News & Insights


February 8, 2016

Health Headlines – February 8, 2016


HHS Abandons Its Appeal of DC District Court Decision Allowing A Provider to Claim Medicare Bad Debt While Non-Medicare Accounts Remain at a Collection Agency – On February 3, 2016, the Secretary of HHS withdrew her appeal of a United States District Court for the District of Columbia decision invalidating CMS’s policy that a Medicare bad debt cannot be claimed while non-Medicare accounts of like amount remain outstanding at a collection agency.  See Mountain States Health Alliance v. Burwell, No. 13-cv-00641 (D.D.C. Sept. 10, 2015).  In the now-final district court decision, the district court held that CMS’s disallowance of Medicare bad debts that had been returned from a collection agency simply because non-Medicare accounts remained at the collection agency violated the bad debt moratorium.  This was an issue of first impression in D.C. and the health system, Mountain States Health Alliance, was represented by this author.

The principle announced in this case, while not binding on other district court judges, is a benefit to any provider that has had its Medicare bad debt disallowed prior to the sunsetting of the bad debt moratorium for failure to treat the account identically at all stages of collection to non-Medicare bad debts of like amount.  While the bad debt moratorium expired on October 1, 2012, it still binds CMS for all cost-reporting periods preceding that date.  And since Medicare reimbursement appeals are often delayed by several years, any current appeal of this issue is likely to be encompassed by the moratorium and all hospitals in the nation have recourse to the D.C. District Courts for Medicare reimbursement disputes. 

On a broader level, the Mountain States decision shows that the bad debt moratorium still has clout and that courts will not automatically accept the Secretary’s contention that her current bad debt policies are consistent with pre-1987 policies.  It therefore bolsters any provider arguments that invoke violations of the bad debt moratorium. 

Reporter, Daniel J. Hettich, Washington, D.C., +1 202 626 9128,

King & Spalding Submits Comments to CMS Regarding Two-Midnight Rule, Rejecting Agency’s Latest Rationale for Payment Reduction - On February 2, 2016, on behalf of more than 200 client hospitals, King & Spalding responded to CMS’s latest justification for its two-midnight rule and associated 0.2 percent payment reduction, published at 80 Fed. Reg. 75107 (Dec. 1, 2015).  King & Spalding’s comments argued in part that CMS’s post hoc rationalization for excluding medical cases from the two-midnight rule’s estimated impact on overall inpatient admissions was unsupportable by both logic and data and that therefore the rate cut cannot stand. 

CMS’s Notice was a requirement of the United States District Court for the District of Columbia in Shands Jacksonville Medical Center v. Burwell, No. 14-00263 (D.D.C. Sept. 21, 2015).  Relying in large part on comments submitted by King & Spalding during CMS’s rulemaking implementing the two-midnight rule in 2014, Judge Randolph Moss’s September 2015 decision held “that the Secretary’s failure to disclose the critical assumptions relied upon by the HHS actuaries deprived Plaintiffs and other members of the public of a meaningful opportunity to comment on the proposed 0.2 percent reduction.”  Judge Moss ultimately concluded that CMS violated the Administrative Procedure Act, and remanded the case back to CMS to explain its rationale for excluding medical cases in its data analysis.

King & Spalding’s comments included the following:

  • CMS’s behavioral assumptions about how physicians and hospitals will respond to the two-midnight rule are inconsistent and mutually exclusive, making its calculation of a net increase of 40,000 inpatient cases – the basis for its rate cut – unsupportable;

  • CMS’s claims regarding the increased “variability” of medical cases, as compared to surgical cases, are not consistent with 2011 Medicare claims data – the same data originally used to substantiate the rate cut; and

  • CMS’s reliance on proprietary screening guidelines, including InterQual and the Milliman Care Guidelines, first mentioned in the December 2015 Notice, cannot now be used to justify a FY 2014 rulemaking, and in any event, CMS’s categorization of such tools is inaccurate.

