Repping 420 Hospitals in Historic Medicare Case

In August 2013, Medicare promulgated a final rule adopting a more stringent coverage standard for inpatient hospital services and, at the same time, reducing the inpatient hospital payment rate by 0.2 percent across the board, based upon an unexplained assumption that the new coverage standard would result in an increase in the aggregate number of inpatient hospital stays.

Akin Gump initially researched the validity of the 0.2 percent payment rate reduction and, having concluded that it did not appear valid, the firm put together a group of 420 client hospitals to challenge it through concerted legal action starting in early 2014. Soon thereafter, Akin Gump filed the first and national-lead case challenging that rate reduction in federal district court in Washington, D.C.—Shands Jacksonville Medical Center, et al. v. Burwell. Other cases involving other hospital groups and trade associations were filed later and consolidated with Shands. In September 2015, after summary judgment briefing, the district court ruled that the agency rule adopting the rate reduction was arbitrary and capricious. Following a remand ordered by the court, the agency determined, in August 2016, to (i) undo the 0.2 percent rate reduction going forward, (ii) repay hospitals for underpayments due to the rate cut that was applied to payments for services rendered in 2014-2016 through a one-time rate increase of 0.6 percent for 2017 and (iii) pay the hospitals involved in the successful court action litigation interest on the underpayments for prior years. According to Medicare program estimates, the nationwide impact of this issue is $220 million per year for all years after 2013.