PA court rules for hospitals challenging insurer who passed on 2% sequestration cut

A Pennsylvania court Wednesday granted summary judgment to a dozen hospitals that sued health insurer Highmark Inc. for passing on its 2% Medicare payment cut under federal sequestration. Highmark began applying the 2% reduction in January 2014 to all claims submitted by the hospitals. “Congress never addressed the issue of whether the 2% reduction in its payments to insurers could be passed to its medical providers,” wrote Judge Stanton Wettick Jr. “The parties agree that this is a matter of contract law…In summary, Highmark has been unable to point to any provision within the Provider Agreements that would support its 2% reduction from the amount Highmark is obligated to pay under the Provider Agreements.” At a May 20 status conference, the court will consider damages to be awarded to the hospitals. In a letter to AHA last year, Centers for Medicare & Medicaid Services Administrator Marilyn Tavenner confirmed that the 2% Medicare payment reduction under federal sequestration does not change Medicare Fee For Service rates or fee schedules, but applies only to the final payment amount. AHA sought the clarification after hospitals reported that some Medicare Advantage Organizations were inappropriately passing their sequestration cut on to providers, apparently due to confusion over how the policy could affect certain payment terms used in MA contracts with providers.