Analysis and opinion by Robert F. Gricius – President DSH Mgmt Solutions, LLC

Text of ruling

In a disappointing but not unexpected (see 3/17/2006 Analysis and opinion ) ruling the CMS Administrator reversed the key facets of the PRRB Baystate SSI ruling as it pertains to the provider. The overall decision notwithstanding there are some critical elements of this ruling that providers should consider as they strategize on how to best utilize the elements of this case and the March 17, 2006 disclosures.

1. This not necessarily an adverse decision for all Providers. The orders promulgated by the 3/17/2006 PRRB ruling called for a comprehensive, multi-year re-compilation of the Medicare SSI ratio, by the Fiscal Intermediary (really CMS) for all hospitals relying on this case.
• There is no guarantee that the re-compilation of this Medicare SSI ratio will prove to be beneficial for all the providers affected by the ruling. As CMS points out, not all changes to the numerator of this fraction will advantage every provider.
• AS CMS point out multiple times, this process can be a dual-edged sword and could result in a lower Medicare SSI ratio for certain Providers. The large number of entitlement terminations per year (roughly 500,000) must be weighed against the multiple types of excluded claims that were erroneously dropped by either SSA or did not match the CMS records for various reasons.
• The consultants (in this case) indemnification of the Provider from any negative financial impact as a result of this litigation notwithstanding (see item 5 below); this could prove to be a materially adverse event for the Provider in the event that the consultant has insufficient capital or insurance in place to cover these liabilities. Were this to occur, and any prediction as the ultimate probability of said occurrence is purely speculative at this point, CMS would still look to the Provider for any financial liability, including, very probably, cumulative overpayment interest expense for the time period lapsed since cost report settlement.
• Rather than rely on the accuracy and preciseness of CMS/SSA recalculation process, it may be wise to perform a rigorous internal analysis and documentation effort to eliminate, to the greatest extent possible, the risk of an adverse result. Alternately, should the worst case occur, the Provider, consultant and law firm team needs to be prepared to be in an extremely strong position to refute said adverse result on appeal.
2. This ruling does not foreclose the option for an individual provider to present their own case on appeal, or perhaps, in the best of all possible worlds, negotiate a settlement directly with the fiscal intermediary, through a provider/year specific CMS revision of the Medicare/SSI ratio.
1. Specifically, the Administrator states “The fact that the Secretary acknowledges the providers’ rights to appeal the SSI calculation does not negate the Secretary’s policy that the SSI ratio is not intended to be corrected with later data. The Secretary explicitly released the data for provider’s challenging the Medicare fraction on appeal.”
2. There is precedent for said revision in the Oakwood SSI case, where CMS stipulated that their prior calculation excluded 72 days that should have been in the numerator of this ratio.
3. Make sure that you have a precise, quantifiable and verifiable determination of the direct and indirect damages that you have suffered as a result of the exclusion of specific Medicare/SSI admissions from the DSH calculation as performed by CMS.
1. This may be the single weakest point in the provider’s case as CMS goes to great length to point out in numerous instances that the Provider did not adequately provide the burden of proof necessary to demonstrate either the precise financial impact of the alleged CMS-SSA matching shortfalls, or the erroneous inclusion or exclusion of days in the denominator or numerator of the Medicare SSI ratio.
1. The Providers’ contention that they were not required to provide a precise financial impact of the alleged shortfalls is questionable at best and ignores the well established CMS guidance, that in situations like this, the Provider bears the burden of proof.
2. Said verifiable results need to specifically identify the claims at issue and provide all the supporting documentation and data available to the provider and its legal team before presenting their case on appeal.
3. Said damages should include the CMS mandated underpayment interest rate for the entire period for which the provider was denied accurate payment for this component. This point, to this author’s knowledge, has not been discussed in any ruling or positions put forth by the provider or CMS.
4. Notwithstanding this omission, this issue is a significant and material component of aggregate damages suffered by the providers given the age of some of these cases. Given the prior reluctance of CMS to provide the underlying detail behind the previous “black box” number, and the numerous flaws uncovered in the PRRB ruling, a well-prepared provider will have a compelling case that their damages are not simply nominal in nature but, by statute, subject to the published underpayment/overpayment interest rate for the subsequent periods in question.
4. Addressing the key Medicare/SSI numerator calculation issues discussed in this CMS Administrator ruling. I opine as follows:
• 1619(B) records: CMS argument concerning the exclusion of the 1619B beneficiaries is less then compelling. Even, per argumentum, that a beneficiary of this type did not receive cash payments for some period of time due to excess income, for those periods where the recipient did not work, they were coded by the system as receiving cash payments (see 9/15/2004 testimony of Alan Shafer – page 313 and 314), by the assignment of a “1” for that month, indicating SSI payment receipt.
• Further, the regulation at issue 20 C.F.R. §416.264, states that “we continue to consider you to be a blind or disabled. individual receiving benefits even though you are in fact no longer receiving regular SSI benefits or special SSI cash benefits
• CMS chances of prevailing on this issue at appeal are slim.
• The “Stale” record argument: CMS acknowledges their improper exclusion of these records, up to a point in time, but then attempts to dismiss the overall relevance of this issue by performing an aggregate analysis, that the effect is immaterial. Presuming, for sake of argument, that their calculations are correct (an argument not entirely consistent with their previous actions in this case), their entire bases for classifying this issue as immaterial ignores the factual basis of the “all or nothing: determination of an individual facilities’ entitlement to a minimum, but not insignificant, Federal DSH payment.
