Ashtabula County Medical Center v. Thompson, No. 1:00CV1895.

• Citation: 191 F.Supp.2d 884
• Decision Date: 08 February 2002
• Docket Number: No. 1:00CV1895.
• Parties: ASHTABULA COUNTY MEDICAL CENTER, Plaintiff, v. Tommy G. THOMPSON, Secretary of Health and Human Services, Defendant.
• Court: U.S. District Court — Northern District of Ohio

191 F.Supp.2d 884

ASHTABULA COUNTY MEDICAL CENTER, Plaintiff, v. Tommy G. THOMPSON, Secretary of Health and Human Services, Defendant.

No. 1:00CV1895.

United States District Court, N.D. Ohio, Eastern Division.

February 8, 2002.

David M Levine, Benesch, Friedlander, Coplan & Aronoff, Cleveland, for Ashtabula County Medical Center, Plaintiffs.

Michael Anne Johnson, Office of the United States Attorney, Northern District of Ohio, Cleveland, for Donna Shalala, Defendants.

MEMORANDUM AND ORDER

ALDRICH, District Judge.

The plaintiff, Ashtabula County Medical Center ("ACMC"), brought this action against the Secretary of Health and Human Services, Tommy G. Thompson ("the Secretary"),¹ seeking judicial review, under 42 U.S.C. § 1395oo(f) and 42 C.F.R. § 405.1877(f), of a final administrative agency decision by the Provider Reimbursement Review Board ("PRRB" or "Board") denying ACMC's request to be classified as a "new provider" under 42 C.F.R. § 413.30(e)² ("the new provider rule"). Now before the Court are the parties' dueling motions for summary judgment (Doc. # 8, 11). For the following reasons, this Court grants ACMC's motion (Doc. # 8) and denies Thompson's motion (Doc. # 11).

I. Background

The facts in this case are uncontested. Both parties stipulated to the relevant facts in a hearing before the Board, and the Court agrees with the parties that there is no dispute as to any material factual issues. ACMC is a hospital located in Ashtabula, Ohio. In May, 1995, ACMC entered into an "Agreement for Purchase of the Right to Operate Nursing Home Beds" with the County Commissioners of Ashtabula County, the owners of the Ashtabula County Home ("ACH"), under which ACMC acquired the right, title, and interest to fifteen of ACH's 310 beds at a price of $7500 per bed. ACMC and ACH are separate and unrelated health care institutions, and ACMC acquired no other assets from ACH. Under Ohio law, which has imposed a moratorium on nursing facility beds in the state of Ohio, ACMC was required to purchase existing beds from another provider and apply for a certificate of need ("CON") before commencing operations. It applied in June 1995 for a CON granting it authority to acquire, relocate, and place into service fifteen long-term care beds on its premises, and the application was granted in October 1995. ACMC, which had not operated as a nursing facility or a skilled nursing facility ("SNF") previously, became Medicare-certified on March 27, 1996. When ACMC began operating its SNF,³ no ACH personnel became ACMC employees or managers. ACH continued to operate as a distinct entity, without any change in its licensure or certification. Furthermore, no ACH residents were transferred to ACMC when ACMC began operating the SNF. Rather, all of the admissions and residents of ACMC's distinct part SNF during the first six months of operation had home addresses within Health Service Area ("HSA") # 10, one of the ten regions into which Ohio is divided for the purposes of administering the CON program. Both ACH and ACMC are located within HSA # 10, about seven miles from one another.

In July 1996, ACMC submitted a request for an exemption under the new provider provision from the routine cost limits ("RCLs") applicable under the Medicare statutes. The new provider provision is an exemption from the statutory caps placed on Medicare reimbursement for health care providers, who, under the Medicare program, are generally reimbursed up to the statutory limit for their reasonable costs in providing necessary health care services. On July 25, 1996, the Health Care Financing Administration ("HCFA")⁴ denied the request. ACMC appealed to the PRRB, which affirmed HCFA's decision. The Board's opinion became the final decision of the Secretary pursuant to 42 U.S.C. § 1395oo(f)(1). ACMC now seeks judicial review of the PRRB's determination that ACMC does not qualify for a new provider exemption to the RCLs.

