Tuesday, November 06, 2012 AHA and Hospitals Sue CMS for 'Arbitrary and Capricious' Payment Policy Related to the solicitation of public comments regarding Medicare's policy to rebill for subsequently denied inpatient Part A stays under the Medicare Part B outpatient hospital benefit (see News Now article), the American Hospital Association along with a number of hospitals across the country filed a lawsuit in US District Court (The American Hospital Association, et al. v. Kathleen Sebelius, Case No. 1:12-cv-1770) on November 1. In the lawsuit, the plaintiffs contend that the Medicare payment denial policy is "arbitrary and capricious" as it unfairly denies payment to hospitals for medically necessary services that are not statutorily excluded under Medicare Part B. Therefore, the plaintiffs request that the court grant a declaratory judgment affirming that the Centers for Medicare and Medicaid Services' (CMS) payment denial policy is invalid and that CMS has failed to promulgate a regulatory rationale for the application of this arbitrary policy. In addition, the plaintiffs request that the court direct CMS to pay the plaintiffs accordingly for the denied services under the Medicare Part B benefit. In its comments to CMS submitted September 4, APTA urged the agency to consider the effect that payment for inpatient hospital services under Medicare Part B might have on the therapy cap for outpatient therapy services. Due to risk of denials when classifying patients for an inpatient stay, APTA explains, there are instances in which a patient's entire stay in the hospitals, sometimes spanning as much 16 days, is classified as an outpatient hospital stay. Therefore, all physical therapy services received during this period as of October 1, 2012, will count toward the therapy cap. "We believe that this is unfair to these patients as it may limit their access to physical therapy in the outpatient setting, when in fact these services should have been billed as inpatient services," says APTA.