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reimbursement was made on the basis of diagnostic related
groupings, in which specific treatments or procedures are
reimbursed at set rates, although reimbursement of certain
outpatient and psychiatric procedures continued to be based on
cost. Throughout the years at issue, petitioners wanted their
premium payments for general and professional liability insurance
to qualify as reimbursable costs for Medicare purposes, though
the direct financial benefit of such qualification was
comparatively less after 1983 than before.
The determination as to whether liability insurance premiums
charged by limited purpose insurance companies would qualify for
Medicare reimbursement was reviewed by intermediaries employed
for that purpose by HCFA. The intermediaries conducted annual
audits of captive insurance companies to determine whether the
premiums charged to insureds met HCFA standards. Throughout the
years here in issue, Blue Cross/Blue Shield of Tennessee, Inc.
(Blue Cross) was the intermediary charged with auditing limited
purpose insurance companies formed in Tennessee to determine
whether the liability premiums that they charged their insureds
would qualify for Medicare reimbursement.
Another consideration on the part of HCA management in
evaluating alternatives to commercial malpractice insurance was
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