The federal government has agreed to pay $666 million to more than 660 hospitals that sued for Medicare back payments.
The settlement, brokered late Tuesday, took nearly two years to settle, involved hospitals nationwide and stemmed from changes to Medicare reimbursement policy made more than 20 years ago.
A lead attorney for the hospitals said Wednesday that the "hard-negotiated" settlement allowed the parties to avoid years of intensive audits and litigation.
"This is, I believe, the single, largest Medicare reimbursement settlement in the history of program ... since it was established in 1965," said John Jacob, an attorney with Akin Gump Strauss Hauer & Feld, which represented 70 of the hospitals.
In the mid-1980s, the Reagan administration took a narrow interpretation of Medicare reimbursement rules, which excluded certain types of low-income patients from the calculation and significantly reduced payments for the hospitals.
Several hospitals sued to amend the rules and won in 1997.
In late 2002, Baystate Medical Center in Springfield, Mass., was the first hospital to sue the Centers for Medicare and Medicaid and the Department of Health and Human Services in federal court for back payments regarding treatments it gave patients starting in the early 1990s. The numbers of plaintiffs grew to more than 660 hospitals, mostly nonprofits.
The federal government appealed the case in the U.S. Court of Appeals for the District of Columbia Circuit, but lost. The government then sought a review by the U.S. Supreme Court in early 2006, but the Court denied it.
"We are happy that the government has accepted what we believe is a fair disposition of this earlier lawsuit," Baystate's chief financial officer, Keith McLean-Shinaman, said late Wednesday.
University of Chicago Hospitals, Duke University Health System, Stanford Health Services and San Francisco General Hospital were among the plaintiffs.
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