St. Mary’s Regional Medical Center is seen in June 2021 from Sabattus Street in Lewiston. Russ Dillingham/Sun Journal file

PORTLAND — St. Mary’s Health System is suing the U.S. Department of Health and Human Services for withholding health care payments and a penalty the department imposed on it stemming from a reporting error the hospital system made related to pandemic relief funds it received.

St. Mary’s argues that when setting aside pandemic relief funds, Congress placed “substance over form” and intended for those pandemic relief funds to go to health care providers, according to St. Mary’s complaint filed with the U.S. District Court of Maine.

St. Mary’s is asking the court to:

• Declare that the federal government’s determination that St. Mary’s must repay any pandemic relief funding payments is contrary to law, arbitrary and capricious.

• Set aside the federal government’s debt determination.

• Issue an interim stay of the federal government’s debt determination and Treasury’s withholding of federal payments.

• Award St. Mary’s attorney’s fees and costs.

• Award St. Mary’s any further relief the court may deem appropriate.

In a statement Monday, St. Mary’s spokesperson Benjamin Sullivan reinforced the hospital system’s position that the government forcing it to repay any pandemic relief funds is unlawful, he said.

“Because of St. Mary’s importance to the community, St. Mary’s has filed litigation to stop the federal government from blocking access to the federal funds to which it is entitled,” he said.

Early in the pandemic, Congress set aside $100 billion to reimburse health care providers for pandemic expenses and losses, according to the complaint.

Health care providers could use the funds to offset health care related expenses or lost revenues due to the pandemic but they could not use the funds as reimbursement for expenses or losses that could be recouped from other financial sources, according to the complaint.

St. Mary’s received nine of those pandemic relief payments, according to its complaint. There were mandatory reporting requirements hospitals had to comply with to prove that those funds were being used as Congress had intended and St. Mary’s forgot to file reports for the last two relief fund payments it received.

In the first three phases of funding distribution, the hospital system received seven payments worth a total of $16 million, according to the complaint. St. Mary’s sufficiently proved that its losses related to the pandemic was higher than the reimbursement it received through Congress’ aid. The hospital system lost more than $32 million in 2020.

St. Mary’s then received two more payments in the fourth phase of funding distributions for a total of more than $5.6 million, according to the complaint. Those funds combined with previously received funds still did not exceed all of St. Mary’s pandemic losses.

However, the hospital system did not timely file a mandated report on those funds because of “a change in personnel causing internal miscommunications…”

It disclosed the reporting oversight to the federal government, along with proof that the hospital system had properly used the funds, according to the complaint. Over the course of several months, hospital staff and DHHS staff communicated with each other about the matter.

DHHS had apparently been satisfied with the proof the hospital system provided after the fact and ultimately reported to St. Mary’s that the issue had been “satisfactorily resolved,” according to the complaint.

“St. Mary’s thus understood that any potential procedural noncompliance relating to timely submissions of the (pandemic relief funds) reports had been addressed,” the complaint reads.

Several months later DHHS staff notified St. Mary’s that it would need to refund those two pandemic relief payments because it did not file those reports timely enough and pay millions of dollars in interest and penalties, according to the complaint.

The U.S. Department of Treasury started withholding funds for health care services, including Medicare payments, to the hospital to offset the debt, according to the complaint. Because the hospital system gets roughly half of its typical revenue from Medicare and Medicare Advantage, its financial situation is declining.

“The community that St. Mary’s serves is at dire risk of losing this critical institution,” the complaint reads.

St. Mary’s argues that the federal government’s position “violates the statutory text, in addition to defying common sense,” the complaint reads. Congress set aside the funds for hospitals that were financially harmed by the pandemic and, as proven in previous pandemic relief payment reports, St. Mary’s is entitled to the funds as it suffered financial loss.

“St. Mary’s needs to receive the Medicare payments it is owed to sustain its operations without disruption,” the complaint reads. “The Lewiston/Auburn community depends on the viability of St. Mary’s critical health care services.”