Alegent Health-Immanuel Med. Ctr. v. Sebelius
Citation | 34 F.Supp.3d 160 |
Decision Date | 31 March 2014 |
Docket Number | Civil Case No. 12–812 (RJL) |
Parties | Alegent Health–Immanuel Medical Center, Plaintiff, v. Kathleen Sebelius, Secretary, Department of Health and Human Services, Defendant. |
Court | U.S. District Court — District of Columbia |
Alegent Health–Immanuel Medical Center, Plaintiff,
v.
Kathleen Sebelius, Secretary, Department of Health and Human Services, Defendant.
Civil Case No. 12–812 (RJL)
United States District Court, District of Columbia.
Signed March 31, 2014
Secretary's motion granted; operator's motion denied.
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Christopher L. Crosswhite, Duane Morris LLP, Washington, DC, for Plaintiff.
Peter C. Pfaffenroth, U.S. Attorney's Office, Washington, DC, for Defendant.
RICHARD J. LEON, United States Magistrate Judge
Plaintiff Alegent Health—Immanuel Medical Center (“Alegent” or “plaintiff”) brought this action against Kathleen Sebelius (“Secretary”), in her official capacity as Secretary of the United States Department of Health and Human Services (“HHS”), pursuant to 42 U.S.C. § 1395 et seq., seeking judicial review of the Secretary's denial of reimbursements for costs associated with offsite medical resident
[34 F.Supp.3d 164]
training during the fiscal years ending on June 30, 2002 and June 30, 2003. See Compl. [Dkt. # 1]. Before the Court are the parties' cross-motions for summary judgment. Upon consideration of the parties' pleadings, relevant law, and the entire record in this case, defendant's Motion for Summary Judgment [Dkt. # 18] is GRANTED and plaintiff's Motion for Summary Judgment [Dkt. # 15] is DENIED.
Pursuant to the Balanced Budget Act of 1997 (“BBA”), the Secretary imposed caps on the number of FTEs a hospital could claim, with some exceptions, using 1996 as the base year. See Pub.L. No. 105–33; 42 U.S.C. § 1395ww(h)(4)(F). The caps limit the number of FTEs for which a hospital can claim DGME/IME reimbursement to the number of FTEs claimed by the hospital for the last cost reporting period ending on or before December 31, 1996.2 See Pub.L. No. 105–33; 42 U.S.C. § 1395ww(h)(4)(F). It goes without saying that the higher the number of FTEs a hospital is able to claim, the larger the amount of potential reimbursement payment it might receive.
The BBA contained certain exemptions to the FTE caps placed on hospitals seeking reimbursement for DGME/IME expenses. For instance, the BBA permitted the Secretary to prescribe rules allowing hospitals that are members of the same “affiliated group”—as defined by the Secretary—to apply their FTE caps on an aggregate basis. See 42 U.S.C. § 1395ww(h)(4)(H)(ii). The BBA also directed the Secretary to prescribe rules for the application of FTE caps to new medical residency training programs established on or after January 1, 1995. See 42 U.S.C. § 1395ww(d)(h)(H)(i).
On August 29, 1997, the Secretary—through CMS—issued regulations implementing the BBA's changes to DGME and IME reimbursements, including the application of FTE caps, in an interim final rule with comment period published in the Federal Register. See 62 Fed.Reg. 45966. The regulations promulgated by the 1997 rule provided that “[h]ospitals that are part of the same affiliated group may elect to apply the [FTE] limit on an aggregate basis.” 3 42 C.F.R. § 413.86(g)(4) (1997). The 1997 rule also provided for adjustments to hospitals' FTE caps for new medical residency programs, to include instances where “a hospital had no residents before January 1, 1995, and it establishe[d] a new medical residency training program on or after that date.” 42 C.F.R. § 413.86(g)(6)(i)(1997).
On May 12, 1998, the Secretary issued a final rule responding to comments received regarding the August 29, 1997 interim final rule and addressing the application of FTE caps. See 63 Fed.Reg. 26318. The regulations in the 1998 final rule allowed the application of FTE caps on an aggregate basis for hospitals in affiliated groups,4 and also continued to provide for
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adjustments to a hospital's FTE caps for new medical residency programs. See 42 C.F.R. § 413.86(g)(4), (6) (1998). In addition, the preamble to the 1998 final rule stated that affiliated groups wishing to apply their FTE caps on an aggregate basis were required to submit a written affiliation agreement 5 to the Secretary and their fiscal intermediaries. See 63 Fed.Reg. at 26338–26339, 26341. In 2002, the Secretary amended 42 G.F.R. § 413.86(b) to include the detailed requirements for affiliation agreements contained in the preamble of the 1998 final rule. See 67 Fed.Reg. 49982, 50069 (Aug. 1, 2002).
