Am. Hosp. Ass'n v. Price

• Decision Date: 11 August 2017
• Docket Number: No. 17-5018,17-5018
• Citation: 867 F.3d 160
• Parties: AMERICAN HOSPITAL ASSOCIATION, et al., Appellees v. Thomas E. PRICE, in His Official Capacity as Secretary of Health and Human Services, Appellant
• Court: U.S. Court of Appeals — District of Columbia Circuit

867 F.3d 160

AMERICAN HOSPITAL ASSOCIATION, et al., Appellees

v.Thomas E. PRICE, in His Official Capacity as Secretary of Health and Human Services, Appellant

No. 17-5018

United States Court of Appeals, District of Columbia Circuit.

Argued May 15, 2017

Decided August 11, 2017

Joshua M. Salzman, Attorney, U.S. Department of Justice, argued the cause for appellant. With him on the briefs were Mark B. Stern, Attorney, Janice L. Hoffman, Associate General Counsel, U.S. Department of Health & Human Services, and Susan Maxson Lyons, Deputy Associate General Counsel.

Catherine E. Stetson argued the cause for appellees. With her on the brief was Morgan L. Goodspeed. Adam K. Levin entered an appearance.

Ronald S. Connelly was on the brief for amicus curiae Fund for Access to Inpatient Rehabilitation in support of appellees.

Before: Garland, Chief Judge, and Henderson and Wilkins, Circuit Judges.

Wilkins, Circuit Judge:

Ought implies can .¹ That is, in order for law—man-made or otherwise—to command the performance of an act, that act must be possible to perform. This lofty philosophical maxim, ordinarily relevant only to bright-eyed college freshmen, sums up our reasoning in this case.

Congress established an administrative appeals process for denied Medicare reimbursement claims, and directed the U.S. Department of Health and Human Services ("HHS") to complete that process within a specified timeframe. Buried under an ever-growing backlog of over a half-million appeals, HHS failed—and continues to fail—to comply with the statutorily mandated deadlines. Consequently, the American Hospital Association and three healthcare providers (together, "Healthcare Providers") sought a mandamus order to force the HHS Secretary to clear the backlog and adhere to the statute's timeframe. The District Court, in turn, thoughtfully and scrupulously weighed the equities, concluding that the scales tipped in favor of mandamus.

The District Court was then confronted with the unenviable task of defining the scope and substance of the mandamus order. In an effort to minimize the judiciary's intrusion on the political branches' prerogatives, the Court adopted an ends-oriented approach of setting targets for HHS to hit, leaving to the Secretary the choice of means for hitting those targets. But what were the appropriate targets to set? The Healthcare Providers proposed an ambitious four-year timetable. The Secretary criticized that timetable as impossible to achieve lawfully and potentially counterproductive, but offered no alternative. Lacking a competing proposal, the District Court adopted the timetable suggested by the Healthcare Providers. In doing so, however, the Court declined to seriously grapple with the Secretary's assertion that lawful compliance with such a mandamus order would be impossible . That is, the Court commanded the Secretary to perform an act—clear the backlog by certain deadlines—without evaluating whether performance was possible . We conclude that, notwithstanding the District Court's earnest efforts to make do with what the parties presented, the failure to seriously test the Secretary's assertion of impossibility and to make a concomitant finding of possibility was an abuse of discretion. The Court declared that a party ought without regard for whether the party can .

I.

A.

"Medicare provides federally funded health insurance to disabled persons and those aged 65 or older ...." Council for Urological Interests v. Burwell , 790 F.3d 212, 215 (D.C. Cir. 2015) (discussing 42 U.S.C. §§ 1395 et seq. ). After a healthcare provider (e.g. , a hospital) performs a service it believes is covered by Medicare, it submits a claim for reimbursement to the Centers for Medicare and Medicaid Services, an agency within HHS. 42 U.S.C. §§ 1395ff(a)(1)-(2), 1395kk-1(a) ; 42 C.F.R. §§ 405.904(a)(2), 405.920 - 405.928. When a provider is denied reimbursement, or is otherwise "dissatisfied" with the initial determination, it is entitled to a four-level administrative appeals process, followed by judicial review. See generally 42 U.S.C. § 1395ff. We previously described the process in greater detail. See Am. Hosp. Ass'n v. Burwell , 812 F.3d 183, 185-87 (D.C. Cir. 2016) (hereinafter, " AHA I ").

From start to finish, the administrative appeals process is designed to take less than one year. To keep things moving, the statute sets specific time frames for each of the four levels of the process: sixty days for the first level, 42 U.S.C. § 1395ff(a)(3)(C)(ii) ; another sixty days for the second level, id. § 1395ff(c)(3)(C)(i) ; ninety days for the third level, id. § 1395ff(d)(1)(A) ; and another ninety days for the fourth level, id. § 1395ff(d)(2)(A). "For years, the administrative appeal process functioned largely as anticipated, with its various stages typically completed within the statutory time frames." AHA I , 812 F.3d at 186 (citing Am. Hosp. Ass'n v. Burwell , 76 F.Supp.3d 43, 46 (D.D.C. 2014) ).

