545 F.Supp.2d 20 (D.D.C. 2008), 06-1263, Baystate Medical Center v. Leavitt

Docket Nº:Civil Action No. 06-1263 (JDB).
Citation:545 F.Supp.2d 20
Party Name:BAYSTATE MEDICAL CENTER, Plaintiff, v. Michael O. LEAVITT, Secretary, United States Department of Health and Human Services, et al., Defendants.
Case Date:March 31, 2008
Court:United States District Courts, District of Columbia
 
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545 F.Supp.2d 20 (D.D.C. 2008)

BAYSTATE MEDICAL CENTER, Plaintiff,

v.

Michael O. LEAVITT, Secretary, United States Department of Health and Human Services, et al., Defendants.

Civil Action No. 06-1263 (JDB).

United States District Court, District of Columbia.

March 31, 2008

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Christopher L. Keough, John Martin Faust, Stephanie Ann Webster, Vinson & Elkins, L.L.P., Washington, DC, for Plaintiff.

Brian G. Kennedy, Lisa Ann Olson, U.S. Department of Justice, Washington, DC, for Defendants.

Robert L. Roth, Crowell & Moring LLP, Washington, DC, for Auburn Regional Medical Center.

MEMORANDUM OPINION

JOHN D. BATES, District Judge.

The Secretary of the Department of Health and Human Services, through the Centers for Medicare and Medicaid Services ("CMS"), is responsible for providing payments known as "disproportionate share hospital" adjustments to hospitals that serve a significantly disproportionate share of low income patients, as set forth under the Medicare statute, Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq. Plaintiff Baystate Medical Center ("Baystate") seeks judicial review of the Secretary's final decision concerning the calculation of its adjustments for fiscal years 1993-1996 (Count One) or, in the alternative, seeks production of certain supplemental security income ("SSI") entitlement records from the Social Security Administration that would allegedly affect the amount of its adjustments (Counts Two and Three).

The parties have agreed that Count One against the Secretary should be resolved first because, if resolved in Baystate's favor, it will be dispositive of the case. The parties have filed cross-motions for summary judgment, and a motions hearing was held on February 14, 2008. 1 Plaintiffs

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in Auburn Regional Med. Ctr. v. Leavitt, Civil Action No. 07-2075 (D.D.C. filed Nov. 15, 2007) (collectively, the " Auburn plaintiffs") were allowed to participate in the briefing as amici because they have raised many of the same issues as Baystate. 2 For the reasons explained below, the Court will grant in part and deny in part both Baystate's and the Secretary's motions for summary judgment and remand the case to the Secretary for further proceedings.

BACKGROUND

I. Statutory and Regulatory Background

Through a complex statutory and regulatory regime, the Medicare program reimburses qualifying hospitals for the services they provide to eligible elderly and disabled patients. See generally County of Los Angeles v. Shalala, 192 F.3d 1005, 1008 (D.C.Cir.1999). The "operating costs of inpatient hospital services" are reimbursed under a prospective payment system ("PPS")--that is, based on prospectively determined standardized rates--but subject to hospital-specific adjustments. 42 U.S.C. § 1395ww(d); see generally In re Medicare Reimbursement Litig., 309 F.Supp.2d 89, 92 (D.D.C.2004), aff'd, 414 F.3d 7, 8-9 (D.C.Cir.2005). One such adjustment is the "disproportionate share hospital" ("DSH") adjustment which requires the Secretary to provide an additional payment to each hospital that "serves a significantly disproportionate number of low-income patients." 42 U.S.C. § 1395ww(d)(5)(F)(i)(I). Congress concluded that the additional DSH payment was necessary for hospitals serving a disproportionate share of low-income patients because they have higher costs per case. See H.R.Rep. No. 99-241, at 16-17 (1985), reprinted in 1986 U.S.C.C.A.N. 579, 594-95. Whether a hospital qualifies for the DSH adjustment, and the amount of the adjustment it receives, depends on the "disproportionate patient percentage" determined by the Secretary under a statutory formula. 42 U.S.C. § 1395ww(d)(5)(F)(v)-(vii). This percentage is a "proxy measure for low income." See H.R.Rep. No. 99-241, at 16, reprinted in 1986 U.S.C.C.A.N. at 594.

The disproportionate patient percentage is the sum of two fractions, commonly referred to as the Medicaid fraction (often called the Medicaid Low Income Proxy) and the Medicare fraction (the Medicare Low Income Proxy). 42 U.S.C. § 1395ww(d)(5)(F)(vi); Jewish Hospital, Inc. v. Secretary of Health and Human Servs., 19 F.3d 270, 272 (6th Cir.1994). The Medicaid fraction reflects the number of hospital inpatient days attributable to patients who were eligible for medical assistance under a State Medicaid Plan, but not Medicare Part A. See 42 U.S.C. § 1395ww(d)(5)(F)(vi)(II); In re Medicare Reimbursement Litig., 309 F.Supp.2d at 93. In contrast, the Medicare fraction reflects the number of hospital inpatient days attributable to Medicare Part A patients who are also entitled to Supplemental Security Income ("SSI") benefits at the time of their hospital stays, and thus is

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often referred to as the SSI fraction. See 42 U.S.C. § 1395ww(d)(5)(F)(vi)(I).

