News & Insights


September 9, 2019

Health Headlines – September 9, 2019

District Court Refuses to Order HHS to Apply Pre-2004 Formula for DSH Payments Following Remand from Supreme Court – On September 4, 2019, following remand from the Supreme Court’s decision in Azar v. Alina Health Services, No. 17-1484 (U.S. June 3, 2019), the United States District Court for the District of Columbia declined plaintiff hospitals’ request that the court direct HHS to calculate disproportionate share hospital (DSH) payments using HHS’s pre-2004 formula.  The district court entered judgment for plaintiffs and remanded the case to HHS for further action consistent with the law established by the case but stopped short of ordering a specific formula to be used for calculating plaintiffs’ DSH payments.

As previously reported here, the Supreme Court’s June 3, 2019, 7-1 decision in Azar v. Alina Health Services upheld the D.C. Circuit’s earlier decision invalidating HHS’s policy to treat beneficiaries enrolled in Part C (also known as Medicare Advantage) as remaining entitled to benefits under Part A for purposes of calculating Medicare DSH payments.  The Supreme Court held that the government’s Part C DSH policy was invalid because it did not comply with the Medicare statute’s notice and comment rulemaking requirement. 

On remand to the district court, the plaintiffs requested that the court enter judgment vacating HHS’s determination to calculate plaintiffs’ DSH payments using its Part C DSH policy and remand to the agency for further proceedings to calculate DSH payments in accordance with HHS’s pre-2004 formula.  Plaintiffs also requested that the court require the parties to file joint status reports every 30 days pending completion of the action on remand. 

The Secretary argued that the court should not order the specific remedy requested by the Plaintiff hospitals.  In fact, the Secretary argued, the Supreme Court’s decision prohibited the Secretary from merely reverting to his pre-2004 practice since that practice too was not the subject of notice and comment rulemaking.  The only solution upon remand, the Secretary suggested, was for him to engage in new notice and comment rulemaking, consider the issue “afresh,” and apply whatever policy was ultimately adopted retroactively to 2004. 

In a two-page order, the district court vacated HHS’s Part C DSH policy and ordered remand to DHS for further proceedings but refused to instruct DHS to use a specific formula to calculate plaintiffs’ DSH payments or order the parties to file the requested status reports.  The court explained that “when a court reviewing agency action determines that an agency made an error of law, the court’s inquiry is at an end: the case must be remanded to the agency for further action consistent with the corrected legal standards.”  The district court found that this was not the “rare case” when a court is convinced that remand would serve no purpose and directs the agency how to resolve a problem. 

The case is Alina Health Services v. Azar, Civil Action No. 14-cv-01415 (TJK).  Please click here for a copy of the court’s order.  Please note that we will be contacting our provider clients to discuss the implications of this order further.

Reporter, John Whittaker, Sacramento, +1 916 321 4808,

Also in the News

CMS Issues Final Rule with Program Integrity Enhancements to the Provider Enrollment Process – CMS recently posted a final rule creating new revocation and denial authorities in the provider enrollment process with the purpose of bolstering CMS’s efforts to stop fraud, waste and abuse.  The final rule is expected to be published in the Federal Register tomorrow, September 10, 2019, and comments are due by November 4, 2019.  Among other new authorities, an “affiliations” authority in the final rule will allow CMS to identify individuals and organizations that pose an undue risk of fraud, waste, or abuse based on their relationships with other previously sanctioned entities.  The rule also includes other provisions aimed at improving CMS’s fraud-fighting capabilities.  These provisions provide a basis for administrative action to revoke or deny Medicare enrollment if:

  • A provider or supplier circumvents program rules by coming back into the program, or attempting to come back in, under a different name (e.g. the provider attempts to “reinvent” itself);
  • A provider or supplier bills for services/items from non-compliant locations;
  • A provider or supplier exhibits a pattern or practice of abusive ordering or certifying of Medicare Part A or Part B items, services or drugs; or
  • A provider or supplier has an outstanding debt to CMS from an overpayment that was referred to the Treasury Department.

The new rule is available here , and a press release from CMS regarding the rule is available here.

King & Spalding Partner Juliet McBride Discusses CMS’s Updated SNF Payment Model – CMS is making important changes to how it pays skilled nursing facilities (SNFs) effective October 1, 2019.  As part of this updated payment model, CMS will reimburse SNFs according to a new Patient-Driven Payment Model (PDPM) intended to shift away from fee-for-service and to drive improved clinical outcomes.  King & Spalding partner Juliet McBride delivered a talk on CMS’s changes at the 2019 MHA Business Summit and was quoted in an article in Specialty Pharmacy Continuum, which is available here

King & Spalding Partner Stephen Goff Named to Sacramento Business Journal’s Best of the Bar List – King & Spalding Sacramento partner Stephen Goff was named to Sacramento Business Journal’s “Best of the Bar,” which highlights regional attorneys whose practice areas include cannabis, criminal defense, tax and succession plans, commercial real estate disputes and labor and employment law, as well as health care.  The full list of attorneys named “Best of the Bar” can be found here.

King & Spalding Webinar: Healthcare Fraud Enforcement Priorities in 2019 and Beyond –

King & Spalding will host a webinar focused on the government’s priorities in healthcare fraud enforcement – from mainstay issues like upcoding and medically “unnecessary” services, to new theories of enforcement against telemedicine and opioid distributors and providers.  The webinar will be held on Monday, September 23, 2019, from 1:00 p.m. ET – 2:00 p.m. ET.  This webinar is prompted by the latest trends in False Claims Act (FCA) cases and investigations, and the panel will discuss how these developments may impact a range of healthcare providers.  The current enforcement environment requires careful thought about areas of exposure, opportunities to mitigate risk, and how to react if investigated.  The panel will discuss lessons learned from recent enforcement activity.  The webinar will include the following topics:

  • Current Areas of Enforcement under the FCA;
  • Continued focus on “medically unnecessary” prescriptions and services;
  • Medicare Advantage upcoding investigations and settlements;
  • Telemedicine and individual accountability “crackdown;”
  • Continued use of the FCA to combat the opioid crisis;
  • Electronic Health Records (EHR) “meaningful use” investigations and settlements;
  • Evolving Trends in Procedural FCA Enforcement;
  • Cochise allows whistleblowers more time to sue under the FCA;
  • Uptick in qui tam dismissals, but DOJ dismissal authority faces challenges;
  • DOJ issues guidelines on cooperation credit in FCA investigations; and
  • Updates to DOJ guidelines for prosecutors in evaluating compliance programs.

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