State loses appeal of nearly $240 million in Medicaid refunds

Louisiana has lost a bid to recoup, with interest, nearly $240 million in Medicaid funds that a federal health agency said it improperly received.

The state returned the overpayments in 2012 but appealed the decision of the federal Centers for Medicare and Medicaid Services, or CMS, in an effort to get the money back.

A three-judge panel of the U.S. 5th Circuit Court of Appeal sided with CMS in a ruling issued earlier this week, ending any potential recoupment.

The case involved $239.5 million in excess payments for uncompensated care at nine Louisiana public hospitals. The overpayments occurred from 1996 to 2006.

The hospitals were paid estimated costs for care of the uninsured on a quarterly basis. A full accounting and settlement reflecting actual costs incurred came at the end of the year. The state contended it did not have to reimburse for overpayments.

A statement issued by the state Department of Health and Hospitals said the ruling wasn’t a surprise.

“It is worth noting that this disallowance, which was issued under a previous administration, was very limited in scope, and dealt specifically with recoupment of funds that were overpaid to the LSU hospitals at the end of each fiscal year. DHH now recoups any funds overpaid to Louisiana hospitals for uncompensated care,” DHH responded.

The state Department of Health and Hospitals first appealed to the Departmental Appeals Board of the U.S. Department of Health and Human Services, which rejected state arguments. It then took the issue to federal district court where it lost again, and finally to the 5th Circuit.

The 5th Circuit panel affirmed U.S. District Court Judge Brian A. Jackson’s ruling, which supported the appeals board decision.

The judges noted the state’s payment system in which it can seek further reimbursement for the hospitals that had been underpaid but does not have to give back federal overpayments.

“In other words, the State lays claim to an asymmetrical retrospective payment system and further aspires to bind HHS (U.S. Department of Health and Human Services) to that system because States have ‘flexibility’ in designing their Medicaid plans, and the Board ordinarily defers to a State’s reasonable interpretation of its own plan,” the court said. “We do not find the Board’s rejection of this position arbitrary and capricious or not in accord with law.”

DHH has argued that the federal health agency approved state plans that set out that position. The 5th Circuit ruling also notes that Louisiana advocates its ability to recoup additional funds from the federal government in the event of underpayments “demonstrates how retrospective reconciliation works in its plans, and there is no textual basis in the plans for the State’s asymmetrical interpretation.”