Cooper Hosp. / Univ. Med. Ctr. v. Burwell

• Decision Date: 11 April 2016
• Docket Number: Civil Action No. 14-1991 (JEB)
• Citation: 179 F.Supp.3d 31
• Parties: Cooper Hospital / University Medical Center, Plaintiff, v. Sylvia M. Burwell, Secretary, U.S. Department of Health and Human Services, Defendant.
• Court: U.S. District Court — District of Columbia

179 F.Supp.3d 31

Cooper Hospital / University Medical Center, Plaintiff,

v.Sylvia M. Burwell, Secretary, U.S. Department of Health and Human Services, Defendant.

Civil Action No. 14-1991 (JEB)

United States District Court, District of Columbia.

Signed April 11, 2016

John Zen Jackson, Mcelroy Deutsch Mulvaney & Carpenter, Morristown, NJ, for Plaintiff.

Johnny Hillary Walker, III, Joshua M. Kolsky, U.S. Attorney's Office for The District of Columbia, Washington, DC, for Defendant.

MEMORANDUM OPINION

JAMES E. BOASBERG

, United States District Judge

Will Rogers once said, “The minute you read something and you can't understand it, you can almost be sure that it was drawn up by a lawyer.” While it is unlikely he had the Medicare and Medicaid statutes in mind, there may be no legislation to which his adage better applies. The present dispute—between Cooper Hospital, a medical center located in Camden, New Jersey, and Sylvia M. Burwell, Secretary of the Department of Health and Human Services—turns on the Secretary's interpretation of a complex set of interwoven Medicare and Medicaid provisions. Cooper seeks partial reimbursement from HHS for its fiscal year 2001 treatment of low-income patients who were ineligible for Medicaid but covered under New Jersey's charity-care statute, the New Jersey Charity Care Program (NJCCP). HHS has denied such repayments, arguing that the provision under which Plaintiff seeks repayment, the Medicare Disproportionate Share Hospital (DSH) provision, does not permit reimbursement for Medicaid-ineligible patients.

Cooper first appealed this denial administratively and, failing there, now brings this suit. In addition to continuing to challenge the reimbursement denial, the hospital also grumbles that HHS has treated it differently from hospitals in other states. More specifically, it objects that while its charity-care patients were denied, the agency permits reimbursement for Medicaid-ineligible patients in states that participate in what is known as § 1115 expansion-waiver programs. Plaintiff contends that these expansion-waiver patients are, in all relevant ways, identical to its NJCCP patients, insofar as both sets of patients are ineligible for traditional Medicaid. Because NJCCP patients' Medicaid ineligibility was the basis for HHs's denial of Cooper's Medicare DSH reimbursement, the hospital believes this same reasoning should prohibit reimbursement for Medicaid-ineligible expansion-waiver patients. It therefore argues that the Secretary's disparate treatment of these patient groups is arbitrary and capricious, thus violating both the Administrative Procedure Act and the equal-protection guarantee implied in the Due Process Clause of the Fifth Amendment to the Constitution.

After traversing its way through the labyrinthine Medicare and Medicaid statutory provisions, the Court ultimately concludes that the agency has acted rationally in interpreting these laws. Indeed, as the Court will explain, D.C. Circuit precedent essentially forecloses any route for success in Plaintiff's suit. Circuit precedent mandates that the Secretary—and this Court—interpret the Medicare statute so as to deny reimbursement for Cooper's NJCCP patient days. Yet the Circuit has also held that Congress granted the Secretary express permission to include § 1115 expansion-waiver patients in Medicare DSH reimbursement. Given these holdings, Plaintiff's claim of disparate treatment fails, as the Secretary had a clear rational basis—and express statutory permission—to differentiate between Cooper's charity-care patients and § 1115 expansion-waiver patients. The Court will, accordingly, grant Defendant's Motion for Summary Judgment.

I. Background

Plaintiff Cooper Hospital / University Medical Center is a 560-bed not-for-profit general-acute-care hospital and academic medical center located in Camden, New Jersey, which participates in both the federal Medicaid and Medicare programs. See Compl., ¶¶ 1, 10; Pl. MSJ at 5. Over a third of Cooper's patients are indigent, given the substantially low-income community that the hospital serves. See Pl. MSJ at 5. Defendant Sylvia M. Burwell is the Secretary of HHS, the agency responsible for operating the Medicare program. See Compl., ¶ 12. Cooper here challenges its Medicare DSH-reimbursement calculation for the fiscal year ending December 31, 2001. See Pl. MSJ at 1. Before turning to the specifics of Plaintiff's claim, the Court will lay out in detail how both the Medicare and Medicaid programs operate. Such explanation is necessary given the complexities of the repayment determination involved here.

