Spectrum Part Lawsuit

April 28, 2008
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GRAND RAPIDS — In a case that dates back more than 15 years, Spectrum Health became one of hundreds of hospitals to share a $666 million settlement over Medicare payments meant to cover the cost of caring for low-income patients.

Spectrum Health Hospitals received $4.8 million covering 1992-94, said Joe Fifer, CFO for the unit that includes Butterworth and Blodgett hospitals.

“The hospitals had a dispute with the Medicare program in the ’90s about how the calculation worked for Medicare ‘Disproportionate Share,’” commonly known as DSH funding, Fifer said.

“My understanding is that Medicare made this change effective for the years 1997 and going forward. The hospitals said, ‘Wait a minute, you can’t just make this change going forward. There’s all of these other years that need to be considered.’”

DSH funding is doled out under two umbrellas: one state-administered formula for Medicaid and another for Medicare, Fifer explained. The lawsuit, which began in 1997 with Baystate Health in Springfield, Mass., concerned the Medicare payments.

The case underwent several appeals before the Supreme Court finally refused to hear it in 2006. That’s when settlement talks began in earnest. Over the years, 667 hospitals joined the suit.

Seven Michigan hospitals shared in the settlement, but Spectrum was the only one on the western side of the state.

“It’s worth it to have good record-keeping that goes back a long way,” Fifer added. “This is a little on the absurd side in terms of it taking so long, but it’s not unusual to have appeal issues or disputes with Medicare that go back many years.”

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