St. Helena Clear Lake Hospital v. Becerra, __ F.4th __, 2022 WL 1051987 (D.C. Cir. March 31, 2021)

Medicare need not reimburse critical access hospitals for the cost of keeping nonemergency specialty doctors on call.

Critical access hospitals provide 24-hour emergency services at remote rural locations. They are limited to 25 inpatient beds. They may not provide nonemergency inpatient care for more than 96 hours; persistently sick patients must be transferred to a larger hospital. Medicare reimburses critical access hospitals for 101% of their “reasonable costs,” while reimbursing ordinary hospitals on a less favorable fixed fee schedule. Medicare also reimburses critical access hospitals for the cost of on-call emergency room doctors, contrary to the Secretary of Health and Human Services’s longstanding practice of denying reimbursement for on-call costs.

St. Helena Clear Lake Hospital, a California critical access hospital, sought Medicare reimbursement for the cost of maintaining nonemergency room specialists on call. After its Medicare contractor denied reimbursement, St. Helena appealed to the Provider Reimbursement Review Board, arguing that, because federal law requires it to provide certain specialty services and to stabilize patients before transferring them, the on-call cost for these services is “necessary and proper” and therefore must be “reasonable.” The Board rejected St. Helena’s argument, ruling that the governing regulations only permit reimbursement of on-call costs for the emergency room. St. Helena sought review in the United States District Court for the District of Columbia, which granted the Secretary’s motion for summary judgment. St. Helena then appealed to the D.C. Circuit. 

The D.C. Circuit affirmed. The court held that the federal obligation to stabilize emergency patients does not require critical access hospitals to maintain various on-call specialists, since emergency physicians are readily available and capable of stabilizing patients for transfer. The court then held that the Board properly construed the federal regulations as allowing reimbursement for on-call emergency room costs only.

The bulletin describing this appellate decision was originally prepared for the California Society for Healthcare Attorneys (CSHA) by H. Thomas Watson and Peder K. Batalden, who are partners at the appellate firm Horvitz & Levy LLP, and is republished with permission.