Court upholds decision that limits payments for therapy

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HHS Secretary Kathleen Sebelius
HHS Secretary Kathleen Sebelius
A federal court ruled in favor of a fiscal intermediary's decision to exclude the allocation of nursing administration costs to therapy costs in Medicare reimbursements for 30 skilled nursing facilities. 

Genesis Health Ventures took Kathleen Sebelius, the Secretary of the Department of Health and Human Services, to court in hopes of forcing the Provider Reimbursement Review Board to change its SNFs' Medicare reimbursements for fiscal year 1996. If the SNFs had won, they would have received $390,685 more for that year.

The U.S. District Court, District of Columbia, affirmed the review board's decision to uphold the Centers for Medicare & Medicaid Services' fiscal intermediary's decision to delete therapy salaries from the provider's allocation basis.

In the process of cost-finding, a provider is able to recover both the direct and indirect costs of care to Medicare beneficiaries. The skilled nursing facilities obtain reimbursement for their “reasonable costs” by submitting a report to a fiscal intermediary.

Genesis argued that Aetna Insurance Co, its fiscal intermediary from 1990 to 1995, had allowed cost reports with combined nursing and therapy salaries as the allocation basis for nursing administration costs. When Veritus Medical Services became the intermediary in 1996, it adjusted the reports, deleting therapy salaries from the allocation basis. The board agreed with Veritus' deletion of therapy costs, saying the SNFs could not show they had written approval of their previous allocation methodology under Aetna. The Medicare Reimbursement Manual says a provider may change its basis for allocating a cost center by making a written request to the intermediary.

Genesis also said CMS was forbidden from changing its allocation method.

The court said none of Genesis' arguments for reversing the decisions of the board were persuasive, and granted Sebelius summary judgement.