In a decision of national importance for hospitals that serve Medicare beneficiaries, Jackson Walker secured a second significant jurisdictional victory for Reimbursement Recovery, Inc. d/b/a Hospital Reimbursement Group (“HRG”) and over 200 of HRG’s client hospitals in seven national healthcare systems. On December 20, 2024, the U.S. District Court for the District of Columbia ruled in favor of HRG and its hospital clients, allowing this large group of hospitals to seek administrative and judicial review of their Medicare payment rates for inpatient hospital services.
Case Background
The basis for the hospitals’ challenges dates back to the Secretary’s original implementation of the Medicare program’s inpatient prospective payment system (IPPS) for hospitals in 1983. In calculating the original IPPS “standardized amount”—the principal building block of the program’s prospective payment rates—the Secretary improperly treated inter-hospital transfers as patient discharges. This error caused the Secretary to understate the original standardized amount and, as a result, to systematically and substantially underpay the hospitals in each succeeding year thereafter.
HRG was the first to identify this significant error in the Medicare reimbursement rates over 20 years ago. HRG filed its first Provider Reimbursement Review Board (PRRB) appeals regarding this issue in 2005, and it has continued to challenge this error on behalf of its client hospitals through annual PRRB appeals since that time.
For the past decade, Jackson Walker’s Healthcare team has represented HRG and hundreds of HRG’s client hospitals in various PRRB appeals and federal court cases regarding this issue. In 2015, the Secretary sought to dismiss the hospitals’ appeals on this issue based on a newly promulgated Medicare regulation. With the assistance of Jackson Walker, HRG and its client hospitals successfully argued to the D.C. Circuit that the new regulation did not prevent review of the hospitals’ claims. See Saint Francis Med. Ctr. v. Azar, 894 F.3d 290 (D.C. Cir. 2018).
After remand from the D.C. Circuit, in 2023 the PRRB again dismissed a subgroup of the hospitals’ administrative appeals on jurisdictional grounds. The PRRB held for the first time that a jurisdictional preclusion statute addressing the budget neutrality adjustment for the inaugural IPPS payment rates applied to strip jurisdiction over the hospitals’ claims. Jackson Walker then filed suit in the U.S. District Court for the District of Columbia on behalf of HRG’s client hospitals challenging the PRRB’s new jurisdictional determination.
DC District Court’s Decision
Following extensive briefing by the hospitals and the Secretary of HHS, the D.C. District Court ruled on December 20, 2024, that the jurisdictional preclusion statute relied on by the PRRB and the Secretary does not apply to the hospitals’ claims. Noting the strong presumption in favor of judicial review of agency action, the Court concluded that Congress neither expressly nor impliedly immunized the Secretary’s original standardized amount calculations from judicial or administrative review. The Court remanded the dispute to the PRRB for a determination on the merits of the hospitals’ claims, and in recognition of how long the hospitals have been challenging the agency action, took the unusual step of ordering the parties to submit monthly reports to the Court on the status of the administrative proceedings.
The remand to the PRRB, with the Court retaining oversight through periodic status reports, ensures continued scrutiny and potential correction of reimbursement calculations, aligning with HRG’s mission to secure fair and accurate compensation for its hospital clients.
Barron Bogatto, Edgar “Jed” Morrison, and Stephen Calhoun lead the team representing HRG and its client hospitals.
“This decision is a monumental win for our client and the broader healthcare community,” said Barron Bogatto. “It affects PPS acute care hospitals nationwide and allows hospitals to continue their challenges of a significant underpayment issue that has persisted for decades. We are proud to have played a role in achieving this outcome and remain committed to advocating for our clients’ rights.”
The case is St. Mary’s Regional Medical Center v. Becerra, No. 1:23-cv-1594-RCL, in the U.S. District Court for the District of Columbia. For more information about the case, view article by Bloomberg Law.
About Our Team
Houston healthcare partner Barron P. Bogatto, who has practiced healthcare law for almost 40 years, focuses on transactional, regulatory and reimbursement matters for healthcare providers of all types. Barron has substantial experience regarding healthcare regulatory issues and restrictions involving healthcare fraud and abuse, false claims, and physician anti-referral matters affecting healthcare joint ventures and integrated delivery systems; governmental healthcare program reimbursement; PRRB appeals; health industry mergers & acquisitions; hospital/physician relationships and joint ventures; and a host of other legal issues affecting hospitals, clinics, and other health industry providers.
San Antonio healthcare partner Edgar “Jed” C. Morrison, Jr. has practiced healthcare law for four decades—litigating Medicare reimbursement disputes on behalf of HHS before entering private practice—and is one of the founding members of Jackson Walker’s Healthcare section. With a board certification in Health Law by the Texas Board of Legal Specialization, Jed exclusively represents healthcare providers and other industry participants related to the regulatory and transactional aspects of healthcare law.
San Antonio litigation partner Stephen Calhoun served as lead litigation counsel overseeing the development of the hospitals’ arguments and drafting the hospitals’ legal briefing. In addition to representing hospitals in Medicare reimbursement disputes, Stephen handles a wide range of complex commercial disputes in state and federal courts across the country.
Meet JW
Since Jackson Walker’s founding in 1887, our attorneys have represented some of the most influential companies and business leaders in the world. With more than 500 attorneys across six offices, we are the largest Texas firm and have been recognized in the prestigious Chambers USA Guide for Healthcare since 2006 for our comprehensive legal services tailored to the healthcare industry. To explore the firm’s experience helping providers navigate the payor and reimbursement landscape, visit the Healthcare & Life Sciences, Healthcare Reimbursements, and Healthcare Litigation practice pages.
