The Texas Supreme Court has denied an attempt by 14 hospitals to force the state Health and Human Services Commission to recalculate and repay the difference on past Medicaid claims.
After a protracted legal dispute over Medicaid reimbursement for fiscal years 2002 through 2009, the high court upheld a 2011 appeals court decision and clarified its own 2008 ruling overturning the agency's rate calculation administrative rules but only requiring the changes to be applied for future fiscal years.
The original suit stems from a 2001 challenge by 14 hospitals, including Methodist Healthcare System of San Antonio and Corpus Christi Medical Center, to the cut-off date used by the Health and Human Services Commission (HHSC) to calculate prospective Medicaid inpatient reimbursement rates.
The prospective payment system was first implemented in 1986, with HHSC re-calculating rates every three years and cutting off data collection of claims six months after the end of the base year, leaving three to five percent of paid claims from the base year out of the new calculation.
In 2001 HHSC denied the hospitals' administrative appeals challenging the cut-off date, on the grounds that they were not raising data entry errors, which can be appealed, but were contesting the rate calculation methodology, which isn't open to appeal under agency rules.
In their lawsuit, filed in 2002, the hospitals argued that the cut-off date was invalid because it wasn't adopted through the state Administrative Procedure Act's rule-making process and that they were unfairly denied appeals.
After the district and appeals courts sided with HHSC, the Texas Supreme Court agreed in part with the hospitals in 2008. It declared the calculation rule invalid as adopted (but not invalidating the cut-off date), found that the hospitals were entitled to administrative hearings and sent the case back to the district court.
Although the high court never mentioned retroactive relief, the hospitals, represented by the Houston-based firm Vinson & Elkins, argued in the district court that the ruling should apply to past fiscal years and that HHSC should recalculate and pay the difference on claims from previous fiscal years starting in 2002.
At the same time that HHSC started creating a new calculation methodology without the cut-off dates, the agency argued that the Supreme Court ruling should only apply to future claims. The district court sided with the hospitals, but the appeals court sided with HHSC -- and the issue ended up before the Supreme Court, with oral arguments in February.
Texas Supreme Court Justice John Devine, writing a unanimous opinion (with one justice abstaining), denied the hospitals bid for repayment and clarified that the 2008 decision did not order HHSC to retroactively calculate payments.