Cmty. Health Sys., Inc. v. Burwell

• Citation: 113 F.Supp.3d 197
• Decision Date: 07 July 2015
• Docket Number: Civil Action No. 14–1432 (BAH)
• Parties: Community Health Systems, Inc., et al. Plaintiffs, v. Sylvia Mathews Burwell, Secretary, U.S. Dep't of Health and Human Services Defendant.
• Court: U.S. District Court — District of Columbia

113 F.Supp.3d 197

Community Health Systems, Inc., et al. Plaintiffs,

v.Sylvia Mathews Burwell, Secretary, U.S. Dep't of Health and Human Services Defendant.

Civil Action No. 14–1432 (BAH)

United States District Court, District of Columbia.

Signed July 7, 2015

Mark D. Polston, Daniel J. Hettich, King & Spalding, Washington, DC, for Plaintiffs.

Joshua M. Kolsky, U.S. Attorney's Office for the District of Columbia, Peter C. Pfaffenroth, U.S. Attorney's Office, Washington, DC, for Defendant.

MEMORANDUM OPINION

BERYL A. HOWELL, United States District Judge

Pending before the Court are cross-motions for summary judgment from the plaintiffs, a group of hospitals owned by Community Health Systems, Inc. ("CHS"), Pls.' Mot. Summ. J. ("Pls.' Mot."), ECF No. 15–1, and the defendant, the Secretary of Health and Human Services ("HHS"), who is sued in her official capacity, Def.'s Mot. Summ. J. ("Def.'s Mot."), ECF No. 19.¹ The plaintiffs were denied $16,400,811 in reimbursements for "bad debt" incurred in the treatment of Medicare patients during fiscal years 2004 through 2006. First Am. Compl. ("FAC") ¶¶ 5, 32, ECF No. 7; Def.'s Mem. Supp. Def.'s Mot. at 1 ("Def.'s Mem."), ECF No. 19. The plaintiffs allege that this reimbursement denial violates the Administrative Procedure Act ("APA"), 5 U.S.C. § 706, and a Congressional moratorium, in effect from 1987 through 2012, that barred any change in HHS policy regarding reimbursement of Medicare bad debt. FAC ¶ 1; Pls.' Corrected Mem. Supp. Pls.' Mot. ("Pls.' Mem.") at 1, ECF No. 15–1. The defendant counters that the policy under which HHS denied the reimbursements is both reasonable and long-standing, having existed at the time the Medicare Bad Debt Moratorium took effect. Consequently, the defendant maintains that the challenged reimbursement denial reflects no policy change that would violate the Moratorium. Def.'s Mem. at 2. For the reasons set forth below, the defendant's motion is granted and the plaintiffs' motion is denied.

I. BACKGROUND

Resolving the instant motions requires a tour of the "labyrinthine world of Medicare reimbursements." District Hosp. Partners, L.P. v. Burwell, 786 F.3d 46, 48 (D.C.Cir.2015) (internal quotation marks omitted). The relevant portions of the Medicare statute are explained first, followed by the history of the Medicare Bad Debt Moratorium, before the Court addresses the reimbursement decision challenged by the plaintiffs.

A. General Medicare Reimbursements and Appeals Therefrom

"Medicare is a federally funded medical insurance program for the elderly and disabled ... [e]stablished as part of the Social Security Act, 42 U.S.C. § 1395 et seq. " Fischer v. United States, 529 U.S. 667, 671, 120 S.Ct. 1780, 146 L.Ed.2d 707 (2000). Inpatient hospital care is generally covered under Part A of the Medicare Act. 42 U.S.C. §§ 1395c –1395i–5. The Centers for Medicare and Medicaid Services ("CMS"), "formerly the Health Care Financing Administration (HCFA), administers the Medicare program on behalf of the Secretary" of HHS. St. Luke's Hosp. v. Sebelius, 611 F.3d 900, 901 n. 1 (D.C.Cir.2010) (internal citation omitted).

The Secretary is required by statute to delegate most of "[t]he administration of [Part A] ... through contracts with [M]edicare administrative contractors." 42 U.S.C. § 1395h(a).² These contractors, known as "Intermediaries," are responsible for, inter alia, "[d]etermining ... the amount of the payments required ... to be made to providers of services, suppliers and individuals," to make those payments, and provide communication, education, and technical assistance to health care providers treating Medicare patients. Id. § 1395kk–1(a)(4). In order to receive payment from the Medicare program, through the Intermediaries, health care providers such as the plaintiffs must submit "cost reports ... on an annual basis." 42 C.F.R. § 413.20(b). After receiving and reviewing these cost reports, Intermediaries "must within a reasonable period of time ... furnish the provider ... a written notice reflecting the contractor's determination of the total amount of reimbursement due the provider." Id. § 405.1803(a). These notices, which "[e]xplain the [Intermediary's] determination of total program reimbursement due the provider" are known as notices of program reimbursements ("NPRs"). See id. § 405.1803(a)(1)(i).

