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Resident Forum
April NaN, 1998

Supreme Court Rules Against Teaching Hospitals

Author Affiliations


JAMA. 1998;279(16):1310M. doi:10.1001/jama.279.16.1310

In a 6 to 3 ruling issued in late February, the US Supreme Court said that the US Department of Health and Human Services (DHHS) could recalculate Medicare payments to teaching hospitals dating back to 1984. The ruling is expected to cost US teaching hospitals over $100 million.

Medicare reimburses teaching hospitals for expenses related to providing graduate medical education (GME). The case of Regions Hospital v Shalala brought forth by St Paul-Ramsey Medical Center, a teaching hospital in St Paul, Minn, questioned whether or not the Secretary of the DHHS had the authority to retrospectively reaudit Medicare payments to teaching hospitals. According to federal statute, the DHHS has a 3-year time limit in which it can reopen a previous Medicare payment audit. In 1985, the US Congress issued new rules regarding Medicare payments to teaching hospitals. The new rules set fiscal year 1984 as a baseline year that would be used to determine subsequent payments.

In 1989, the DHHS began a reaudit of its 1984 Medicare payments to teaching hospitals and determined that it had overpaid many in 1984. For example, the reaudit found that Medicare had overpaid St Paul-Ramsey Medical Center by more than $4 million in 1984. Because payments for the baseline year were too high, it is likely that payments after 1984 were also too high.

Lawyers for the teaching hospital argued that when the DHHS reaudited payments from 1984, it violated Congress' 3-year time limit. The DHHS argued that because payments in 1984 determined all future payments, they had the right to reaudit that year. The DHHS also stated that its intention was not to recoup any payments more than 3 years old. In its brief, the government argued that "the reaudit rule reflects the (DHHS) Secretary's entirely sensible view that Congress would not have wanted to cement prior errors into all future GME payments simply because reimbursements in certain prior years based on those errors cannot be corrected."

Federal appeals courts were split on the issue. The Supreme Court's ruling determined that the reaudit was "authorized by the Medicare Act" and was not unfairly retroactive. The DHHS would now be able to recalculate and recoup Medicare payments if it had reaudited those payments within the 3-year time limit set by Congress.

This case does not directly relate to the issue of Physicians at Teaching Hospitals (PATH) audits, which primarily concern a reinterpretation of rules regarding supervision and documentation by teaching physicians. The July 25, 1997, and October 22, 1997, Resident Forum columns discussed PATH audits in greater detail.