Opinion ID: 3158926
Heading Depth: 2
Heading Rank: 1

Heading: reasonable cost limits and the atypical

Text: SERVICES EXCEPTION IN MEDICARE REIMBURSEMENT Through the Centers for Medicare and Medicaid Services (CMS), the Secretary provides for the reimbursement of the reasonable costs of healthcare services for Medicare beneficiaries. See 42 U.S.C. § 1395f(b)(1)(A). Two aspects of the reimbursement scheme are relevant here. The first is the system for managing the costs of reimbursement. Healthcare providers submit requests for reimbursement for services provided to Medicare beneficiaries, subject to the RCLs the Secretary has calculated based on statutory and regulatory restrictions. See 42 U.S.C. §§ 1395c–1395g; see also St. Francis Health Care Ctr. v. Shalala, 205 F.3d 937, 939–43 (6th Cir. 2000) (explaining how the Secretary calculates RCLs). The Secretary may adjust RCLs according to certain exceptions and allow skilled nursing facilities (SNFs) to be reimbursed above the established RCLs. See 42 U.S.C. § 1395yy(c); 42 C.F.R. § 413.30(e). One such exception is the “atypical services” exception, which generally allows a healthcare provider to be reimbursed above the RCLs if the service it provides is, inter alia, “atypical in nature and scope.” 1 42 C.F.R. § 413.30(e)(1). 1 The “atypical services” exception initially provided for an upward adjustment to an RCL if “[t]he provider can show that the: (i) Actual cost of items or services furnished by a provider exceeds the applicable limit because such items or services are atypical in nature and scope, compared to the items or services generally furnished by providers similarly classified; and 4 For years, both hospital-based and freestanding SNFs 2 received full reimbursement for atypical services under this exception. See Canonsburg II, 989 F. Supp. 2d at 13. In 1994, however, that changed. In order to effect congressionally directed cost savings, the Secretary altered the calculation for the atypical services exception for hospital-based SNFs. The new calculation, set forth in section 2534.5 of the Medicare Provider Reimbursement Manual (section 2534.5), created a reimbursement “gap” for hospital-based SNFs. Ctrs. for Medicare & Medicaid Servs., Provider Reimbursement Manual Part I § 2534.5, available at http://wayback.archive-it.org/2744/20111201152312/http://w ww.cms.gov/Manuals/PBM/list.asp (last visited Nov. 16, 2015). Whereas freestanding SNFs continued to receive reimbursement for the full cost of their atypical services, hospital-based SNFs were reimbursed below full cost. St. Francis, 205 F.3d at 941–43 (explaining section 2534.5 gap created for hospital-based SNFs). (ii) Atypical items or services are furnished because of the special needs of the patients treated and are necessary in the efficient delivery of needed health care.” 42 C.F.R. § 413.30(f)(1) (1996) (currently promulgated with non-material alterations at 42 C.F.R. § 413.30(e)(1)); see also Limitations on Coverage of Costs Under Medicare, 39 Fed. Reg. 20,164, 20,165 (June 6, 1974) (describing original atypical services exception). As discussed infra n.3, the 1996 regulation is the version relevant to this appeal. 2 In calculating RCLs, the Secretary categorized healthcare providers into four groups depending on whether the provider’s facility is freestanding or hospital-based and on whether the facility is urban or rural. 42 U.S.C. § 1395yy(a). 5 The second relevant aspect of the Medicare reimbursement scheme involves the claims process itself. Under that process, an SNF submits a claim for reimbursement to a private intermediary, which processes the claim and provides reimbursement under CMS’s authority. See 42 U.S.C. § 1395kk-1(a). The provider can appeal an unfavorable reimbursement decision to the Provider Reimbursement Review Board (PRRB), id. § 1395oo(a), whose members are appointed by the Secretary, id. § 1395oo(h). All proceedings before the PRRB are between the provider and the intermediary—neither the Secretary nor CMS is a party to the proceedings and the Secretary can participate only by filing an amicus brief or by providing counsel for the intermediary. 42 C.F.R. § 405.1843(a)–(d). The Secretary, however, has the discretionary authority to reverse, affirm or modify the PRRB’s decision. See 42 U.S.C. § 1395oo(f)(1). The provider can seek review of the PRRB’s decision—or the Secretary’s decision if she exercises her discretion—in the district court “for the judicial district in which the provider is located” or in the “District Court for the District of Columbia”. Id.