Court ends hospital's fight over SNF reimbursement rule

A Pennsylvania hospital can't file a second lawsuit challenging a Medicare provision that created a “reimbursement gap” between hospital-run skilled nursing facilities and freestanding ones, a judge ruled on Wednesday.

Canonsburg General Hospital in Canonsburg, PA, originally filed a lawsuit in 2001 against the U.S. Department of Health and Human Services, claiming a provision in the Medicare Provider Reimbursement Manual deprived it of reimbursements for its hospital-based SNF.

The provision, which was replaced in 1998, provided freestanding SNFs with reimbursements covering the full costs of atypical services, but reimbursed hospital-based facilities below full cost, the judge's ruling states. Canonsburg's original lawsuit was unsuccessful, with a judge ruling the provision didn't violate any existing regulations.

In its appeal, Canonsburg argued that HHS waived a defense of issue preclusion — which prevents an entity from relitigating an issue — because it didn't raise it in earlier court proceedings. In its ruling, the U.S. Court of Appeal for the District of Columbia Circuit rejected Canonsburg's appeal, stating HHS's use of issue preclusion was valid and the suit can't continue because the same issue was litigated in earlier proceedings.