Mount Nittany Medical Center sues federal government over loss of Medicare designation
Mount Nittany Medical Center sued top federal health officials Friday after the hospital was stripped of a special Medicare status, a move it said could cost an estimated $9 million a year and jeopardize its ability to invest in critical services.
Mount Nittany’s sweeping lawsuit challenged the revocation of its sole community hospital designation in the wake of the July 2024 opening of Penn Highlands State College.
“This substantial reduction of Medicare funding will make it significantly more challenging for Mount Nittany to provide the same types and levels of services that it currently makes available to Medicare and other patients in the Centre County community,” the hospital’s attorneys wrote in the lawsuit. “It will also make it substantially more difficult for Mount Nittany to invest in its service offerings and capabilities and follow through on planned expansions of services in areas identified as critical needs for the Centre County community.”
The U.S. Department of Health and Human Services, its Secretary Robert Kennedy Jr., the Centers for Medicare & Medicaid Services and its Administrator Dr. Mehmet Oz were listed as defendants. Neither agency immediately responded Monday when contacted by the Centre Daily Times.
According to Mount Nittany’s 2024 tax return, the hospital made $61.2 million profit. A roughly $9 million loss would have accounted for nearly 15%.
In a written statement, a health system spokesperson cast the federal government’s decision as baseless and said protecting access to healthcare services remains its highest priority.
“This decision eliminates millions of dollars of critical Medicare funding that supported Mount Nittany Medical Center’s role as the community’s indispensable provider of inpatient and outpatient care to the Medicare eligible population and preserved access to essential healthcare services for the community we serve,” the health system said.
“... Our focus remains unchanged: preserving our independence as a community-governed health system, providing exceptional care, and serving the community we have proudly supported for more than 120 years.”
Mount Nittany, a 260-bed facility located just outside State College, had been designated a sole community hospital since 2017. The intent of the program is to ensure geographically isolated hospitals receive greater reimbursement for care provided to Medicare beneficiaries.
In order for hospitals to qualify, the government looks at criteria such as distance from a similar hospital and percentage of inpatient admissions in a service area. That changed when Penn Highlands opened about four miles away.
The government deemed the much smaller Penn Highlands a “like hospital” and canceled Mount Nittany’s designation effective April 1. In its lawsuit, Mount Nittany said the change has and will continue to cause “immediate and substantial harm.”
The filing made clear that Mount Nittany fought hard to retain its status as a sole community hospital. A representative reached out to a Medicare administrative contractor two months after Penn Highlands opened to seek clarification about the designation.
The lawsuit also detailed hundreds of pages of written submissions to the government and meetings that featured four of the hospital’s C-suite executives, including President and CEO Kathleen Rhine.
Mount Nittany argued the government improperly inflated the data of Penn Highlands State College by combining it with the larger and farther away Penn Highlands Huntingdon. By its calculations, Penn Highlands State College accounts for only 5.5% of Mount Nittany’s volume — falling short of a key 8% threshold.
The hospital further argued Penn Highlands is not a “like hospital” in a clinical sense. Mount Nittany was designated a Level IV trauma center in January and has more than 60 specialties. In contrast, it said Penn Highlands offers far fewer specialized services save for a 10-bed emergency department.
The meetings and letters to the government proved unsuccessful, prompting the seven-count lawsuit. Mount Nittany asked for its sole community hospital designation to be reinstated fully, or at least temporarily pending the administrative appeals process.
The lawsuit comes as the nonprofit health system is negotiating a new collective bargaining agreement with the union that represents about 950 workers at the hospital. Negotiations began in late April and the contract is set to expire July 1.
The union told the CDT on Monday it does not agree with the approach of President Donald Trump’s administration. Workers also called on Mount Nittany to invest in its workforce, citing the high cost of living in Centre County and the health system’s profits and expansions.
“If they came to Centre County, they would see that Mount Nittany is the sole provider for tens of thousands of patients in this community. Delivering babies, receiving dialysis, treating cancer — everyone knows Mount Nittany is where you come to receive vital care,” Mount Nittany Workers United said in a written statement. “We are calling on elected officials to reverse this decision, so our community can continue to get the funding we know is right.”
A 10-floor, $350 million patient tower at Mount Nittany Medical Center is on track to open at the end of the year, one of several recent expansions for the health system. Mount Nittany Health also opened a $90 million, 125,000-square-foot outpatient center near Toftrees in September 2024, its first walk-in clinic opened in May 2024 at 2051 S. Atherton St. and recently announced plans for a new dermatology facility.