Ascension Borgess Hosp. v. Becerra

Decision Date30 August 2021
Docket NumberCivil Action No. 20-139 (BAH)
Citation557 F.Supp.3d 122
Parties ASCENSION BORGESS HOSPITAL, et al., Plaintiffs, v. Xavier BECERRA, Secretary of Health and Human Services, Defendant.
CourtU.S. District Court — District of Columbia

Andrew B. Howk and N. Kent Smith, HALL, RENDER, KILLIAN, HEATH & LYMAN, P.C., attorneys for Plaintiffs.

Derek S. Hammond, Assistant United States Attorney, Assistant United States Attorney, United States Attorney's Office for the District of Columbia, and Jonathan C. Brumer, U.S. Department of Health and Human Services, Office of the General Counsel, for the Defendant Xavier Becerra, Secretary of Health and Human Services.


BERYL A. HOWELL, Chief Judge

Pending before the Court are cross-motions for summary judgment regarding the dismissal of claims asserted by forty-eight plaintiff hospitals before the U.S. Department of Health and Human Services("HHS") Provider Reimbursement Review Board ("PRRB") for lack of jurisdiction. Plaintiffs challenged their reimbursement from HHS for serving a disproportionate share of low-income patients, arguing before the PRRB that the use of an undisclosed audit protocol to estimate the relevant factors and determine the amounts of reimbursements was improper because the protocol is a substantive rule that HHS failed to properly promulgate through notice-and-comment rulemaking. The PRRB dismissed for lack of jurisdiction, on the ground that, pursuant to a statutory bar on administrative and judicial review codified at 42 U.S.C. § 1395ww(r)(3), challenges to the methodology used in calculating the disproportionate share payments are precluded regardless of whether the challenge is characterized as procedural or substantive.

In this appeal of the PRRB rulings, plaintiffs contend that notice-and-comment challenges fall outside the scope of the statutory preclusion provision and that the relevant audit protocols are ultra vires. Plaintiffs’ attempts to evade the statutory bar on administrative or judicial review are foreclosed, however, by binding precent. For the reasons set forth below, HHS's motion for summary judgment is granted, and plaintiffsmotion for summary judgment is denied.


Resolving the instant motions requires navigating the "labyrinthine world" of Medicare reimbursements. See Adirondack Med. Ctr. v. Sebelius , 740 F.3d 692, 694 (D.C. Cir. 2014). The background of this case is described below, including a description of the relevant portions of the Medicare Act, the key regulations and rulemakings, and the factual and procedural background underlying the challenged agency action.

A. Statutory Background

The Medicare program was established by Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq. , to pay for health-care services furnished to eligible beneficiaries, who are generally individuals over the age of sixty-five or individuals with disabilities. See id. § 1395c. A sub-agency of HHS, the Centers for Medicare and Medicaid Services ("CMS") administers Medicare, id. § 1395kk, and, among other responsibilities, pays hospitals for providing inpatient hospital services, id. § 1395ww(d).

The dispute between the parties here is narrow, but requires some background on the key statutory provision, 42 U.S.C. § 1395ww(r). Section 1395ww governs payments to hospitals for inpatient hospital services, and § 1395ww(d)(5)(F) directs HHS to make supplementary payments to certain hospitals that serve a disproportionate number of low-income patients (known as Disproportionate Share Hospitals or "DSHs"). Id. § 1395ww(d)(5)(F) ; see also Fla. Health Scis. Ctr., Inc. v. Sec'y of Health & Human Servs. ("Florida Health II "), 830 F.3d 515, 517 (D.C. Cir. 2016). Historically, DSH payments were calculated "based on the number of days per year that the hospital served Medicaid and low-income Medicare patients," Florida Health II , 830 F.3d at 517. The Patient Protection and Affordable Care Act ("ACA"), Pub. L. No. 111–148, enacted in 2010, revised the DSH payment criteria and limited administrative and judicial review of the Secretary of Health and Human Services’ ("Secretary") application of those criteria. ACA § 3133, codified at 42 U.S.C. § 1395ww(r) ; see also Florida Health II , 830 F.3d at 517.

The amended DSH criteria, which became effective in fiscal year ("FY") 2014, create two payments: An "empirically justified" payment equal to twenty-five percent of the amount due to a hospital based on the pre-ACA formula, 42 U.S.C. § 1395ww(r)(1), and an "additional payment" for uncompensated care based on a hospital's estimated proportional share of the uncompensated care of all DSHs, id. § 1395ww(r)(2). This additional payment is calculated by multiplying three factors: (a) seventy-five percent of the Secretary's estimate of the upcoming fiscal year's DSH payments nationwide based on the pre-ACA formula; (b) an estimate of the decline in the national uninsured rate for the fiscal year as compared to 2013; and (c) an estimate of each qualifying hospital's proportional share of the total nationwide amount of uncompensated care. Id. § 1395ww(r)(2)(A)(C). Paragraph 3 of § 1395ww(r) —the Preclusion Provision—limits review as follows:

There shall be no administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or otherwise of the following:
(A) Any estimate of the Secretary for purposes of determining the factors described in paragraph (2);
(B) Any period selected by the Secretary for such purposes.

