to reduce payments under the Medicare and Medicaid Disproportionate Share Hospital (DSH) programs beginning in 2014. These programs, which pay out approximately $22 billion every year, partially reimburse many hospitals for otherwise uncompensated care provided to low-income and uninsured patients. The reductions are based on the premise that the ACA’s expansion of coverage should significantly reduce the number of uninsured Americans, which, in turn, should result in a substantial decrease in the uncompensated care provided at acute care hospitals.

Scheduled reductions to the Medicaid DSH program will total $18.1 billion between 2014 and 2020, with additional laws extending DSH reductions to 2021 and 2022. Conversely, reductions to the Medicare DSH program will be determined by a new statutory formula that begins with a 75% decrease from current levels and then reimburses funds on the basis of the percentage decreases in states’ uninsured rates. Under this formula, a hospital in a state that sees its uninsured rate decrease by 50%, for example, could see a reduction of over a third of its Medicare DSH payments.

Without further amendments to health reform laws, DSH reductions could create considerable financial deficits for hospitals in states that forgo the ACA’s Medicaid expansion. This is especially troublesome for physicians that treat many uninsured and low-income patients. In addition, a coverage gap will remain in many such states, as the insurance exchanges created by the ACA were intended to serve patients who have incomes greater than 100% of federal poverty level (FPL) (since patients making less would be eligible for Medicaid under the law’s expanded eligibility criteria). States opting out of Medicaid expansion could thereby have many patients with incomes less than 100% of FPL uncovered by Medicaid and simultaneously ineligible to purchase discounted insurance through the exchanges. These patients would remain uninsured and become the primary beneficiaries of uncompensated hospital care.

In other words, hospitals in non-expansion states could face an alarming decline in DSH funding despite seeing little or no change in the amount of uncompensated care provided, which would directly affect the clinical practice of physicians responsible for the provision of this care.

Overall, the ACA marks the beginning of a shift from producer-centered, volume-driven payment models to patient-centered, outcomes-driven models. This goes hand-in-hand with an increased focus on decreasing healthcare costs while improving the quality and value of care. Healthcare spending continues to outpace economic growth and is expected to account for 25% of the US economy in less than two decades. By comparison, in 2010, other OECD nations spent on average about 9.3% of their GDP on healthcare. This will only be exacerbated by the ACA’s expansion of coverage unless physicians embrace the law’s changes to their clinical practice while simultaneously attempting to reduce expenditures and maintain high-quality patient care.

Neil Issar resides in Nashville, Tennessee, and is a student at the Vanderbilt School of Law. He is expected to graduate in the summer of 2016. He attended McGill University prior to law school, earning a B.Sc in 2010. He is the co-President of the Health Law Society, a Vanderbilt Law School Chancellor’s Scholar, and Deans Scholar.

SCOTUS Denies Petition from Patients Refused Oral Surgery Medicare Coverage

The U.S. Supreme Court has denied Delores Berg’s and Thomas DiCecco’s petition for certiorari on a class action suit contending that the Medicare Benefit Policy Manual misinterprets the dental exclusion provisions of 42 USC 1395y(a) and 42 CFR 411.15. Berg and DiCecco suffer from autoimmune disease, which has destroyed their salivary glands, teeth, gums, and has led to life-threatening infections. However, according to the HHS manual, oral surgery is not included in their coverage. “When an excluded service is the primary procedure involved, it is not covered regardless of its complexity or difficulty,” states the manual. The district court and Ninth Circuit accorded Chevron, U.S.A., Inc. v Natural Resource Defense Council, Inc. deference to the Secretary’s interpretation and rejected Berg and DiCecco’s claims.

Legislative History

According to the petition, Congress never intended for the dental exclusion to deny coverage in instances of extraordinary oral surgical work, but for routine dental care. “The committee bill provides a specific exclusion of routine dental care to make clear that the services of dental surgeons covered under the bill are restricted to complex surgical procedures. Thus,… a routine annual or semi-annual checkup would not be covered…Similarly, too, routine dental treatment – filling, removal, or replacement of teeth or treatment of structures directly supporting the teeth, would not be covered,” stated Senate Report No. 89-104 (1965). However, the Ninth Circuit found that the dental exclusion provisions were ambiguous and found the Secretary’s interpretation to be reasonable under Chevron.


In their petition, Berg and DiCecco argued that the Supreme Court should grant certiorari because the Ninth Circuit’s decision conflicts with other appellate court rulings that preclude Chevron deference in instances where agency actions lack the “force of law.” Specifically, they argued that Medicare Appeals Council decisions and manual provisions lack precedential authority, and therefore cannot be subjected to Chevron deference. Further, Berg and DiCecco asserted that the Ninth Circuit’s decision “establishes an irrational policy and misconstrues” Barnhart v Walton. “Nothing in Barnhart alludes to or suggests that a ‘process of adjudication’ supports Chevron deference to an administrative review system’s decisions that lack the force of law,” stated the petition. Nevertheless, the Supreme Court denied the petition.