Mount Nittany Medical Center filed a lawsuit against the federal government on Friday seeking to overturn the cancellation of its status as a sole community hospital, which for the past nine years has provided the College Township facility with millions of dollars a year in higher Medicare reimbursement rates.
The lawsuit contends that Mount Nittany was erroneously stripped of the special Medicare designation in April after the Center for Medicare and Medicaid Services wrongly combined data to determine that Penn Highlands State College, which opened in 2024 as a campus of Penn Highlands Huntingdon, is a “like hospital” in the same geographic area.
The U.S. Department of Health and Human Services, Secretary Robert F. Kennedy Jr., the Center for Medicare and Medicaid Services and its administrator, Mehmet Oz, are named as defendants in the suit, which alleges the agencies used a policy fundamentally at odds with statute and regulations to revoke Mount Nittany’s designation.
Sole community hospitals receive higher rates of Medicare reimbursements and other financial protections. Mount Nittany stands to lose at least $9 million per year in in additional inpatient and outpatient reimbursement from traditional Medicare, as well as several million dollars a year in payments from Medicare Advantage plans, according to the lawsuit
“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,” attorney Siobhan Cole wrote. “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.”
Mount Nittany has held the sole community hospital designation since 2017 because it is 25 to 35 miles from the nearest “like hospital” and accounted for at least 75% of the total inpatient admissions of individuals residing in its service area.
A 260-bed facility, Mount Nittany offers more than 60 medical specialties and other services, most of which it says are not offered at Penn Highlands State College.
Penn Highlands State College advertises 18 inpatient beds, but the lawsuit states that state health department records indicate that as few as six are set up and staffed. Because it has considerably fewer beds, the lawsuit argues, Penn Highlands State College could not total the 8% or more of Mount Nittany’s total inpatient acute care days needed to be considered a like hospital.
But CMS combined Penn Highlands State College’s inpatient days with those of the 71-bed Penn Highlands Huntingdon, which is about 33 miles away, to calculate a total of 23.1% of Mount Nittany’s inpatient days.
That, according to the lawsuit, runs afoul of state and federal law, CMS regulations and the definition of sole community hospital, which is predicated on distance and time from the nearest like hospital.
“[Penn Highlands] State College’s opening did not make [Penn Highlands] Huntingdon’s inpatient capacity and capabilities any more accessible to patients in the Centre County community than before,” Cole wrote.
Combining data for the purposes of the 8% threshold also established a new policy and the government violated the law requiring a 60-day review and comment period for changes to a “substantive legal standard,” according to the filing.
Mount Nittany further claims that its due process rights were violated. The medical center began seeking clarification about its sole community hospital status as early as 2024 and since 2025 provided voluminous materials and communications to its Medicare administrative contractor in an effort to protect its designation.
But in canceling Mount Nittany’s designation, the agencies did not respond to or even acknowledge the hospital’s arguments, according to the lawsuit. Mount Nittany says it had no notice of or opportunity to respond to the grounds on which the designation would be revoked.
Mount Nittany is asking a federal district judge to reinstate its designation as a sole community hospital and vacate the CMS policy as unlawful. If that is not granted, the lawsuit alternatively asks for CMS, through the administrative contractor, to redetermine redetermine whether Penn Highlands State College is a like hospital using data solely for the State College campus and not combined with any other facility.
