SHERMAN-A second Medicare-certified hospice provider in East Texas is challenging the constitutionality and validity of the Medicare regulation used to calculate the aggregate annual provider cap.

Heart to Heart Hospice of Tyler filed suit against Kathleen Sebelius, Secretary of the Department of Health and Human Services on June 2 in the Sherman Division of the Eastern District of Texas.

The first lawsuit was filed May 18 by Harris Hospice.

The DHHS administers the hospice benefit 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."

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

With places of business in Plano and Tyler, Heart to Heart Hospice states that Medicare made a demand for $365,513 in repayment based upon its calculations of the cap obligation for the Medicare fiscal year 2008.

The plaintiff 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.

"Heart to Heart 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, Heart to Heart 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 plaintiffs 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.

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

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. 4:10cv00275

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