Hospital unreasonably relied on advice on FTEs

Medicare and Medicaid

Hospital unreasonably relied on advice on FTEs A hospital unreasonably relied on the fiscal intermediary’s (FI) faulty advice regarding how to count full time equivalent (FTE) residents. A hospital had to repay several million dollars to the Medicare program for training its medical residents. In fiscal years (FY) 1995 and 1996 the hospital and another hospital participated in the same residency training program. In 1996 the second hospital withdrew and the remaining hospital absorbed the residents the second hospital would have trained.

The FI advised the hospital to adjust up its graduate medical education (GME) and indirect medical education (IME) FTE count to reflect the additional residents. In 2005 the FI reopened the cost reports and adjusted the FTE resident count down to omit the residents from the second hospital for FY 2003, a decision that was affirmed by the Provider Reimbursement and Review Board (PRRB). In this case, when questions arose concerning the hospitals FTE resident count, the hospital made no attempt to have the question resolved by the Secretary or any other legal authority. The hospital was satisfied with the policy judgment of the FI who is a “mere conduit” for the Secretary.

It was the hospital’s responsibility as a participant in the Medicare program to become familiar with the legal requirements for cost reimbursement and to know the limitations of the FI because the FI cannot resolve policy questions. In addition, the PRRB’s decision that affirmed the FI’s downward adjustment of the FTE for FY 1999 to 2003 did not go against congressional intent when Congress enacted the Balanced Budget Act of 1997 (BBA) (P.L. 105-33). The BBA’s statutory language clearly limited a teaching hospital’s GME FTEs and IME FTEs and imposed a facility-level cap as well as the FTE resident count be limited to a figure reported on or before December 31, 1996.

Although the PRRB properly decided the Affiliated Group Exception did not the apply, the PRRB was arbitrary when it failed to address why the Temporary Cap Exception (TCE) did not apply to the hospital. Under the TCE a provider who takes on residents because another hospital closes or discontinues its program is eligible for a temporary adjustment to its FTE.

The PRRB acknowledged that the regulations provide for a TCE but it failed to explain why the exception did not apply. Accordingly the hospital’s motion for summary judgment was granted in part and denied in part and the case was remanded to the agency for additional analysis of the TCE issue.

Swedish American Hospital v. Sebelius, D. D.C., March 29, 2011, ¶303,739

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