WASHINGTON- A divided federal appeals court has ruled that a Maryland nursing facility is entitled to more than $1 million in Medicare reimbursements that it should have been given when it started operations.
The ruling comes too late for the Transitional Care Center, a 24-bed facility that closed its doors July 1999 in part because of reimbursement issues, hospital officials said.
“We opened this program hoping and needing to get new-provider status and the rug got pulled out from under us,” said Brian Bailey, vice president of finance at Maryland General Hospital, which operated the Baltimore facility.
In a published opinion Wednesday, the U.S. 4th Circuit Court of Appeals said the Transitional Care Center was eligible for higher levels of Medicare reimbursement that new nursing facilities can receive for their first few years, while they become established.
A lower court had ruled that the facility was not “new” because its licensed beds were merely shifted from other existing facilities, and that the Department of Health and Human Services did not have to pay the higher reimbursement rate.
But the appeals court said the Transitional Care Center should have been considered a “new provider” because it was the first skilled nursing facility that Maryland General Hospital operated with its own staff, patients and equipment, even if the beds were already licensed elsewhere.
“Maryland General Hospital was starting a brand-new care facility and it didn’t get any of the staff, equipment or patients from any other facility,” said Carel Hedlund, the hospital’s attorney. “It started it from scratch and I think the court saw that.”
Prior to 1998, new skilled nursing facilities were entitled to higher Medicare reimbursement rates as a way to cover from low occupancy rates and start-up costs. A new provider was defined as an institution that had been operating for less than three years in the area where it was certified.
The program changed in July 1998 to a prospective payment method. Instead of being reimbursed for services rendered, skilled nursing facilities now get a predetermined rate per patient day based on a yearly cost reports and the level of care the patient requires, said an official with the Center of Medicare and Medicaid Services.
Center spokesman Peter Ashkenaz said many skilled nursing facilities struggled and ultimately failed during the late 1990s, in part because Medicare implemented the prospective payment system.
Bailey said the Transitional Care Center struggled when it was denied the higher reimbursement rates and then crumbled under prospective payment.
While the prospective payment system has made the issue of reimbursements start to fade, Hedlund said that Wednesday’s appeals court decision could help facilities with cases still pending.
“This is the first time the skilled nursing community has won at the appeals court level,” Hedlund said. “We are very pleased. This was absolutely the right decision.”
In the meantime, the loss of the center hasn’t been too detrimental to Maryland General Hospital.
“While it was an excellent facility, there is no break in the continuum of care now that it isn’t here. Hospitals are adaptive creatures that respond well to the problems they face,” said Lee Kennedy, a hospital spokesman.