Cares Cmty. Health v. U.S. Dep't of Health & Human Servs.

• Citation: 944 F.3d 950
• Decision Date: 20 December 2019
• Docket Number: No. 18-5319,18-5319
• Parties: CARES COMMUNITY HEALTH, Appellant v. UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, et al., Appellees
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

944 F.3d 950

CARES COMMUNITY HEALTH, Appellant

v.UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, et al., Appellees

No. 18-5319

United States Court of Appeals, District of Columbia Circuit.

Argued October 21, 2019

Decided December 20, 2019

James L. Feldesman, Washington, DC, argued the cause for appellant. With him on the briefs were Matthew S. Freedus, Washington, DC, and David A. Bender.

Karen Schoen, Attorney, U.S. Department of Justice, argued the cause for appellees. With her on the brief were Joseph H. Hunt, Assistant Attorney General, and Alisa B. Klein, Attorney.

Before: Tatel, Pillard, and Wilkins, Circuit Judges.

Pillard, Circuit Judge:

A provision of the Medicare statute we call the Not Less Than Provision, 42 U.S.C. § 1395w-27(e)(3)(A), requires that private Medicare insurance plans' reimbursements to a Federally Qualified Health Center (FQHC) for government-subsidized medical services be "not less than" what the insurers pay other healthcare providers not receiving such subsidies. Cares Community Health, an FQHC, claims that the Not Less Than Provision also prevents private Medicare prescription drug plans from reimbursing an FQHC less for dispensing pharmaceuticals than they would reimburse a non-FQHC for dispensing the same drugs. Cares sued the U.S. Department of Health and Human Services (HHS), the HHS Secretary, and the Administrator of the Centers for Medicare and Medicaid Services (CMS), claiming that they unlawfully allowed an insurer offering Medicare prescription drug coverage, Humana Health Plan, Inc., to pay Cares less for drugs that Cares obtains at a discount under a separate federal program known as Section 340B, id . § 256b, than Humana would reimburse a non-FQHC for the same drugs. The district court dismissed Cares' claim, holding that the Medicare statute does not mandate that HHS require Humana to reimburse FQHCs for discounted pharmaceuticals at a rate "not less than" Humana pays other providers for the same drugs. Cares Cmty. Health v. HHS , 346 F. Supp. 3d 121, 129 (D.D.C. 2018) (quoting 42 U.S.C. § 1395w-27(e)(3)(A) ). We affirm.

BACKGROUND

To become an FQHC like Cares under the Medicare program, 42 U.S.C. § 1395x(aa)(4), a health center must provide "primary health services" to "medically underserved" communities, id . § 254b(a), regardless of patients' ability to pay, see id . § 254b(k)(3)(G). FQHCs are a key part of the medical safety net for low-income individuals without health insurance. Recognizing that FQHCs' central role in treating low-income, uninsured patients means that they provide lots of uncompensated care, Congress has provided FQHCs various forms of financial support. See generally Cmty. Health Care Ass'n of N.Y. v. Shah , 770 F.3d 129, 136 (2d Cir. 2014).

The Medicare statute provides one such support through governmental "wraparound" payments. Those payments make up the difference between what private insurers —reimburse FQHCs for providing non-pharmacy outpatient medical services to Medicare beneficiaries and what traditional Medicare would reimburse a provider for the same services, which might be higher. See 42 U.S.C. § 1395l (a)(3)(B). Because insurers might otherwise be tempted to save money at the government's expense by lowering their reimbursements to FQHCs receiving wraparound payments, Medicare's Not Less Than Provision prevents insurers from exploiting the wraparound support by selectively reducing reimbursement rates to FQHCs. See id . § 1395w-27(e)(3)(A).

The Public Health Service Act provides a second support through Section 340B, which requires drug manufacturers participating in Medicaid to offer pharmaceutical discounts to FQHCs and certain other safety-net healthcare providers. See id . § 256b. These drug discounts can produce income for eligible providers insofar as insurers reimburse them at market prices that exceed the 340B-discounted price. Notwithstanding some difference in how these two supports operate, Cares argues that the Medicare statute's protection against insurers' freeloading off the wraparound program also necessarily forbids insurers from lowering their reimbursements to capture for themselves the benefit of Section 340B discounts.

A. The "Not Less Than" Payment Mandate

"The federal Medicare program reimburses medical providers" such as FQHCs "for services they supply to eligible patients" age 65 and older or with disabilities. Ne. Hosp. Corp. v. Sebelius , 657 F.3d 1, 2 (D.C. Cir. 2011). The Medicare statute is divided into five "Parts," lettered A through E, with Parts A through D each corresponding to a separate benefit category under Medicare. Id . Traditional Medicare comprises Part A, which "covers medical services furnished by hospitals and other institutional care providers," and Part B, which covers outpatient care like physician and laboratory services. Id . Congress authorized wraparound payments to FQHCs in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Medicare Modernization Act or MMA), Pub. L. No. 108-173, 117 Stat. 2066, which "established the Medicare Advantage program" in Part C, id . § 201(a), 117 Stat. at 2176 (codified as amended at 42 U.S.C. § 1395w-21 et seq . ), and added prescription drug coverage to Medicare in Part D, id . § 101, 117 Stat. at 2071 (codified as amended at 42 U.S.C. § 1395w-101 et seq . ).

