On June 8, 2016, Southeast Arkansas Hospice, Inc. (SEARK) filed a petition for a writ of certiorari to the Supreme Court to review an Eighth Circuit decision that upheld the annual Medicare payment cap for hospice services. Under the Medicare Act (42 U.S.C. § 1395f(i)(2)(A)), each hospice’s annual payment is capped at an amount calculated based on the number of beneficiaries receiving care at the hospice and a multiplier. Any payment above the cap must be refunded by the hospice to CMS. SEARK argues that the cap in combination with the prohibition on the discharge of hospice patients due to inability to pay operate as a regulatory taking under the Takings Clause, for which hospices must be compensated. The Supreme Court’s response as to whether to grant the petition is due on July 11, 2016.
The District Court and the Eighth Circuit rejected SEARK’s Takings Clause argument. In evaluating a claim of regulatory taking, courts consider three factors: the character of the governmental action, its economic impact, and its interference with reasonable investment-backed expectations. The Eighth Circuit concluded that none of the three factors supports a finding that Medicare’s annual payment cap policy for hospice care providers constitutes a regulatory taking. The Circuit Court concluded that (1) the reimbursement cap allocates the government’s capacity to subsidize healthcare, (2) SEARK presented no evidence to suggest that the cap makes it impossible to profitably engage in its business, and (3) the voluntariness of participation in Medicare by hospice providers “forecloses the possibility that the statute could result in and imposed taking.”
SEARK previously filed suit against CMS seeking to invalidate a former version of the hospice cap regulation, which employed a calculation methodology that was ultimately struck down by several courts and amended by CMS. See Se. Arkansas Hospice, Inc. v. Sebelius, 784 F. Supp. 2d 1102 (E.D. Ark. 2011). In that case, the court reversed the application of the regulation to SEARK’s 2009 claims.
The Eighth Circuit opinion is Se. Arkansas Hospice, Inc. v. Burwell, 815 F.3d 448 (8th Cir. 2016). The Supreme Court case number is 15-1495, and the Supreme Court docket for the case is available by clicking here.
Reporter, Igor Gorlach, Houston, +1 713 276 7326, igorlach@kslaw.com.
