Operators mull bankruptcy as a hedge against lawsuits

Kindred Healthcare on Wednesday sued Health and Human Services Secretary Alex Azar for more than $10.1 million in lost reimbursements, saying a previous decision penalizes some of the company’s long-term care hospitals and a skilled nursing facility for not joining certain states’ Medicaid programs.

At issue is how companies collect unpaid deductibles or copays for dual-eligible patients, meaning those who have both Medicare and Medicaid coverage. To win Medicare reimbursement for that bad debt, providers must show that they attempted to make collections. The Centers for Medicare & Medicaid Services’ must-bill policy requires companies to bill both Medicare and Medicaid and receive formal denials, or “remittance advice.”

But nine Kindred long-term care hospitals in Pennsylvania and Massachusetts and one skilled nursing facility in Tennessee were not part of those states’ Medicaid programs between 2006 and 2014. In the case of Pennsylvania, that state did not accept long-term care hospitals into Medicaid until 2012.

CMS’ independent Provider Reimbursement Review Board originally found Kindred complied with collection requirements within reason and “should not be required to engage in the futile process of attempting to bill” Pennsylvania. But the HHS secretary overturned that ruling, via CMS Administrator Seema Verma, in a notice dated Jan. 19.

“The administrator’s decision is arbitrary, capricious, an abuse of discretion (and) not in accordance with the law,” Kindred states in its complaint. The company also argues that CMS and HHS have failed to compel state Medicaid programs to comply with the statutory billing obligations required to win bad debt repayment.

An HHS spokeswoman said in an email Thursday that the department has no comment on the pending litigation.