Hospitals in 3 southern states sue over Medicare

July 7, 2004

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Wed Jul 7, 2004 01:26 PM ET

WASHINGTON, July 7 (Reuters) - Nearly 100 hospitals in Alabama, Louisiana

and Mississippi on Wednesday said they filed suit against the U.S. Health

and Human Services Department for $226.3 million in Medicare payments they

claim they are owed.

The hospitals, organized by the Alabama Hospital Association, said the

Health and Human Services Department uses an " arbitrarily developed " formula

that overstates how much wages account for the total cost of each patient

case.

The spokesman for the Centers for Medicare and Medicaid Services, an agency

of the U.S. Department of Health and Human Services, was not immediately

available to comment.

The hospitals took issue with two adjustments that Medicare officials use in

calculating reimbursements for inpatient hospital service -- wages and

wage-related costs.

According to the complaint, the Health and Human Services Department

regulations illegally overstate the portion of the average cost per case

that is attributable to the labor component. They also said the labor

component illegally includes costs that are not wage or wage-related.

As a result, federal officials have not properly determined the reimbursable

amount of wages and wage-related costs incurred by hospitals to deliver

Medicare services, the hospitals said.

That has resulted in Medicare payments that do not fully cover reimbursable

costs at hospitals in low-wage and rural areas, according to the Alabama

Hospital Association.

" We found that hospitals in some areas of the country were getting paid

twice as much as Alabama hospitals for the exact same procedure, " said Gregg

Everett, the association's general counsel.

Six hospitals in Mississippi, 13 hospitals in Louisiana and 78 hospitals in

Alabama joined the lawsuit, filed Tuesday in the U.S. District Court for the

District of Columbia.

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