More Than 600 Hospitals Sue HHS Over Inpatient Rate Reduction

The reduction has cost each hospital that participates in the Medicare program an average of $200,000 per year, the suit alleges.

A lawsuit filed Tuesday against Health and Human Services Secretary Alex Azar claims the Trump administration has been under-reimbursing hospitals for inpatient services by about $840 million per year.

The complaint, filed by 622 hospitals, claims Congress gave HHS the authority to reduce Inpatient Prospective Payment System (IPPS) reimbursement rates to recoup prior overpayments, up to about $11 billion, in fiscal years 2014-2017. The law explicitly prohibits the Centers for Medicare & Medicaid Services from carrying those reductions beyond fiscal year 2017, but the Trump administration did so anyway, continuing an unauthorized 0.7% rate reduction in fiscal years 2018 and 2019, the lawsuit alleges.

The reduction has cost each hospital that participates in the Medicare program an average of $200,000 per year, which totals about $124.4 million per year for the plaintiff hospitals and about $840 million per year for all hospitals that participate in Medicare, according to the suit.

The hospitals accuse CMS of conflating three different laws "to justify its unlawful conduct, which resulted in massive savings for CMS and significant financial detriment to the Plaintiffs."

The legal wrangling over IPPS comes as hospitals press the administration on its approach to the Outpatient Prospective Payment System (OPPS) as well. Even after a federal judge vacated the site-neutral payment provisions of OPPS for 2019, the administration moved forward with its site-neutral policy for 2020—so hospitals asked the court to toss the 2020 rule as well.

A spokesperson for CMS told HealthLeaders Friday that the agency does not comment on matters of pending litigation.

Editor's note: This story was updated Friday afternoon to note the fact that CMS declined to comment.