A. Medicare Reimbursement Policies

“This case is significantly more difficult to describe than to decide,” Cookeville Reg'l Med. Ctr. v. Thompson, No. 04–1053, 2005 WL 3276219, at *1 (D.D.C. Oct. 28, 2005)

, for navigating the Medicare and Medicaid statutes' choppy waters is no easy feat. Both are federally funded medical-insurance programs that are part of the Social Security Act, which “is among the most intricate [statutes] ever drafted by Congress. Its Byzantine construction, as Judge Friendly has observed, makes the Act ‘almost unintelligible to the uninitiated.’ ” Schweiker v. Gray Panthers, 453 U.S. 34, 43, 101 S.Ct. 2633, 69 L.Ed.2d 460 (1981) (quoting Friedman v. Berger, 547 F.2d 724, 727 n. 7 (2d Cir.1976) ). Although the two programs share similarities, each functions in partial independence of the other, albeit with many cross-references between the subchapters.

1. Medicare DSH Adjustment

Medicare, established as Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395 et. seq. ,

provides medical insurance for the elderly and disabled, and the present dispute concerns provisions within Medicare “Part A,” which authorizes payments for certain inpatient hospital services and related services. See Def. MSJ/Opp. at 2; see also 42 U.S.C. §§ 1395c –1395i–5. While the federal government reimburses hospitals for qualified costs under Medicare, the reimbursement rates are not based on hospitals' actual costs. Instead, they are based on a Prospective Payment System (PPS), which provides “prospectively determined rates, rather than on the actual operating costs incurred by the hospital.” Def. MSJ/Opp. at 3 (citing 42 U.S.C § 1395ww(d)(1)–(4) ). HHs's calculations for reimbursement rates for individual hospitals can thus significantly affect a given hospital's bottom line. Unsurprisingly, then, the gravamen of this suit concerns such a reimbursement calculation for Cooper Hospital.

Cooper objects to HHs's approach to calculating reimbursement rates under what is known as the Medicare Disproportionate Share Hospital (DSH) adjustment. Recognizing that “[h]ospitals that serve disproportionate numbers of low-income patients have higher per-case medicare costs,” but receive the same PPS reimbursements as other hospitals, see H.R. Rep. No. 99-241, pt. 1, at 16 (1986), Congress created the Medicare DSH adjustment, which requires HHS to increase PPS payments to hospitals that serve a “significantly disproportionate number of low income patients.” 42 U.S.C. § 1395ww(d)(5)(F)(i)(I)

; Pl. MSJ at 1; Def. MSJ/Opp. at 3. Whether a given hospital qualifies for a Medicare DSH adjustment, and how large that adjustment is, depends on the hospital's “disproportionate patient percentage,” or DPP. See 42 U.S.C. § 1395ww(d)(5)(F)(v) ). That DPP calculation is in turn based on the sum of two fractions. The first is referred to as the “Medicare/SSI” DPP fraction, which is not relevant here, id.§ 1395ww(d)(5)(F)(vi)(I), and the second is the Medicaid DPP fraction. Id.§ 1395ww(d)(5)(F)(vi)(II). The latter is so called because it calculates reimbursement for those who are Medicaid eligible, see Compl., ¶ 36; Def. MSJ/Opp. at 3, but whether it does in fact permit reimbursement only for Medicaid-eligible patients is the question at the heart of this suit.

As explained in more detail below, the controversy here concerns the proper calculation of Cooper's Medicaid DPP fraction of the Medicare DSH calculation for fiscal year 2001. As of 2001, the Medicaid DPP fraction was defined as follows:

the fraction (expressed as a percentage), the numerator of which is the number of the hospital's patient days for such period which consist of patients who (for such days) were eligible for medical assistance under a State plan approved under subchapter XIX of this chapter, but who were not entitled to benefits under [Medicare] part A of this subchapter, and the denominator of which is the total number of the hospital's patient days for such period.

42 U.S.C. § 1395ww(d)(5)(F)(vi)(II)

(emphasis added). To pierce through the legalese, the reason this fraction is known as the Medicaid fraction is because “subchapter XIX” is the Medicaid statute, and so a “State plan approved under” it refers to a Medicaid state plan. Id.§§ 1396 et seq. In plain English, then, the Medicaid DPP fraction is the percentage of all hospital patients who are eligible for medical assistance under a Medicaid state plan but not eligible for Medicare Part A. Or, expressed in mathematical terms:

Total days treating patients eligible for medical assistance under a Medicaid state plan but not eligible for Medicare Part A All patient days

Medicare DSH thus provides supplemental reimbursement for treatment of patients who were eligible for either Medicare/SSI (“Medicare DPP”) or Medicaid ( “Medicaid DPP”), as both populations tend to have disproportionately higher medical-treatment costs. The greater the number of patient days included in this fraction, then, the higher the reimbursement rate for the hospital from HHS. Confusingly, while this dispute concerns the Medicare DSH adjustment, because that adjustment depends in part on how the Medicaid DPP defines Medicaid eligibility, the crux of the statutory interpretation dispute turns primarily on the Secretary's reading of the Medicaid statute. The Court will thus take a short detour through that legislation.

2. Medicaid...