Sebelius v. Auburn Regional Medical Center: Hospitals Allege Medicare Intentionally Underpaid Providers–And Got Away With It

By Katie Booth

In the Supreme Court’s recent decision in Auburn Regional Medical Center, the Court held that a suit against HHS by eighteen hospitals alleging intentional underpayment of Medicare reimbursements was barred by a 180-day internal agency deadline for appeals of reimbursement decisions. The rub is that the hospitals only found out about the underpayments, which allegedly occurred from 1987 to 1994, in March of 2006. These underpayments affected thousands of hospitals and added up to billions of dollars. Yet under Auburn, since the hospitals did not sue within 180 days of the underpayment (or even within an extended three-year window for “good cause”), they cannot recover. The Court in Auburn rejected the hospitals’ argument that equitable tolling should apply, finding instead that “the presumption in favor of equitable tolling does not apply to administrative appeals of the kind here at issue.”

The Auburn decision raises important questions about the ability of the federal government to intentionally underpay healthcare providers. In oral argument, the lawyer for the hospitals characterized HHS’s actions as “intentional concealment . . . [and] misconduct by the Secretary, that caused the statute of limitations time to be missed.” While there are good reasons not to disturb decades-old reimbursement decisions, it is sobering that the federal government can intentionally conceal underpayments and—if it conceals the underpayment for only 180 days—never have to reimburse the injured party. This situation presents a striking contrast “to 42 CFR § 405.1885(b)(3) (2012), which permits reopening of an intermediary’s reimbursement determination ‘at any time if it is established that such determination . . . was procured by fraud or similar fault of any party to the determination.’” In other words, HHS can reopen reimbursement decisions if a provider intentionally conceals important information, but not vice versa.

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Part I- Fragmentation in Health Care: The Patient’s Perspective

This past September, I had the unfortunate and ironic experience of transitioning from conducting research on the American healthcare system to being a patient in the American healthcare system.  In September, I was diagnosed with testicular cancer, while working as a research assistant for Professor Einer Elhauge, scouring the Affordable Care Act for regulatory powers with potential for defragmenting our national healthcare system.

Professor Elhauge, recently described fragmentation as a systemic lack of coordination between physicians, as well as between physicians and hospitals.  This fragmentation results in increased medical cost and medical errors.  My experience as a patient has led me to believe that defragmentation could help reduce other, less quantifiable, emotional and psychological costs to patients.  I will attempt to demonstrate this through recounting the first half of my story.[1]

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Duke Institute for Genome Sciences and Policy: Law and Biosciences Fellowship Program

Duke University invites applications for the 2013-2014 Fellowship Program at the Institute for Genome Sciences and Policy.

The Goal:

This fellowship is ideal for individuals who are interested in an academic or policy career working on issues in science and society, with a particular interest in the legal, ethical, and social implications of the biosciences.  

The Institute:

The Institute for Genome Science and Policy (IGSP) is an interdisciplinary institute at Duke designed to advance the biosciences and to study and inform their implications for science, health and society.

Through conferences, workshops, lectures, and education, the Institute promotes research, education and public outreach on the biosciences and their ethical, legal, and social implications for society sciences.  For more information, visit our website at

The Fellowship:

The Law and Biosciences Fellowship is a residential fellowship that provides an opportunity to become involved in the activities of the IGSP and the University, while pursuing independent scholarship at the intersection of biosciences and law.  To enable integration in the Duke community and to allow the fellow(s) to complete a significant body of independent scholarship, we prefer two-year terms, but will consider shorter term fellowships, as well.  We expect fellows to dedicate approximately one third to one half of their time to supporting the science and society activities of the IGSP, working with Nita A. Farahany, JD, Ph.D., while dedicating the other half of their time to independent research.  For the 2013-2014 fellowship, we will provide fellows with office space, a competitive stipend and benefits. Applicants should have a JD or other doctoral level degree (MD, PhD) in a relevant area.  A law degree is a significant advantage, but is not a requirement.

The Application Process:

Applicants should submit a CV, contact information for three references, a writing sample, and a research proposal (in 2000 words or less) to Melissa Segal ( by February 15, 2013.  We will choose fellows based on demonstrated academic merit, likelihood of future success in academia or science policy, and on strength of their research proposals.  Decisions will be made by March 15, 2013.

Duke University is an equal opportunity/affirmative action employer.