Payment Matters: Hospitals Suffer Setback in IME Research Case

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The issue of whether hospitals are entitled to Medicare Indirect Medical Education (IME) payment for time spent by residents in “pure research” has a turbulent history. Initially, federal district courts in Ohio, Arizona, Rhode Island, Illinois, and Michigan all ruled that such reimbursement is appropriate. In 2008, however, the U.S. Court of Appeals for the First Circuit in Rhode Island Hospital v. Leavitt, 548 F.3d 29 (2008) issued a contrary decision and upheld the Secretary’s disallowance of IME for such activities. A year and a half later, the U.S. Court of Appeals for the Seventh Circuit reached a contrary conclusion, deciding that reimbursement for such expenses is allowable. University of Chicago Med. Ctr. v. Sebelius, 618 F.3d 739 7th Cir. (2010). Now, the U.S. Court of Appeals for the Sixth Circuit has added its voice to the tumult, upholding the Secretary’s position and her denial of reimbursement for such expenses. Henry Ford Health Sys. v. Department of HHS, No. 10-1209 (6th Cir. Aug. 18, 2011) [PDF]

The single issue in the district court cases and in the Rhode Island case was how to read the regulation at 42 C.F.R. § 412.105(f), which specifies that a resident’s time may be included in the IME FTE count if the resident is (1) enrolled in an approved teaching program and (2) assigned to a “portion” of the hospital subject to the prospective payment system. The dispute principally focused on whether the word “portion” as used in the regulation refers to a geographic location within the hospital, as the hospitals have contended, or to a function that the resident is performing within the hospital irrespective of physical location, as the government has argued.

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