In its recent decision in Teche Specialty Hospital v. Sebelius, the District Court for the Western District of Louisiana vacated two inpatient rehabilitation (IRF) coverage denials by the Medicare Appeals Council (MAC). The court concluded that the MAC improperly required actual improvement (rather than expected improvement) and improperly discounted the treating physician’s testimony. Teche represents one of the relatively few cases that have worked through all five levels of the Medicare appeals framework.  

Because both beneficiaries at issue received care prior to CMS’s significant IRF coverage changes in 2009, the court applied the older IRF coverage standards contained in Health Care Financing Administration (HFCA) Ruling 85-2. The MAC had interpreted Ruling 85-2 as requiring “significant practical improvement . . . in a reasonable period of time” as a condition for coverage and denied the hospital’s claims because neither beneficiary had made significant progress toward their rehabilitation goals. The district court strongly disagreed with this interpretation and noted that the MAC had essentially rewritten the applicable language by omitting the phrase “can be expected” from its citation of the relevant language in Ruling 85-2. The court noted that the full text of Ruling 85-2 states “Hospitalization after the initial assessment is covered only in those cases where the initial assessment results in a conclusion by the rehabilitation team that a significant practical improvement can be expected in a reasonable period of time.” (Emphasis added.) Thus, the court concluded that it was improper to deny coverage on the basis that the beneficiaries did not actually improve as long as the rehabilitation team reasonably expected significant practical improvement.

Additionally, the court took issue with the MAC’s dismissal of the treating physician’s testimony. Before the administrative law judge (ALJ), the treating physician testified in both cases on the various reasons IRF care was medically necessary. Although noting that a physician’s testimony is not always controlling, the court found that the MAC improperly discounted the physician’s testimony without pointing to any evidence inconsistent with the physician’s testimony or to evidence supporting a contrary conclusion.

The court’s opinion is available here.