News & Insights


August 26, 2019

Health Headlines – August 26, 2019

District Court Rules that Supreme Court’s Allina Decision Requires Notice-and-Comment Rulemaking for CMS’s Long-Term Care Hospital Bad-Debt Reimbursement Policy – On August 22, 2019, the United States District Court for the District of Columbia held that CMS had unlawfully changed its “must-bill” policy, without going through notice-and-comment rulemaking, when it denied bad-debt reimbursement claims requirements for long-term care hospitals (LTCHs). The district court’s opinion in Select Specialty Hospital-Denver, Inc. v. Azar is the first opinion to discuss rulemaking requirements under the Medicare statute in the wake of the Supreme Court’s recent Allina decision.

Plaintiffs, a group of LTCHs located in 26 different states, filed suit challenging various denials by CMS for reimbursement of bad debts. The claims were denied due to plaintiffs’ alleged failure to comply with CMS’s “must bill” policy. Under Medicare Part A, providers can generally receive reimbursement for bad debts of Medicare patients who fail to pay deductibles or coinsurance amounts owed for hospital care so long as certain criteria are satisfied, including a requirement to make “reasonable collection efforts.” 42 C.F.R. § 413.89(e). The Provider Reimbursement Manual provides that collection efforts are not required for so-called “dual eligible” patients -- those who are eligible for both Medicare and Medicaid -- so long as the provider determines that no other source would be legally responsible. CMS revised its must-bill policy in 2004, however, to require providers to demonstrate compliance with respect to dual-eligible patients by: (1) billing their respective state Medicaid programs for bad debts of dual-eligible patients; and (2) obtaining a remittance advice (RA) from the state demonstrating that Medicaid is not responsible.

The general requirement to bill state Medicaid programs had been consistently articulated by CMS since at least 1983. The RA requirement was imposed by CMS in 2004 pursuant to a Joint Signature Memorandum issued to Medicare intermediaries. Most of the plaintiffs were not subjected to these requirements until 2007. Plaintiffs faced significant obstacles when attempting to comply.  Some states did not permit plaintiffs to enroll in Medicaid because the states did not recognize LTCHs as eligible providers.  Other states allegedly subjected plaintiffs to enrollment delays that made it impossible for plaintiffs to obtain timely RAs. 

The district court ruled that CMS was required to undergo notice-and-comment before issuing the revision to the must-bill policy, citing the Supreme Court’s recent decision in Azar v. Allina Health Services, 139 S. Ct. 1804 (2019). The Medicare statute requires CMS to conduct notice-and-comment for any rule, requirement, or other statement of policy that establishes or changes a “substantive legal standard” governing payment for services. The district court held that the revised must-bill policy was not merely a procedural rule, which would be exempt from notice-and-comment requirements under Circuit precedent; the revised policy changed the substantive standards for payment, because it effectively required providers to participate in state Medicaid programs and enter into legal contracts with those programs. Consequently, the district court ruled that CMS could not impose the must-bill policy on plaintiffs without satisfying the Medicare statute notice-and-comment obligations.

The case is Select Specialty Hospital-Denver, Inc. v. Azar, Civil Action No. 10-cv-1356 (BAH). Please click here for a copy of the opinion.

Reporter, J. Gardner Armsby, Atlanta, +1 404 572 2760,

Also In the News

King & Spalding Webinar: Playing by the Rules – Review of CMS’s Recent Inpatient, Outpatient, and Physician Rulemakings and More – Within the span of a few summer days, CMS issued multiple voluminous rulemakings affecting hospitals:  proposed rules on the Outpatient Prospective Payment System, Physician Fee Schedule, and End-Stage Renal Disease Prospective Payment System and final rules on the Inpatient Prospective Payment System, Skilled Nursing Facility Prospective Payment System, Inpatient Psychiatric Facility Prospective Payment System, Inpatient Rehabilitation Facility Prospective Payment System and Hospice Payments.

King & Spalding will host an 80-minute webinar discussing the highlights from these rulemakings on Thursday, August 29, 2019 at 1:00 pm ET.

Click here to register. You do not have to be a client to attend, and there is no charge.

King & Spalding Webinar:  Open Borders for Rx Drugs?  The Trump Administration’s Move to Authorize Prescription Drug Importation – Section 804 of the Federal Food, Drug, and Cosmetic Act authorizes the importation of certain prescription drugs from Canada, but only if the HHS Secretary certifies that importation would “pose no additional risk” to U.S. consumers and “result in a significant reduction in the cost” of those prescription drugs.  Since enactment, no Secretary has made such a certification.  Nonetheless, on July 31, 2019, HHS released its “Safe Importation Action Plan,” designed to pave the way for the importation of select prescription drugs from foreign countries through two potential pathways.  King & Spalding will host a webinar on Thursday, September 12, 2019, from 1:00 p.m. ET until 2:00 p.m. ET that will outline the new policies, their broader policy implications, and the Secretary’s legal authority to enact the plan.

Click here to register. You do not have to be a client to attend, and there is no charge.