II. Standard

Pursuant to Federal Rule of Civil Procedure 56(c), summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323-25, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The burden then shifts to the nonmoving party to demonstrate the existence of a material dispute as provided in Rule 56(e):

[a]n adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.

Fed.R.Civ.P. 56(e); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Parties opposing summary judgment must go beyond the pleadings and produce some type of evidentiary material in support of their position. See Celotex, 477 U.S. at 324, 106 S.Ct. 2548.

In determining whether a genuine issue of material fact exists, this Court must view the evidence in a light most favorable to the nonmoving party. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); White v. Turfway Park Racing Assn., 909 F.2d 941, 943-44 (6th Cir.1990). A fact is "material" only if its resolution will affect the outcome of the lawsuit. Anderson, 477 U.S. at 248, 106 S.Ct. 2505. Determination of whether an issue is "genuine" requires consideration of the applicable evidentiary standards. Thus, in most civil cases, the Court must decide whether the evidence is such that "reasonable jurors could find by a preponderance of the evidence that the [nonmoving party] is entitled to a verdict" or whether the evidence is "so one-sided that [the moving party] must prevail as a matter of law." Id. at 252, 106 S.Ct. 2505. Rule 56(c) "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S.Ct. 2548.

The Board's decision must be reviewed under the standard established by the Administrative Procedure Act ("APA"). 42 U.S.C. § 1395oo(f)(1) (1996). Under the APA, agency decisions may only be set aside if they are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" or are "unsupported by substantial evidence in a case ... reviewed on the record of an agency hearing provided by statute." 5 U.S.C. § 706(2)(A), (E); Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 413-15, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971). The Court may consider evidence in the record as a whole, even if not discussed by the agency decisionmaker. Queen City Home Health Care Co. v. Sullivan, 978 F.2d 236, 243 (6th Cir.1992).

An agency's interpretation of the statutes it is entrusted to administer is entitled to great deference. See Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843-44, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984) (finding that "a court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of the agency," but rather should sustain that interpretation as long as it is "a permissible construction of the statute"). In cases where an agency's interpretation of its own regulations is at issue, increased deference is warranted, and the agency's interpretation should be entitled to "controlling weight" unless "plainly erroneous or inconsistent with the regulation." Thomas Jefferson Univ. Hosp. v. Shalala, 512 U.S. 504, 512, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994); see also Auer v. Robbins, 519 U.S. 452, 461, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997). Furthermore, deference is especially warranted where an agency regulation "concerns `a complex and highly technical regulatory program'" such as Medicare. Thomas Jefferson Univ. Hosp., 512 U.S. at 512 (quoting Pauley v. BethEnergy Mines, Inc., 501 U.S. 680, 697, 111 S.Ct. 2524, 115 L.Ed.2d 604 (1991)). Nonetheless, a district court has a duty to review an agency's interpretation of its own regulations, and should reverse an agency determination where "an `alternative reading is compelled by the regulation's plain language or by other indications of the Secretary's intent at the time of the regulation's promulgation.'" Id. (quoting Gardebring v. Jenkins, 485 U.S. 415, 430, 108 S.Ct. 1306, 99 L.Ed.2d 515 (1988)). Finally, Auer deference is not warranted unless the language of the regulation is ambiguous. Christensen v. Harris Cty., 529 U.S. 576, 588, 120 S.Ct. 1655, 146 L.Ed.2d 621 (2000).

III. Analysis

The only real issue in this case is whether ACMC, by virtue of acquiring fifteen beds from ACH to establish a new SNF program, became a new provider for purposes of the new provider exemption, as ACMC contends, or merely effected a change of ownership ("CHOW") of an institution previously existing for over three years, as the Secretary contends.⁵ The Court can only reverse the Board's determination that ACMC is not entitled to the exemption if that conclusion was contrary to the plain meaning of the regulation or was arbitrary, capricious, or unsupported by substantial evidence. A brief survey of the Medicare reimbursement scheme and of the Ohio CON program is appropriate before addressing the discrete question presented.

A. Medicare and the Ohio CON Program

In 1965, Congress enacted the Medicare program, a federally funded and...