B. Factual and Procedural BackgroundAlegent Health—Immanuel Medical Center is a not-for-profit, general acute care hospital located in Omaha, Nebraska. See Administrative Record (“AR”) at 148–149; Compl. at ¶ 6. Alegent is owned and operated by Alegent Health, a non-profit health care system in Southeast Nebraska and Southwest Iowa. See AR at 148–49. Creighton University (“Creighton”) is a private university that is also located in Omaha. See AR at 107. Creighton's medical school, like most medical schools in the United States, sends its third and fourth year medical students to participate in residency training programs in local hospitals in order to gain clinical experience. See Def.'s Mot. Summ. J. at 8, AR at 19.
Prior to July 1998, Creighton's psychiatric residency training program took place at Creighton St. Joseph Regional Healthcare System, LLC (“St.Joseph”). See AR at 19, 149–50, 483, 491. St. Joseph had an FTE cap of 145.39 for IME and 165.45 for DGME, as established by the cost reporting period ending on May 31, 1996. See AR at 19. In 1997, St. Joseph informed Creighton that it would no longer be able to fulfill its responsibilities as the school's training site, causing Creighton to approach plaintiff about becoming the new primary training site for its psychiatric residency training program. See AR at 149, 491.
Because Alegent had not previously participated in any medical residency training program, it had a cap of zero FTEs. See AR at 19. In an effort to raise the number of FTEs plaintiff could claim, and thus raise the potential level of Medicare reimbursement, Alegent and St. Joseph agreed to form an affiliated group. See AR at 19, 149, 491. On June 30, 1998, the parties entered into an academic affiliation agreement (“Agreement”), and plaintiff became the primary site for Creighton's residency training program. See AR at 19–20. By doing so, Alegent and St. Joseph were able to apply the FTE caps on an aggregate basis, thereby allowing Alegent access to a Medicare reimbursement it would otherwise not have been entitled to receive. See id.
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Following an audit of plaintiff s cost reports for its fiscal years ending June 30, 1999 through June 30, 2002, the fiscal intermediary determined that the Agreement satisfied the requirements for establishing an affiliated group for the purpose of applying FTE caps on an aggregate basis. See AR at 20. Furthermore, the intermediary determined that plaintiff's medical residency program was a “new program,” and allowed reimbursement on that basis through June 30, 2001. See id. However, during a subsequent audit of plaintiff's cost report for its fiscal year ending June 30, 2003, the intermediary determined that the Agreement was insufficient under the regulations because it was an academic affiliation agreement rather than an FTE sharing agreement, and thus did not expressly contemplate the application of St. Joseph's FTE caps on an aggregate basis. See id. Following this determination, the fiscal intermediary disallowed all IME and DGME payments claimed by plaintiff pursuant to the Agreement for the fiscal years ending June 30, 2000 through June 30, 2003. See id.
Alegent appealed the intermediary's determination to the PRRB. See AR at 1254–55. Alegent argued that requiring a written affiliation agreement prior to 2002 was contrary to the regulations in place and therefore violated the Administrative Procedure Act (“APA”). See AR at 20–22. It also argued that requiring a written affiliation agreement violated the Paperwork Reduction Act (“PRA”) because HHS did not get Office of Management and Budget (“OMB”) approval before making the request. See AR at 22. Finally, Alegent argued that the Secretary should be estopped from denying it reimbursement because plaintiff relied, to its detriment, on the findings of the fiscal intermediary that Alegent qualified for adjustments to the FTE caps because it qualified a new medical residency program.
The PRRB reversed the intermediary's determination regarding the fiscal years ending on June 30, 2000 and June 30, 2001, but affirmed the intermediary's determination regarding the fiscal years ending on June 20, 2002 and June 30, 2003. See AR at 16–28. The PRRB determined that the Agreement satisfied the requirements for creating an affiliated group for the fiscal years ending on June 30, 2000 and June 30, 2001, allowing Alegent and St. Joseph to apply their FTE caps on an aggregate basis for those cost reporting periods, but that the agreement lapsed without renewal in 2001. See AR at 27. The PRRB determined that there was no valid affiliation agreement in place for fiscal years 2002 and 2003, and thus Alegent and St. Joseph could not aggregate their FTE caps for those periods. See id. The PRRB concluded that the Secretary's actions were “consistent with his authority under the statute and do not constitute a violation of the APA.” Id. It did not, however, reach any conclusions regarding plaintiff's equitable estoppel claim, nor did it expressly address plaintiff's PRA claims. See id.
The CMS Office of Attorney Advisor notified plaintiff and the fiscal intermediary in writing on February 2, 2012 that it would review the PRRB's decision. See AR at 8. However, on March 20, 2012, the Administrator sent plaintiff and the intermediary a second letter informing them that it had declined to review the decision. See AR at 1. By declining to review the PRRB's decision under the circumstances, the Administrator effectively affirmed the PRRB's decision, thereby making it the final decision of the Secretary...
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Alegent Health-Immanuel Med. Ctr. v. Sebelius
...34 F.Supp.3d 160Alegent Health–Immanuel Medical Center, Plaintiffv.Kathleen Sebelius, Secretary, Department of Health and Human Services, Defendant.Civil Case No. 12–812 RJLUnited States District Court, District of Columbia.Signed March 31, 201434 F.Supp.3d 163Christopher L. Crosswhite, Dua......