The 20 (Maybe 30?) Years War: Provider Challenge to the IPPS Medicare Standardized Amount

• February 26, 2025

• Kenneth R. Marcus

On December 20, 2024, the U.S. District Court for the District of Columbia issued its decision in favor of the plaintiff hospitals in the case of St. Mary’s Regional Medical Center v. Becerra. This decision, however, is merely the latest development in a saga commencing as early as 2005 involving challenge to the computation of the Medicare Inpatient Prospective Payment System (IPPS) Standardized Amount. The famous words of Winston Churchill pronounced during the darkest hours of WWII come to mind: “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” Thus, for at least 20 years hospitals have challenged the accuracy of the IPPS Standardized Amount, which is the constant in the formula that drives IPPS payment computation. The core statistic of the Standardized Amount is the average hospital cost per discharge, which was computed based on 1981 nationwide hospital discharge data. The basis of the challenge is that the 1981 data was tainted because it included transfers, thus increasing the denominator of the cost/discharge fraction, thereby reducing the average cost per discharge. Despite the dogged efforts of hundreds of hospitals nationwide dating back to at least 2005 challenging the accuracy of the Standardized Amount, to date neither any federal court nor the Provider Reimbursement Review Board (PRRB) has reached a decision on the merits. Rather, hospitals have been forced to litigate jurisdiction and, while the task has been laborious, time-consuming, and expensive, to date they have succeeded.

ARTICLE TAGS

• Regulation, Accreditation, and Payment Practice Group
• Government Reimbursement