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March 22, 2019

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Hospitals and CMS To Update Court About Two-Midnight Rule Challenge After Final Inpatient Rule Is Published in August

This is an update on the hospital lawsuit challenging CMS’s fiscal year 2014 “Two-Midnight” rule and the agency’s corresponding 0.2% reduction to inpatient prospective payment rates, in Shands Jacksonville Medical Center v. Burwell. As previously reported, the court ruled that CMS had violated mandatory notice and comment requirements regarding key information the agency had used to rationalize its 0.2% payment reduction. The court ordered CMS to disclose the missing information to the public and to reopen the issue for further comment, following which the court would evaluate if CMS’s actions were lawful. After publishing the missing information and receiving many comments, in April 2016, CMS proposed both to eliminate the 0.2% payment reduction and to make up for the reductions in fiscal years 2014-2016 with a one-time 0.6% increase to hospital inpatient rates in 2017.

The hospital plaintiffs and CMS were to have filed a status report with the court, by May 23, 2016, addressing the parties’ positions as to the impact of CMS’s proposal. Instead, however, the court has allowed the parties to delay filing their status report until two-weeks after the agency publishes its final rule governing hospital inpatient payments for fiscal year 2017. The parties explained that CMS’s final rule “could affect the nature of, or need for, any further proceedings . . . .” The final rule will be published in early August.

We will continue to monitor and to provide updates with any breaking developments in the Shands Jacksonville case. As it currently stands, the agency’s action in fiscal year 2014 (carried forward to fiscal years 2015 and 2016 ) is in serious jeopardy. Thus, as we have previously mentioned, hospitals should continue to take actions to preserve their appeal rights as to underpayments caused by the Two-Midnight rule and the 0.2% payment reduction.

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About this Author

Sven Collins, Squire PB, Healthcare attorney

Sven Collins focuses his practice on Medicare and Medicaid reimbursement litigation, as well as on litigation and risk-management guidance in areas of employment and labor, trade secrets, unfair competition and other commercial disputes.

Sven litigates and tries cases before courts, arbitrators and government agencies and  regularly represents hospitals and healthcare providers in innovative reimbursement appeals seeking additional payment under Medicare.  

He also counsels and represents employers in disputes in a variety of employment and labor-related...

Stephen P. Nash, Squire Patton, Health Systems Attorney, Information Exchange Lawyer

Stephen Nash is the co-leader of our Healthcare Practice Group. He has represented healthcare organizations for more than 30 years. His clients include academic medical centers, hospitals and health systems, health information exchanges, medical groups and other physician organizations, health plans and other managed care organizations, long term care organizations, ancillary health service providers, healthcare investors, state agencies and sovereign powers.

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Michi Tsuda, Hospital Advisory Attorney, Health maintenance, Squire Patton Boggs
Senior Associate

Michi Tsuda focuses his practice on advising hospitals, physician groups, health maintenance organizations, management services organizations, private-equity funds, sovereign governments and health-related joint ventures in operational, regulatory, transactional and litigation matters.

He has represented clients in connection with a broad range of corporate, governance, reimbursement, fraud and abuse, and other regulatory compliance matters.

Mimi H. Brouillette, Medicare coverage, Squire PB, regulatory attorney
Senior Associate

Mimi Brouillette has broad experience in various healthcare and finance related issues. She routinely represents clients in Medicare and Medicaid coverage and reimbursement litigation in agency appeals and in federal courts. She also advises hospitals and other healthcare organizations in operational, regulatory and transactional matters.

Mimi is a native Mandarin speaker and assists with negotiations and development of projects with Chinese and other international clients, with a focus on healthcare.