1. Medicare Part C Services and Wraparound Payments

Under Medicare Advantage (Part C), private insurance companies—known as Medicare Advantage organizations—contract with CMS to offer Medicare beneficiaries a similar range of medical coverage to what traditional Medicare funds directly under Parts A and B. See Ne. Hosp. Corp. , 657 F.3d at 2 ; see also MSPA Claims 1, LLC v. Tenet Fla., Inc. , 918 F.3d 1312, 1316 (11th Cir. 2019). CMS pays those insurers (the Medicare Advantage organizations) a fixed amount for each eligible Medicare beneficiary they enroll, and the insurers in turn negotiate agreements with healthcare providers to reimburse them for services they provide to the insurers' enrolled beneficiaries. See Ne. Hosp. Corp. , 657 F.3d at 3. Part C imposes certain requirements on CMS' contracts with insurers, e.g. , 42 U.S.C. § 1395w-27, some of which CMS must require insurers to implement in their agreements with providers, e.g. , id . § 1395w-27(e)(3)(A).

Relevant here, the Medicare Modernization Act includes three interlocking requirements regarding Medicare Advantage organizations' relationship with FQHCs, each of which we give a shorthand name for ease of reference. See MMA § 237(a)-(c), 117 Stat. at 2212-13.

First , the Wraparound Payment Provision, codified in Medicare Part B, authorizes wraparound payments from the Federal Supplementary Medical Insurance Trust Fund, a funder of outpatient services that beneficiaries receive under Part B. 42 U.S.C. § 1395l (a)(3)(B) ; see also Schweiker v. McClure , 456 U.S. 188, 190, 102 S.Ct. 1665, 72 L.Ed.2d 1 (1982). Wraparound payments make up the difference between the reimbursement amount Medicare Part B sets for "[FQHC] services," 42 U.S.C. § 1395k(a)(2)(D)(ii), and what insurers and beneficiaries actually pay FQHCs for those services under Part C. See id . § 1395l (a)(3)(B). That shortfall occurs because insurer and patient payment methodologies under Part C yield payment amounts that do not always match what FQHCs are due under Part B. Id . Wraparound payments thus help to meet FQHCs' costs of providing outpatient medical services. The parties agree that the Wraparound Payment Provision's reference to "[FQHC] services"—a term that Medicare defines as outpatient services provided under Medicare Part B, id . § 1395x(aa)(3) —does not encompass prescription drugs, so wraparound payments top up payments for outpatient services provided by FQHCs, but not their pharmacy services.

Second , the Written Agreement Provision, codified in Part C under the heading "Payment rule for [FQHC] services," helps to implement the Wraparound Payment Provision by specifying which transactions count for wraparound payments as well as when and where the Trust Fund must make such payments. Id . § 1395w-23(a)(4). The Written Agreement Provision requires a wraparound payment "directly" to an FQHC whenever a Medicare beneficiary "who is enrolled with [a Medicare Advantage] plan under [Part C] receives a service from a[n FQHC] that has a written agreement with the [Medicare Advantage] organization that offers such plan for providing such a service." Id .

Third , recognizing that wraparound payments could encourage insurers to reduce their reimbursements to FQHCs because they know the Trust Fund is on the hook for any shortfall, Part C's Not Less Than Provision compels CMS to police insurers' reimbursements to FQHCs. Specifically, it mandates that CMS' contracts with Medicare Advantage organizations require the agreements identified in the Written Agreement Provision to stipulate that payments "to the [FQHC] for services provided by such" FQHC are "not less than the level and amount of payment that the [Medicare Advantage] plan would make for such services if the services had been furnished by" a non-FQHC. Id . § 1395w-27(e)(3)(A). The Not Less Than Provision thereby prevents private insurers participating in Medicare Advantage from reducing their reimbursements in order to save money at the Trust Fund's expense.

Together, the Wraparound Payment and Written Agreement Provisions mandate and spell out implementation of subsidies for FQHCs providing "[FQHC] services" to Medicare Advantage beneficiaries. The Not Less Than Provision is applied through the Written Agreement Provision's "written agreement" to protect the wraparound payment regime's fiscal sustainability. The Written Agreement Provision identifies which transactions are subject to the Not Less Than Provision; if the benefit in question is not covered by the "written agreement described in" the Written Agreement Provision, there is nothing through which the "not less than" mandate...