California Healthline Daily Edition

Summaries of health policy coverage from major news organizations

Calif. Hospitals Set To Receive Funds From CMS Settlement

On April 5, CMS agreed to a settlement with about 2,200 hospitals to end lawsuits related to an error in reimbursement rates, according to parties involved in the deal, the Los Angeles Times reports.


In the suits, the hospitals allege that Medicare committed a mathematical error in 1998 when it adjusted certain reimbursements for inpatient hospital care to reflect area wages. Congress requested the change in the Balanced Budget Act of 1997 to ensure adequate reimbursements for urban and rural hospitals.

According to the lawsuits, the error caused thousands of hospitals to receive significant underpayments.

A group of hospitals in 2007 complained about the error and sought repayment. In January 2011, a federal appeals court overturned a district court ruling that sided with CMS and ordered the Obama administration to address the issue (Terhune, Los Angeles Times, 4/12).

Recent Settlement

CMS is expected to pay at least $3 billion to settle the suits. However, the exact amount is unknown because the agency is not required to report it (Daly [1], Modern Healthcare, 4/12).

Two large health systems -- HCA and Tenet Healthcare -- said they will receive $271 million and $84 million, respectively (Daly [2], Modern Healthcare, 4/12).

Meanwhile, more than 200 California hospitals stand to share a total of more than $310 million from the settlement. Cedars-Sinai Medical Center officials said the hospital will receive $14.3 million, while Long Beach Memorial Medical Center said it is due about $6 million (Los Angeles Times, 4/12).

CMS is expected to make all payments by June 30, according to hospital and CMS officials (Daly [1], Modern Healthcare, 4/12).

This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.