Hospice lawsuit challenges Medicare regulation

SHERMAN-A Medicare-certified hospice provider is challenging the validity of the Medicare regulation used to calculate the aggregate annual provider cap.

Harris Hospice Inc. filed suit against Kathleen Sebelius, secretary of the U.S. Department of Health and Human Services, on May 18 in the Sherman Division of the Eastern District of Texas.

DHHS administers the hospice benefits and reimburses the providers on a per diem basis for services to its beneficiaries. However, the total annual Medicare payments to the provider are subject to an aggregate annual provider cap.

Any hospice or provider whose Medicare revenues exceed its total cap allowance for any given year is subject to demands for repayment of the difference.

The cap is "calculated as the product of the individual cap amount (adjusted annually for inflation) and the number of Medicare beneficiaries in a hospice program in any given accounting year."

The plaintiff, Harris Hospice, states that in March Medicare made a demand for $411,151 in repayment based upon its calculations of Harris Hospice's cap obligation for the Medicare fiscal year 2008.

Harris Hospice claims that the Medicare regulation governing calculation of the cap is contrary to the plain language of the Medicare Act and is arbitrary and capricious and is in excess of statutory authority.

"Harris Hospice alleges that it has been materially prejudiced by Medicare's refusal to abide the Congressional mandate regarding the methodology for calculation of the cap," the lawsuit states.

Further, Harris Hospice argues that "Medicare's failure to follow the Congressional mandate to allocate the cap proportionally across years of care is unlawful and subjects hospice providers to improper repayment demands for services properly rendered."

The plaintiff is asking the court for a declaration stating the Medicare regulation governing calculation is invalid, vacates the regulations and stops Medicare from using the regulation.

Harris Hospice also wants the judge to order Medicare's prior calculations invalid and unlawful and restore to Harris Hospice all sums paid pursuant to repayment demands based upon the invalid regulation.

According to the lawsuit, multiple federal courts have determined that the regulation that Medicare uses to perform the cap calculation is invalid.

Attorney Mark I. Agee of Dallas and attorney Brian M. Daucher of Sheppard, Mullin, Richter & Hampton of Costa Mesa, Calif., are representing the plaintiff.

U.S. District Judge Richard A. Schell is assigned to the litigation.

Case No. 4:10cv00252