Reporter, Elizabeth N. Swayne, Washington, D.C., + 1 202 383 8932,

House Energy and Commerce Committee Seeks Comments on Changes to Provider-Based Status – On Friday, February 5, 2016, key Republican leaders of the House Energy and Commerce Committee solicited comments from healthcare stakeholders – including hospitals – regarding the impact of payment changes for off-campus provider-based departments as set forth in section 603 of the Bipartisan Budget Act of 2015.  The Committee is seeking feedback from all stakeholders no later than February 19, 2016.  The Committee’s letter is available here.

Section 603 limits payment rates for services furnished in new off-campus provider-based departments to the Medicare Physician Fee Schedule or Ambulatory Surgical Center Payment System rate.  These payment changes take effect on January 1, 2017.  Off-campus departments that were billing Medicare off of the Hospital Outpatient Prospective Payment System before the November 2, 2015 enactment date are included in the statute’s grandfathering provision and will continue to receive hospital outpatient payment rates.  On-campus departments, remote locations of hospitals, satellite facilities and provider-based entities such as rural health clinics are not subject to the payment changes. 

Robust hospital feedback to the Committee’s inquiry may be especially important as the Committee’s letter suggests that Section 603 may only be the start of additional site-neutrality payment policies.  While the letter acknowledges that the Committee is aware of concerns that Section 603 may jeopardize hospitals’ ability to provide care in medically underserved areas, the Committee’s letter also discusses recommendations from MedPAC, the Government Accountability Office and others calling for additional site-neutrality policies for ambulatory procedures and cardiac imaging. 

Reporter, Christopher Kenny, Washington, D.C., + 1 202 626 9253,

Second Circuit Invalidates CMS Regulation and Holds That Hospitals Designated as Rural May Apply for an Urban Wage Index While Retaining Benefits of Rural Referral Center Status – On February 4, 2016, the United States Court of Appeals for the Second Circuit struck down HHS regulations that prohibited hospitals from seeking classification as “urban” for purposes of their standardized amount and wage index, and “rural” for other reimbursement purposes such as the 340B Drug Pricing Program.  The court held that the plain meaning of the statute indicated that “Congress intended hospitals with ‘acquired rural status’ to be treated like ‘geographically rural’ hospitals when applying for [Medicare Geographic Classification Review Board (MGCRB)] reclassification.” The case is Lawrence + Memorial Hospital v. Burwell, et al., Docket No. 15-164-cv (2d Cir. Feb. 4, 2016).  

The regulations (referred to as the Reclassification Rule) prohibited hospitals granted re-designation as “rural” under 42 U.S.C. § 1395ww(d)(8)(E) (commonly referred to as Section 401) from seeking an additional reclassification by the MGCRB under 42 U.S.C. § 1395ww(d)(10) as “urban” for a year where the Section 401 rural re-designation was in effect. Further, hospitals re-designated as rural under Section 401 were required to maintain rural status for at least one full twelve-month cost reporting period after re-designation before they could cancel that rural status and reapply for reclassification as “urban” by the MGCRB.

Rural Referral Centers (RRCs) enjoy several benefits including the ability to qualify for preferable drug pricing under the 340B program with a lower Disproportionate Share Hospital (DSH) percentage.  As a result, the Reclassification Rule forced certain hospitals, such as the plaintiffs, to choose between benefiting from the more lenient 340B qualification standards or a higher urban wage index.

While the district court upheld the Secretary’s regulation as a permissible construction of the statute, the Second Circuit found that the statutory language clearly allowed hospitals to be treated as “rural” for some purposes and “urban” for others, and declared the Reclassification Rule invalid.  In particular, the court held that the “Secretary’s purported distinction between ‘geographically rural’ hospitals and hospitals with ‘acquired rural status’ for the purposes of an MGCRB application appears nowhere in the statute.”  The court thereby joined the Third Circuit, which made a similar finding in July 2015.  See Geisinger Community Med. Ctr. v. Sec’y U.S. Dep’t of Health & Human Servs., 794 F.3d 383 (3d Cir. 2015). 

