Washington, DC --- The entire New Jersey congressional delegation sent a letter today to Leslie V. Norwalk, Acting Administrator of the Centers for Medicare & Medicaid Services (CMS), asking that the agency hold New Jersey hospitals harmless for an estimated $200 million in Medicare reimbursement errors to Disproportionate Share Hospitals (DSH) in New Jersey.  The errors were the result of a miscalculation in the complex formula used to compute the Medicare payments to hospitals that treat Medicaid patients.

 

In their letter, the New Jersey lawmakers wrote that "a recoupment of this magnitude would have a crippling effect on our hospitals." Disproportionate Share Hospitals treat a disproportionate share of indigent patients and therefore receive federal funds to help offset the cost of treating people who are uninsured.  (A COPY OF THE LETTER AND A LIST OF THE AFFECTED HOSPITALS FOLLOWS.)   

 

The letter was initiated by U.S. Rep. Frank Pallone, Jr. (D-6), Chairman of the House Energy and Commerce Subcommittee on Health.  He was joined by U.S. Sens. Frank R. Lautenberg (D-NJ) and Robert Menendez (D-NJ) and U.S. Reps. Michael Fergusen (R-7), Christopher Smith (R-4), Donald Payne (D-10), Robert Andrews (D-1), Rodney Frelinghuysen (R-11), William Pascrell (D-8), Frank LoBiondo (R-2), James Saxton (R-3), Rush Holt (D-12), Scott Garrett (R-5), Steve Rothman (D-9) and Albio Sires (D-13).

 

"New Jersey's hospitals are already struggling due to budget cuts and treating the uninsured and simply cannot afford one more blow," Pallone said today.  "To cap things off, the erroneous formula is still in effect, compounding the problem with each passing day.  We believe the hospitals acted in good faith and should not be penalized for the mistake.  As a delegation, we hope that CMS will conclude New Jersey hospitals should be held harmless just as New York and Pennsylvania hospitals were in a similar situation." 

 

Leslie V. Norwalk, Esq.

Acting Administrator

Centers for Medicare & Medicaid Services

Hubert H. Humphrey Building

Room 314G

200 Independence Avenue, SW

Washington, D.C. 20201

 

Dear Acting Administrator Norwalk,

 

We are writing to you to express our utmost concern related to a Medicare reimbursement issue recently brought to our attention that runs the risk of unfairly taking hundreds of millions of dollars from hospitals in New Jersey that treat a disproportionate share of indigent patients.

 

It has been communicated to us by a number of our constituent hospitals that the state’s Fiscal Intermediary, Riverbend Government Benefits Administrator (Riverbend), has recently issued letters to all hospitals that received disproportionate share hospital (DSH) payments over the last several years. By notice of these letters, Riverbend has stated its intent to reopen the hospitals’ Medicare cost reports dating back to at least 2001 to correct errors in its DSH calculations.

 

As we understand the situation, Medicaid eligible days used to calculate Medicare DSH payments are calculated by the Fiscal Intermediary, in part, based upon an algorithm developed by the state Medicaid agency. Riverbend has recently communicated that the number of Medicaid days were overstated because they reportedly included certain ineligible days.

 

Since the inception of the state’s use of the algorithm, hospitals were never given the opportunity to review or verify the detail results of the Medicaid data and therefore have been unable to validate any errors.  Hospital providers had no choice but to rely on the calculations as performed by Riverbend based on the data provided to the Fiscal Intermediary by the state Medicaid agency.  Although several hospitals and other parties periodically did seek access to the underlying DSH data, this data was never made available.  As a result hospitals had no reason to believe that they should not, and had no choice but to, base their budgets on the calculations provided to them by Riverbend. 

 

Hospitals in New Jersey are currently operating in a very fragile economic environment.  Data from 2006 shows an average operating margin of negative 0.3 percent, with 51 percent of the state’s hospitals operating in the red.  An independent estimate of the amount of historical Medicare payments that could potentially be recouped is valued at more than $200 million.  A recoupment of this magnitude would have a crippling effect on our hospitals.

 

As you may be aware, an identical situation occurred with the Medicare Program in 1999.  CMS learned then that hospitals in, among other states, our neighboring New York and Pennsylvania, had through no fault of their own received erroneous DSH payments because the Fiscal Intermediaries, using data provided by the states, had included significant numbers of ineligible days in the DSH calculations.  Although the Medicare Program began the process of recovering hundreds of millions of dollars in DSH payments, when the inequities of these recoupments became apparent, CMS appropriately changed course. With the issuance of Program Memorandum No. A-99-62 (Dec. 1999), CMS directed that it would “hold harmless” any aggrieved hospitals who had been the honest beneficiaries of inflated DSH payments. 

 

While we agree that any identified errors in New Jersey should be corrected going forward, any resolution of this issue for prior fiscal years should be consistent with the “hold harmless” treatment mandated by Program Memorandum No. A-99-62. In addition, we propose that the fiscal intermediary implement adjustments to current DSH payments to the affected New Jersey hospitals so as to avoid any further perpetuation of the error and to provide a solid basis upon which New Jersey providers can base their operations.

 

We look forward to receiving a prompt response from CMS on how the agency plans to address this important issue

 

Sincerely,

Frank Pallone, Jr., Member of Congress

Michael Ferguson, Member of Congress

Frank R. Lautenberg, U.S. Senator

Robert Menendez, U.S. Senator

Christopher Smith, Member of Congress

Donald Payne, Member of Congress

Robert Andrews, Member of Congress

Rodney Frelinghuysen, Member of Congress

Bill Pascrell, Jr., Member of Congress

Frank LoBiondo, Member of Congress

James Saxton, Member of Congress

Rush Holt, Member of Congress

Scott Garrett, Member of Congress

Steve Rothman, Member of Congress

Albio Sires, Member of Congress

 

Hospitals Affected Include:

Jersey City Medical Center

UMDNJ - University Hospital

Greenville Hospital

Barnert Hospital

Shore Memorial Hospital

General Hospital at Passaic St. Mary Hospital

St. Clare's Hospital - Denville

Raritan Bay Medical Center

St. Mary's Hospital - Passaic

Beth Israel Hospital

Burdette Tomlin Mem Hospital

Christ Hospital

Muhlenberg Reg Med Center

Elizabeth General Med Center

Saint Peter's Univ. Hospital

St. Francis Med Center-Trenton

St. James Hospital

St. Michael's Medical Center

Holy Name Hospital

Newark Beth Israel Med Center

Clara Maass Medical Center

Monmouth Medical Center

Saint Barnabas Medical Center

Kimball Medical Center

South Jersey Hospital

Cooper University Med Center

East Orange General Hospital

Columbus Hospital

Englewood Med Center

Palisades Medical Center

St. Joseph's Med Center

Newton Memorial Hospital

Centra State Medical Center

Kennedy Mem Hospitals UMC

Hackensack Unv Med Center

Meadowlands Med Center

Our Lady of Lourdes Center

Rancocas Hospital

Mem Hospital of Salem County

Wayne General Hospital

Meridian Health - Jersey Shore

RWJ Hospital at Hamilton

RWJ University Hospital

Warren Hospital

Bayonne Hospital

Atlantic City Medical Center

Mercer Medical Center

Helene Fuld Medical Center

West Jersey Health Systems

Mem Hospital of Burlington Co

Irvington General Hospital