AHA, THA support challenge to HHS ‘net effect’ standard in Medicaid

The AHA and Texas Hospital Association today filed a friend-of-the-court brief supporting the Texas Health and Human Services Commission and several Texas hospitals and health systems challenging a U.S. Department of Health and Human Services’ Departmental Appeals Board decision adopting a “net effect” standard for “bona fide provider-related donations” to supplemental payments in Medicaid. The Centers for Medicare & Medicaid Services adopted the standard in its Medicaid Fiscal Accountability Rule, withdrawn last September at the urging of AHA and others. 

“This regulatory history demonstrates that, one way or another, CMS impermissibly required regulated parties to operate in an unclear legal environment—and it unlawfully and retroactively penalized some of these regulated parties to the tune of $25 million for violating these unclear legal standards,” the brief states. “Put another way, the challenged DAB decision expected a state agency and the hospital-intervenors to conform its longstanding financing arrangements to a ‘net effect’ test that was not in place at the time and that the agency later indicated was unclear. This lack of clarity violates the most basic tenets of American law.”