Lancaster General Hospital, along with three other hospitals and the American Hospital Association, has filed a lawsuit against the Department of Health and Human Services contending the federal government has illegally denied it millions in Medicare payments.
The lawsuit was filed Thursday in federal court in Washington, D.C.
LGH is seeking payment in full for Medicare claims denied by third-party auditors.
The auditors, who are federal contractors, demand repayment of claims based on reviews of medical records months or years after the procedures were performed. The contractors' fees are based on money returned to Health and Human Services.
"The Medicare program has been refusing to pay hospitals for hundreds of millions of dollars' worth of care provided to patients, even though all agree that the care provided was reasonable and medically necessary as the Medicare Act requires," the complaint alleges.
Lancaster General has repaid the federal government $3.8 million since April 2011, according to the complaint.
"Those are costs that we would much rather invest on care for our community," said John Lines, Lancaster General spokesman.
At issue is payment under Medicare Part A, which pays for in-hospital patient care. Medicare Part B pays for care for outpatient procedures. Treatment provided in clinics or doctors' offices is typically less costly than in-patient care.
When auditors have denied LGH claims, they usually contend the in-patient care could have been provided in an outpatient setting, according to the lawsuit. They do not contend the care was medically unnecessary.
Under Health and Human Services policy, once payment under Part A has been denied, payment for that treatment cannot be claimed under Part B.
LGH, the other hospitals and the hospital association contend that is a violation of the Medicare Act, which requires repayment for care regardless of the venue.
If the care was medically necessary and it should not have been provided in the hospital, then it should be repaid at the outpatient rate, they contend.
"As steward of our community's resources, we have an obligation to seek payment," Lines said.
"They are essentially limiting funds that are already becoming limited and we have less to provide services in our community."
Since April 2011, LGH has been asked to turn over 4,089 patient records, many to determine whether inpatient treatment was medically necessary. Of those, auditors determined 645 patients should not have been admitted as inpatients.
Lines said LGH frequently appeals the audit determinations. When it does so, the hospital wins the appeal 86 percent of the time, according to the lawsuit.
LGH does not always choose to appeal, a decision made in part based on the cost of the appeal, the suit states.
The suit also seeks to have HHS change the payment denial policy.
LGH says it spends hundreds of thousands of dollars a year on policy compliance and appeals.
The hospital has six staff members who work full- or part-time responding to audit requests and appeals. LGH also has hired a vendor to respond to medical records requests at an annual cost of more than $100,000. And, it has hired an external physician consulting company to handle medical necessity appeals. It also spends $150,000 per year on software to track the status of requests and appeals.
"Because of these increased costs, Lancaster has had to reallocate resources that could have been used for patient care and staff education and training," the lawsuit contends.
Charles S. Miller, a spokesman for the U.S. Justice Department, was contacted by the Bloomberg business news service. He declined to comment on the allegations contained in the lawsuit.
Along with LGH, the other hospitals involved in the lawsuit are: Missouri Baptist Sullivan Hospital in Sullivan, Missouri; Munson Medical Center in Traverse City, Michigan; and South Bend, Indiana-based Trinity Health Corp.
The Washington, D.C.-based American Hospital Association claims a membership of nearly 5,000 hospitals and health care systems nationwide and 40,000 individual members.
bharris@lnpnews.com
