Temple University Loses Medicare Wage Classification Fight


June 22, 2021 10:53 am

Temple University Hospital lost a bid to challenge its reassignment to a lower-paid geographic area for purposes of calculating its Medicare payments because it didn’t pursue an administrative action first, the Third Circuit said.

The Medicare Act requires hospitals objecting to their operating cost reimbursements to present their claims to the Provider Reimbursement Review Board, the U.S. Court of Appeals for the Third Circuit said. 

The provision works in tandem with the Social Security Act’s jurisdiction-stripping section, which precludes courts from hearing claims for reimbursement “arising under” the Medicare Act unless they’ve been through the agency’s appeals process, the court said.

Together, the provisions create a channeling requirement that operates as a “near-absolute bar” to the court’s authority to hear cases arising under the Medicare Act that haven’t first been presented to the U.S. Health and Human Services Department, the court said.

Medicare repays hospitals for certain operating costs, including wages. The wage index varies based on the geographic area to which a hospital is assigned to reflect the prevailing wages in that area.

In February 2020, Temple secured reassignment to a geographic classification that upgraded its wage index to that for New York City, thereby increasing its reimbursements. 

Temple’s reclassification was supposed to be in effect from 2021 to 2023, but HHS redrew the borders and reassigned the hospital to a new, lower-paid geographic area. The hospital sued, arguing HHS improperly withdrew its New York City wage index classification.

A federal district court entered judgment for HHS. The reclassification decision deserved deference, it said.

The Third Circuit vacated the judgment and sent the case back to the district court for dismissal Monday. The federal court lacked subject matter jurisdiction because Temple hadn’t first filed its objections with the PRRB, it said.

Judge Peter J. Phipps wrote the opinion. Judges Richard L. Nygaard and Jane R. Roth joined. 

Joseph D. Glazer, Princeton, N.J., represented Temple. The U.S. Department of Justice represented HHS.

The case is Temple Univ. Hosp., Inc. v. Secretary, U.S. Dep’t of Health & Human Servs., 2021 BL 230209, 3d Cir., No. 21-1293, 6/21/21.