United States District Court, E.D. Louisiana
ORDER AND REASONS
the Court are cross-motions for summary judgment. Having
considered the parties' briefs and the applicable law,
the Court now issues this Order and Reasons.
Greenbrier Hospital, LLC (“Greenbrier”), a
Medicare-certified inpatient psychiatric facility in
Covington, Louisiana, seeks judicial review of a decision
from the Administrator of the Centers for Medicare and
Medicaid Services (“CMS”). Greenbrier contends
that the Administrator applied the wrong legal standard in
determining the appropriate reimbursement rate for its cost
report beginning on January 1, 2008.
Structure of Medicare Reimbursement
the operating component of the Department of Health and Human
Services charged with administering the Medicare program. CMS
pays hospitals participating in the Medicare program through
a fiscal intermediary or Medicare Administrative Contractor
(MAC). Inpatient psychiatric facilities (IPFs) like
Greenbrier are required to file annual cost reports (an
accounting of its operating and capital-related costs that
should be allocated to Medicare) with their responsible MAC.
The cost report is reviewed and subject to audit by the MAC,
which then issues a Notice of Program Reimbursement (NPR)
reflecting the final determination of the total amount due to
the provider. The MAC's decision may be appealed to the
Provider Reimbursement Review Board (PRRB), and the
Administrator of CMS may, at its own option, review the
Equity and Fiscal Responsibility Act (“TEFRA”) of
1982 exempted IPFs from the payment methodologies that
applied to ordinary hospitals. IPFs, therefore, were paid on
a “reasonable cost” basis. In 1999, Congress
passed the SCHIP Balanced Budget Reform Act, which required
the Secretary to develop and implement a per diem prospective
payment system for IPFs (“IPF-PPS”). The
Secretary issued a final rule establishing the IPF-PPS in
November 2004. The final rule provided for a three-year
transition period, during which the IPF would receive blended
payments comprised of an increasing percentage of the PPS
rate and a decreasing percentage of the TEFRA rate each year.
a clerical error, when CMS issued the final rule for the
transition period, it incorrectly used summertime dates. The
rule published on November 15, 2004 provided:
§ 412.426 Transition period.
(a) Duration of transition period and composition of the
blended transition payment. Except as provided in
paragraph (c) of this section, for cost reporting periods
beginning on or after January 1, 2005 through June
30, 2008, an inpatient psychiatric facility receives
a payment comprised of a blend of the estimated Federal per
diem payment amount, as specified in § 412.424(c) and a
facility-specific payment as specified under paragraph (b).
(1) For cost reporting periods beginning on or after January
1, 2005 and on or before June 30, 2006,
payment is based on 75 percent of the facility-specific
payment and 25 percent is based on the Federal per diem
(2) For cost reporting periods beginning on or after
July 1, 2006 and on or before June
30, 2007, payment is based on 50 percent of the
facility-specific payment and 50 percent is based on the
Federal per diem payment amount.
(3) For cost reporting periods beginning on or after
July 1, 2007 and on or before June
30, 2008, payment is based on 25 percent of the
facility-specific payment and 75 percent is based on the
Federal per diem payment amount.
(4) For cost reporting periods beginning on
or after July 1, 2008, payment is based
entirely on the Federal per ...