When dissatisfied with an NPR, a provider may seek review of, and a hearing regarding the Intermediary's decision before, the Provider Reimbursement Review Board ("PRRB" or "Board"), so long as certain jurisdictional requirements, which are not at issue here, are met. 42 U.S.C. § 1395oo(a). "A decision of the Board shall be final unless the Secretary, on his own motion ... reverses, affirms, or modifies the Board's decision." Id. § 1395oo(f)(1). The Secretary has delegated responsibility for hearing appeals from PRRB decisions to the CMS Administrator. See 42 C.F.R. § 405.1875 ; Mercy Home Health v. Leavitt, 436 F.3d 370, 374 (3d Cir.2006). The dissatisfied provider, or, as in this case, a group of dissatisfied providers, may file a civil action challenging the PRRB or the Administrator's final decision in the "District Court of the United States for the judicial district in which the greatest number of providers participating in both the group appeal and the civil action are located or in" this District. 42 C.F.R. § 405.1877(e)(2).

B. Medicare Bad Debt Reimbursements

The Medicare statute provides that non-Medicare patients shall not be forced to share the cost of treatment for Medicare patients. 42 U.S.C. § 1395x(v)(1)(A)(i). This ban on cross-subsidization effectively requires that "the necessary costs of efficiently delivering covered services to individuals covered by" Medicare "will not be borne by individuals not so covered." Id. Although the costs incurred for most of the care provided to Medicare patients are borne by the government, individual Medicare patients are "often responsible for both deductible and coinsurance payments for hospital care." Hennepin Cnty. Med. Ctr. v. Shalala (Hennepin County ), 81 F.3d 743, 745 (8th Cir.1996). If Medicare patients fail to pay this portion of their care, Medicare allows for reimbursement of these "bad debts" so long as certain criteria are met. 42 C.F.R. § 413.89(e). The principle underlying the reimbursement of Medicare bad debt is straightforward: "This policy, adopted in 1966[,] ... was originally intended to prevent costs of beneficiary care from being shifted to non-Medicare patients," in keeping with the statutory cross-subsidization ban in § 1395x(v)(1)(A)(i). U.S. Dep't of Health and Human Servs., Ofc. of Inspector Gen., Semiannual Rep. to the Congress (Apr. 1, 1986–Sept.30, 1986) ("1986 OIG Report") at 2.³

"Bad debts" in the Medicare context are defined as "amounts considered to be uncollectible from accounts and notes receivable that were created or acquired in providing services." 42 C.F.R. § 413.89(b)(1). Such debts are "attributable to the deductibles and coinsurance amounts" billed to Medicare patients. Id. § 413.89(a) ; see also Def.'s Mot. Ex. 1 (Provider Reimbursement Manual ("PRM"), Chapter 3) § 300, ECF No. 19–1. For reimbursement of bad debt arising from nonpayment of coinsurance and deductible amounts due from Medicare patients, a hospital must satisfy the following four criteria:

(1) The debt must be related to covered services and derived from deductible and coinsurance amounts. (2) The provider must be able to establish that reasonable collection efforts were made. (3) The debt was actually uncollectible when claimed as worthless. (4) Sound business judgment established that there was no likelihood of recovery at any time in the future.

42 C.F.R. § 413.89(e). While the regulations do not define key terms used in these criteria, such as "reasonable collection efforts," "uncollectible," "worthless," and "likelihood of recovery," see id. the HHS sets out interpretive instructions, policies and procedures in the PRM, see Catholic Health Initiatives (CHI ) v. Sebelius, 617 F.3d 490, 491 (D.C.Cir.2010) (describing PRM as "guidelines and policies to implement Medicare regulations which set forth principles for determining the reasonable cost of provider services, but it does not have the effect of regulations") (internal quotation marks omitted).

The opening paragraph of PRM § 310 sets out HHS' interpretation of the phrase "reasonable collection effort" as follows:

To be considered a reasonable collection effort, a provider's effort to collect Medicare deductible and coinsurance amounts must be similar to the effort the provider puts forth to collect comparable amounts from non-Medicare patients. It must involve the issuance of a bill on or shortly after discharge or death of the beneficiary to the party responsible for the patient's personal financial obligations. It also includes other actions such as subsequent billings, collection letters and telephone calls or personal contacts with this party which constitute a genuine, rather than a token, collection effort. The provider's collection effort may include using or threatening to use court action to obtain payment.

Administrative Record ("AR") at 371 (PRM § 310), ECF No. 24–1.⁴ As this

portion of PRM § 310 makes clear, a "reasonable collection effort" requires both the issuance of a bill and similar treatment of Medicare and non-Medicare bills.

The second paragraph of PRM § 310, subsection A specifically addresses the use of collection agencies, stating that "[a] provider's collection effort may include the use of a collection agency," without mandating such use. Id . (PRM § 310.A). If a provider chooses to refer Medicare debt to a collection agency, HHS "expects the provider to refer all uncollected patient charges of like amount to the agency without regard to class of patient," consistent with the policy expressed in the opening paragraph that both Medicare and non-Medicare debt be treated similarly. Id.

A "presumption of...