On August 6, 2014, the United States District Court for the District of Columbia enjoined CMS, its Medicare Administrative Contractors (MACs), and the Provider Reimbursement Review Board (PRRB) from applying the self-disallowance regulation to any pending or future administrative appeal to the PRRB that involves a MAC’s failure to issue a timely notice of program reimbursement (NPR) within twelve months of the provider’s filing of its cost report. In particular, the court issued an order “that the Board, the rest of [HHS] . . ., and all current and future Medicare contractors are enjoined from applying 42 C.F.R. § 405.1835(a)(1)’s ‘dissatisfaction’ requirement for Board jurisdiction to any pending or future Board appeal that . . . is based on the Medicare contractor’s failure to issue a timely NPR.”

The statute governing PRRB jurisdiction states that a provider may file a PRRB appeal either from an NPR or from the MAC’s failure to timely issue an NPR. The statute requires a provider to show that it is “dissatisfied” with its MAC’s determination only when appealing from an NPR. It does not require that a provider be “dissatisfied” when appealing from a failure to timely issue an NPR. Yet, CMS’s regulation draws no distinction between the two types of appeals but purports to apply to all appeals. The court, therefore, enjoined CMS from applying this “self-disallowance” requirement to appeals stemming from a MAC’s failure to issue a timely NPR. The court stopped short of granting the full-relief requested by the providers; that is, it did not hold that the entire regulatory provision was invalid (even as applied to appeals from an NPR) because it was overbroad and its plain language violated the statute. Rather, the court explicitly limited its holding to appeals from a failure to timely issue an NPR and emphasized “that no provision of this Order pertains to the application of 42 C.F.R. § 405.1835(a)(1)’s ‘dissatisfaction’ requirement to Board appeals pursuant to 42 U.S.C. § 1395oo(a)(1)(A) that are based on a timely NPR” (emphasis added).

The court’s order is consistent with CMS’s “technical correction” in the 2015 inpatient prospective payment system (IPPS) final rule, which is scheduled to be published in the Federal Register on August 22, whereby CMS clarifies that the dissatisfaction requirement does not apply to appeals stemming from the MAC’s failure to timely issue an NPR. CMS’s technical correction is retroactive to October 1, 2008, and CMS states that providers may seek reopening of any adverse decisions issued in the three years before October 1, 2014 that were based on prior application of the self-disallowance regulation.

CMS’s technical correction and the court’s injunction are significant and could assist providers going forward. On occasion, providers fail to protest or include an item they arguably should have included on their as-filed cost reports. Appeals of such issues from an NPR are subject to a jurisdictional challenge because of the “dissatisfaction” requirement that applies to NPR appeals. But if a provider were to file an appeal of the vulnerable issue as soon as the 12-month deadline for the MAC’s issuance of an NPR elapsed, the dissatisfaction requirement would not apply. Providers in this situation have an incentive not to follow the more typical practice of simply waiting to appeal from the NPR once it is issued.

Reporter, Daniel J. Hettich, Washington D.C., +1 202 626 9128, dhettich@kslaw.com.