• Accordingly, this issue needs to be evaluated on a hospital/year specific basis to determine the specific claims excluded and their precise financial impact.
• As this is unlikely to be done by CMS in the near future, the burden of this task necessarily falls to the Provider; a difficult, but not insurmountable task.
• Beneficiaries without Title II numbers: CMS’s position in this ruling, namely “CMS writes two HICAN’s from the SSA record” is based on the testimony of Anthony Dean, CMS’s principle Medpar programmer. Mr. Dean has recanted his testimony and his changed his position on this issue numerous times beginning in 1995 through the most recent September 14, 2004 hearing; He can hardly be considered a credible witness upon which CMS can base a decision of this magnitude.
• In my opinion, based on Mr. Dean’s constantly evolving position on this issue, CMS needs to discard Mr. Dean’s testimony as not credible; and ;
• Needs to give considerably more weight to Mr. Shafer as the only, and unrebutted expert witness in this proceeding, whose testimony corroborates the Provider’s position;
• As is noted in the ruling, the attorney’s for CMS had every opportunity to inquire as to Mr. Shafer’s compensation agreement; in fact, it specifically notes that “it would have been correctly a subject of examination”.
• Regardless, said examination was not undertaken. To now question his objectivity based on purely speculative bases of projected future work for Mr. Shafer based upon the number of cases outstanding that are similar in nature, is patently groundless and absurd.
• Manual or forced pay of SSI benefits: On this issue, the CMS Administrator points out the conflicting testimony of the Provider’s witness testimony of Ms. Cribb and Mr. Shafer as primary grounds for concluding the Provider did not prove its case that this issue had adversely impacted the Provider’s DSH reimbursement.
• In reviewing the 9/15/2004 testimony and experience/expertise in this area, for both Ms. Cribb and Mr. Shafer’s, it is clear that the weight of Mr. Shafer’s testimony based on his expert witness credentials and prior testimony in this area, is far more credible than that or Ms. Cribb’s; as and such, needs to take precedence over her testimony.
• CMS is correct in that the Provider wasn’t able to quantify the magnitude of the problem other to say that is was “ a lot”; which is not precise enough to prove their case; accordingly;
• CMS or the Provider or the consultant need to do further investigation into the documents produced by SSA in order to determine a reasonable range of times this happened by year, preferably by hospital, in order to gain more precision for this damages amount.
• Retroactive/determinations/holds: The Providers’ case is not particularly strong here, as despite given data for 627 patients for one year, they were only able to identify 12 stays that were missing from the SSI days calculation; further, they only focused on stays were not in the existing base, without attempting to verify the existing base with their data, which could also have been lower.
• Unless they can come up with a more compelling argument and series of facts, they chances of the Provider prevailing on appeal are not favorable.
5. In the event that a provider decides to move forward on appeal of its SSI ratio and the firm(s) retained to assist the provider agrees to accept the downside financial risk for a lower SSI ratio as a result of litigation it is imperative that the Provider ensure that the firm(s) have adequate capital/insurance in place to undertake such a risky proposition.
• In perhaps one of the more startling disclosures present in this ruling, it is noted (page 21 of the ruling) that “The Agreement between the Provider and Consultant acknowledges this possibility in providing for the Consultant to be liable for any decreases in the Provider’s DSH payment as a result of litigation³³”
• Although the author of this analysis applauds the Consultant’s willingness to assume such risk in the face of the uncertainty inherent in a litigation effort of this type and magnitude, it is not a position I would recommend a provider rely upon to mitigate any financial liability they might incur from said litigation.
• In lieu of said risk assumption, I would recommend that the Provider and Consultant work in tandem to ensure that any appeal put before a governing body have as its basis an irrefutable case with sufficient documentation and/or statistical testing to eliminate the possibility that the ultimate result of said appeal would be adverse to the Provider’s case.
6. The focus of any appeal on the Medicare SSI ratio needs to be on the numerator of the fraction, not on the denominator.
• The Provider has lost at both the PRRB and CMS Administrator level in attempting to challenge the accuracy of the Medicare covered days component, arguing among other things that the denominator should include only paid days as included in the PS&R reports.
• In addition to the simple mathematical observation that any change in the numerator will have a “disproportionately” lager impact on the revised Medicare SSI ratio, it is also the area where the more egregious oversights have occurred by both SSA and CMS.
• Although an argument can be made that there are some fairly straightforward issues that can be addressed in the denominator of this fraction (e.g. a Medicare recipient may have exhausted his or her annual allowable covered and/or lifetime reserve days for a single incident of illness) the reality is, that in most cases, this conclusion may require access to other Provider’s records.
• Accordingly, from a risk-reward perspective, Provider’s are better off spending their resources on identifying records that were erroneously excluded from the numerator.
7. In event that the Provider decides to retain an expert witness or someone who is offering an opinion testimony “similar to that which would be offered by an expert of certain alleged CMS data flaws on the DSH patient percentage95” make sure that “expert” or “pseudo expert” does not have a vested, directly related, financial interest in the outcome.
• As the ruling goes on to note, the consultants in this case, although not qualified as experts” gave testimony similar to that which would be proffered by a legitimate, qualified expert witness.
• The consultants agreements with the Provider in this case (a 35% contingency fee (Page 50 of the ruling) in addition to the fact that they are underwriting the cost of the legal and consulting fees in this case severely undermined their testimony credibility.