Reporter, Lara Compton, Los Angeles, +1 213 443 4369,

Bipartisan Bill to Expand Telehealth Services for Medicare Patients – On February 3, 2016, Senators Brian Schatz (D-Hawaii), Roger Wicker (R-Miss.), Thad Cochran (R-Miss.), Ben Cardin (D-Md.), John Thune (R-S.D.), and Mark Warner (D-Va.) introduced a bipartisan bill that would expand telehealth services through Medicare titled “Creating Opportunities Now for Necessary and Effective Care Technologies (CONNECT) for Health Act.”  Telehealth is the delivery of health-related services and information through telecommunications.   The purpose of the legislation is to improve healthcare outcomes and reduce costs for patients and providers, according to Senator Schatz’s press release.

42 U.S.C. § 1834(m) outlines the current Medicare payment requirements for telehealth services.  A summary of the CONNECT for Health Act released by Senator Schatz explains that 42 U.S.C. §1834(m) constrains telehealth reimbursement by imposing:

  • Originating site restrictions;

  • Geographic limitations;

  • Restrictions on store-and-forward technologies;

  • Limitations on distant site providers; and

  • Limitations on covered codes.

Senator Schatz’s summary outlines how the CONNECT for Health Act would, among other things:

  • Create a bridge program to help providers transition to the goals of the Medicare Access and CHIP Reauthorization Act (MACRA) and the Merit-based Incentive Payment System (MIPS) through using telehealth and remote patient monitoring (RPM) without most of the aforementioned § 1834(m) restrictions;

  • Allow telehealth and RPM to be used by qualifying participants in alternative payment models, without most of the aforementioned § 1834(m) restrictions;

  • Permit the use of remote patient monitoring for certain patients with chronic conditions;

  • Allow, as originating sites, telestroke evaluation and management sites; Native American health service facilities; and dialysis facilities for home dialysis patients in certain cases;

  • Permit further telehealth and RPM in community health centers and rural health clinics;

  • Allow telehealth and RPM to be basic benefits in Medicare Advantage, without most of the aforementioned § 1834(m) restrictions; and

  • Clarify that the provision of telehealth or RPM technologies made under Medicare by a health care provider for the purpose of furnishing these services shall not be considered “remuneration.”

Reporter, Stephanie F. Johnson, Atlanta, +1 404 572-4629,


CMS Extends Home Health and Ambulance Company Moratorium – Effective January 29, 2016, CMS is extending its temporary moratorium on the enrollment of new Medicare ground ambulance and home health agencies within designated areas of Florida, Illinois, Michigan, Texas, Pennsylvania, and New Jersey for an additional six months.  CMS first imposed the moratorium in a more limited geographic region on July 31, 2013.  To view CMS’s notice, click here.

King & Spalding to Host Roundtable Addressing Bad Behavior By Leased Network Payers After UFCW v. Sutter Health On Wednesday, February 24, 2016, King & Spalding will host a webinar regarding the implications of the California Court of Appeals decision in UFCW & Employers Benefit Trust v. Sutter Health, which held that the rights and obligations of a provider as against a leased network payer are not governed by the underlying contract between the provider and the contracting agent.  A significant amount of provider revenue comes from leased network payers, so this decision has left providers scratching their heads as to how they can obtain the benefit of the bargain they struck when they agreed to accept discounted payments from leased network payers. This webinar will focus on strategies that revenue cycle departments can employ to identify ways that leased network payers have “misbehaved” by failing to adhere to the terms of agreements between the providers and contracting agents. The webinar will also explore contracting strategies to prevent such misbehavior.  To register, please click here

Save the Date: 25th Annual Health Law & Policy Forum - King and Spalding’s 25th annual Health Law & Policy Forum will take place in Atlanta on March 21, 2016 at the St. Regis Hotel in Buckhead.  We are pleased to present keynote speaker Bob Woodward of The Washington Post to share his insights on the politics affecting national health policy.  To pre-register, please click here.

Save the Date: King & Spalding Reception at HCCA Compliance Institute - Please join Sara Kay Wheeler, President of the Health Care Compliance Association (HCCA), and the King & Spalding team at a reception during the 20th annual HCCA Compliance Institute.  The reception will be held at the Aria Café in Las Vegas on Monday April 18, 2016 from 5:00 to 8:00 pm.