42 U.S.C. § 1395ww(r)(3).

Paragraphs (2)(c) and (3) of § 1395ww(r) are implicated in this suit. Plaintiffs challenge the auditing procedure used by the Secretary in calculating Factor Three of their uncompensated care payments, see 42 U.S.C. § 1395ww(r)(2)(C), and HHS argues that such a challenge is foreclosed by the Preclusion Provision.

B. Regulatory Background

To implement the mandates of § 1395ww(r), HHS employs a data collection tool known as "Worksheet S-10," which is a component of the Medicare cost report submitted annually to HHS by hospitals. FY 2020 Final Rule, 84 Fed. Reg. 42,044, 42,359, 42,364 –68 (Aug. 16, 2019). In Worksheet S-10, hospitals provide data on the volume and value of uncompensated care provided to low-income patients, and Worksheet S-10 is "the only national data source that includes data for all Medicare hospitals." FY 2014 Final Rule, 78 Fed. Reg. 50,496, 50,635 (Aug. 19, 2013). Until recently, "most of the data elements reported on Worksheet S-10" were "unused for payment purposes." Id. Medicare Administrative Contractors ("MACs") are hired by HHS to carry out "certain auditing and payment functions for" the agency, including managing payments for inpatient services and, relevant here, auditing hospitals’ Worksheet S-10 submissions. Def.’s Mem. Supp. Mot. Dismiss & Mot. Summ. J. ("Def.’s Mem.") at 3, ECF No. 24-2 (citing 42 U.S.C. §§ 1395h, 1395x(u), 1395kk-1 ).

Each year since 2013, HHS has proposed and adopted the methodology for calculating the estimates underlying the following year's uncompensated care through rulemaking. See generally, e.g. , 84 Fed. Reg. 42,044 ; 78 Fed. Reg. 50,496. Although HHS has long used Worksheet S-10 to collect uncompensated care data from hospitals, the agency used other proxy data to calculate Factor 3 in the DSH rulemaking process through FY 2017 because of concerns "that hospitals [had] not had enough time to learn how to submit accurate and consistent data through this reporting mechanism." 78 Fed. Reg. at 50,635 ; see also Def.’s Mem. at 7 ("HHS ultimately decided ... not to [base payments on Worksheet S-10 data] in connection with the FYs 2014, 2015, 2016, and 2017 because of concerns about: the accuracy, consistency, and completeness of the data reported in Worksheet S-10."). Throughout this period, however, HHS indicated that it intended use Worksheet S-10 data to calculate uncompensated care payments in the future. See, e.g., 78 Fed. Reg. at 50,635 ("[W]e stated in the proposed rule that we may proceed with a proposal to use data on the Worksheet S-10 to determine uncompensated care costs in the future, once hospitals are submitting accurate and consistent data through this reporting mechanism."); FY 2017 Final Rule, 81 Fed. Reg. 56,762, 56,773 (Aug. 22, 2016) ("In light of public comments, we believe it would be appropriate to institute certain additional quality control and data improvement measures to the Worksheet S-10 instructions and data prior to moving forward with incorporation of Worksheet S-10 data into the calculation of Factor 3.... We expect data from the revised Worksheet S-10 to be available to use in the calculation of Factor 3 in the near future, and no later than FY 2021.").

After years of proposing to use Worksheet S-10 data, and "[l]ong after the S-10 audits were completed," Pls.’ Mem. Supp. Cross-Mot. Summ. J. & Opp'n Def.’s Mot. Dismiss & Mot. Summ. J. ("Pls.’ Opp'n") at 6, ECF No. 30, HHS announced via notice-and-comment rulemaking that its FY 2020 estimates of Factor 3—the proportions of hospitals’ uncompensated care—would be based on the data provided in Worksheet S-10 for FY 2015. 84 Fed. Reg. at 42,048. HHS justified its decision to use FY 2015 data from Worksheet S-10, in part, because "this was the most recent year of data that [it] had broadly allowed to be resubmitted by hospitals." Id. at 42,364. Since "it was not feasible to audit all hospitals," id. at 42,365, the decision of which hospitals to audit was "based on a risk-based assessment process," id. , resulting in a selection of hospitals for audit whose combined uncompensated care payments "represented approximately half of the proposed total uncompensated care payments for FY 2020," id. at 42,364.

C. Factual & Procedural Background

Plaintiffs are forty-eight hospitals eligible to receive uncompensated care payments under 42 U.S.C. § 1395ww(r). Consolidated Compl. ("Compl.") ¶ 14, ECF No. 21.1 Each hospital had its Worksheet S-10 ...

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    ...its judgment for that of the agency" when reviewing agency decisions under this standard, Ascension Borgess Hosp. v. Becerra , No. 20-cv-139 (BAH), 557 F.Supp.3d 122, 127–28, (D.D.C. Aug. 30, 2021) (quoting Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co. , 463 U.S. 29, 43, 103 S......
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    ...the factors, which means that a challenge to that audited data is precluded from review. Accord Ascension Borgess Hosp. v. Becerra, 557 F.Supp.3d 122, 132 (D.D.C. 2021) (“The challenged audit procedures are part of the methodology behind the Factor 3 estimate because the data being audited ......

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