But starting in fiscal year 2011, an unexpected and dramatic uptick in appeals produced a jam in the process. The uptick was attributable to multiple causes, including "a large increase in the number of new beneficiaries as members of the ‘baby boom’ generation began to reach 65 and become eligible for Medicare," and "a growing sense, among at least some members of the provider community, that it is a good business practice to appeal every denied claim." Decl. of Ellen Murray, Chief Fin. Officer of the Dep't of Health and Human Servs., J.A. 91-92. Furthermore, as we stressed in our previous decision, much of the increased workload can be traced back to the congressionally mandated Medicare Recovery Audit Program. AHA I , 812 F.3d at 186-87. Under that program, recovery audit contractors ("RACs") would review reimbursement claims that have already been paid, "identify[ ] underpayments and overpayments," and "recoup [ ] overpayments." 42 U.S.C. § 1395ddd(h)(1). When a RAC flags an overpayment, the healthcare provider could either repay the difference or appeal the RAC's decision through the four-level administrative appeals process, as though the claim were denied at the outset. Id. § 1395ddd(f)(2)(A). Instead of repaying the difference, many providers elected to avail themselves of the administrative process. After the program was implemented, "the number of appeals filed ballooned from 59,600 in fiscal year 2011 to more than 384,000 in fiscal year 2013." AHA I , 812 F.3d at 187.

As those appeals moved through the process, they piled up at the third level, where an administrative law judge ("ALJ") reviews the matter de novo . Instead of waiting in line, providers stuck at the ALJ level may skip to the next, through a process called "escalation." 42 U.S.C. § 1395ff(d)(3). But that choice comes at a cost: the provider must forfeit certain procedural rights, such as a hearing before an independent ALJ. Id. § 1395ff(d)(1), (2). Many claimants, therefore, have been reluctant to "escalate" their appeals, and the ALJ backlog continues to grow. As of June 2, 2017, there was a backlog of 607,402 appeals awaiting review at this level. Status Report of Def. Thomas Price at 2, No. 14-cv-851 (June 5, 2017), ECF No. 56. On its current course, the backlog is projected to grow to 950,520 by the end of fiscal year 2021, id. , and "some already-filed claims could take a decade or more to resolve," AHA I , 812 F.3d at 187. This is, of course, far outside the ninety-day timeframe set by statute. 42 U.S.C. § 1395ff(d)(1)(A).

B.

In 2014, the Healthcare Providers filed suit seeking a mandamus order to compel the HHS Secretary to clear the backlog and comply with the ninety-day statutory timeframe for ALJ hearings.

The Healthcare Providers moved for summary judgment, and the Secretary simultaneously moved to dismiss for lack of subject-matter jurisdiction. Am. Hosp. Assoc. v. Burwell , 76 F.Supp.3d 43, 45 (D.D.C. 2014). The District Court first grappled with whether it faced a jurisdictional question—i.e. , whether, pursuant to 28 U.S.C. § 1361, the threshold mandamus requirements were met, United States v. Monzel , 641 F.3d 528, 534 (D.C. Cir. 2011) —or a merits question—i.e. , whether mandamus would be equitable, Telecomms. Research & Action Ctr. v. FCC , 750 F.2d 70, 80 (D.C. Cir. 1984). The Court concluded that the jurisdictional and equitable merits inquiries were one and the same ("merged"), and so resolved the summary judgment and dismissal motions together. Am. Hosp. Assoc. , 76 F.Supp.3d at 49-50. Based on this merged analysis, the District Court granted the Secretary's motion to dismiss, reasoning that "HHS's budgetary constraints, its competing priorities, and its incipient efforts to resolve the issue together dictate that mandamus is not warranted." Id. at 56. "Congress," furthermore, was "aware of the situation and [was] in a position to address the problem." Id.

On appeal, we reversed the District Court's dismissal. AHA I , 812 F.3d at 194. We first clarified that "the distinction between the jurisdictional inquiry and the equitable merits inquiry matters, especially because it affects our standard of review." Id. at 190. As for the jurisdictional inquiry, we held that the Healthcare Providers "ha[d] demonstrated that the threshold requirements for mandamus jurisdiction [were] met." Id. at 192. We then left the equitable merits inquiry to the District Court to consider but, in an effort to help guide the Court's "difficult decision," we "set out the factors that weigh most strongly for and against mandamus in this case." Id. Counseling for mandamus, we highlighted the backlog's real impact on human health and welfare, and, "critically to our thinking," the Secretary's substantial discretion over the RAC program, which contributed significantly to the backlog. Id. at 193. Counseling against mandamus, we highlighted the risk of "infringing on the authority and discretion of the executive branch;" the legislative branch's awareness of the problem and its capacity to...