The SSI fraction--and issues pertaining to identifying SSI patients--lies at the heart of this case. The DSH provision defines the SSI fraction as:

the fraction (expressed as a percentage), the numerator of which is the number of such hospital's patient days for such period which were made up of patients who (for such days) were entitled to benefits under part A of this subchapter and were entitled to supplemental security income benefits (excluding any State supplementation) under subchapter XVI of this chapter, and the denominator of which is the number of such hospital's patient days for such fiscal year which were made up of patients who (for such days) were entitled to benefits under part A of this subchapter.

Id. § 1395ww(d)(5)(F)(vi)(I) (hereinafter, "DSH provision" or "subparagraph (d)(5)(F)(vi)"). In other words, calculation of the numerator and denominator each require tallying the number of patient days for patients entitled to benefits under Part A of the Medicare Act; the numerator differs from the denominator in that it captures an additional restriction--the Medicare patients in the numerator must also be entitled to SSI benefits at the time of their hospital stays. See 51 Fed.Reg. 16772, 16777 (May 6, 1986) (DSH interim final rule). 3 Thus, the greater the number of patient days involving SSI beneficiaries, the greater the hospital's DSH adjustment.

The SSI program is a federal assistance program for low-income individuals who are aged, blind, or disabled. 42 U.S.C. § 1382. The SSI program is administered by the Social Security Administration ("SSA"). Id. § 1381a. Hence, calculation of the numerator of the SSI fraction requires use of SSA data, in addition to the Medicare inpatient data compiled by CMS.

The Health Care Financing Administration--the predecessor to CMS--announced soon after enactment of the DSH provision that the Secretary, rather than the hospitals, would be solely responsible for computation of the SSI fraction in light of the voluminous data and involvement of another agency. 51 Fed.Reg. 31454, 31459 (Sept. 3, 1986) (DSH final rule). HCFA noted that, as of 1986, the data sources for the computation of the SSI fraction included approximately 11 million billing records from the Medicare inpatient discharge file, and over 5 million records from the SSI file compiled by the SSA. Id. Computation of the SSI fraction would require matching individual Medicare billing records to individual SSI records. Id. Considering the administrative burdens and complexity of the match process, HCFA concluded that it would be solely responsible for the match process, which it would conduct retrospectively for every eligible Medicare hospital on a "fiscal year" basis--that is, based on discharges occurring in the federal fiscal year ending each September 30. Id. at 31459-60; 42 C.F.R. § 412.106(b). 4 HCFA recognized that the statute provided

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for the match process to be based on a hospital's "cost reporting period" (rather than the fiscal year); thus, HCFA also provided each hospital the option of having its SSI fraction computed based on its own cost reporting period notwithstanding the belief that the two different periods would yield "reasonably close" percentages. 5 51 Fed.Reg. at 16777; 42 C.F.R. § 412.106(b).

The data underlying the match process is drawn from (1) the Medicare Provider Analysis and Review File ("MEDPAR"), which is also referred to as the Medicare Part A Tape Bill ("PATBILL"), and (2) an SSI eligibility file that the SSA transmits annually to CMS. 6 52 Fed.Reg. 33143, 33144 (Sept. 1, 1987); 51 Fed.Reg. at 16777. The SSI fraction is thus determined by computing the number of patient days of those patients entitled to both Medicare Part A and SSI as indicated by matching CMS's MEDPAR file and the SSA's SSI eligibility file. 51 Fed.Reg. at 16777.

Medicare payments are initially determined by a "fiscal intermediary"--typically an insurance company that acts as the Secretary's agent for purposes of reimbursing health care providers. See 42 C.F.R. §§ 421.1, 421.3, 421.100-.128. A fiscal intermediary is required by regulation to apply the SSI fraction computed by CMS. See id. § 412.106(b)(2) and (b)(5). In contrast, the intermediary (rather than CMS) calculates the Medicaid fraction based on annual cost reporting data submitted by the provider. Id. §§ 412.106(b)(4), 413.20. The fiscal intermediary then determines the total amount of DSH reimbursement due the provider, which it sets forth in a Notice of Program Reimbursement ("NPR"). Id. § 405.1803.

A provider dissatisfied with the amount of the award is entitled to request a hearing before the Provider Reimbursement Review Board ("PRRB" or "Board"), an administrative body composed of five members appointed by the Secretary who must be "knowledgeable in the field of payment of providers of services." 42 U.S.C. § 1395 oo(a), (h). The Board has the authority to affirm, modify, or reverse the final determination of the intermediary "even though such matters were not considered by the intermediary in making such final determination," and the Secretary may then reverse,...

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