1. In “Reffett, et.al. v. Commissioners of Internal Revenue” “It seems to be rather generally accepted rule that all agreements to pay witnesses extra compensation contingent on the success of the lawsuit are against public policy whether the agreement is with an ordinary witness, an expert witness or a witness who cannot be compelled to testify, because such agreements constitute a direct temptation to commit perjury.”

• Even if an Agreement is entered into initially as a contingency fee structured reimbursement, and then subsequently modified to eliminate that component of fees “the witness will still be subject to impeachment on the ground of biases with respect to evidence prepared and opinions formulated during the period in which the witness labored under the contingency fee agreement.”
• CMS even went so far as to question the credibility of the one legitimate expert witness, Alan Shafer (see 9/15/2004 Deposition Testimony of A. Shafer ) due to the fact that certain data the he analyzed was selected by one of the consultants identified with a vested financial interest in the outcome of this litigation. As is discussed in item 4 above, said presumed lack of independence of an experienced, well qualified expert witness based on speculation and innuendo is not only insulting to the expert, it is insulting to the court.
• Does this mean that a Provider cannot retain an expert witness, or firm headed by an expert witness; absolutely not; in fact, to prevail in litigation of this type it is crucial. It simply means, at a minimum that the Agreement with the expert witness, or a firm whose principal is an expert witness, cannot be contingency or case resolution based. The expert must be allowed to do his/her own analysis, select the documents/data files upon which such analysis is based, and should not be responsible for legal or other consulting costs that may impinge his/her independence in opining on the case.

Please contact Bob Gricius at robertgricius@dshmgmtsys.com with any questions or comments on this analysis and recommended process.