Empire Health Found. v. Price

• Decision Date: 13 August 2018
• Docket Number: NO: 2:16-CV-209-RMP,: 2:16-CV-209-RMP
• Citation: 334 F.Supp.3d 1134
• Parties: EMPIRE HEALTH FOUNDATION, FOR VALLEY HOSPITAL MEDICAL CENTER, Plaintiff, v. Thomas E. PRICE, M.D., Secretary of the United States Department of Health and Human Services, Defendant.
• Court: U.S. District Court — District of Washington

334 F.Supp.3d 1134

EMPIRE HEALTH FOUNDATION, FOR VALLEY HOSPITAL MEDICAL CENTER, Plaintiff,

v.Thomas E. PRICE, M.D., Secretary of the United States Department of Health and Human Services, Defendant.

NO: 2:16-CV-209-RMP

United States District Court, E.D. Washington.

Signed August 13, 2018

Daniel J. Hettich, Pro Hac Vice, King & Spalding LLP, Washington, DC, Teresa Ann Sherman, Paukert & Troppmann PLLC, Spokane, WA, for Plaintiff.

James Owen Bickford, US Department of Justice, Washington, DC, Joseph P. Derrig, U.S. Attorney's Office, Spokane, WA, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT, AND DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

ROSANNA MALOUF PETERSON, United States District Judge

Plaintiff Empire Health Foundation ("Empire"), for Valley Hospital Medical Center (the "Hospital"), brings this action against the Secretary of the United States Department of Health and Human Services (the "Secretary"). Before the Court is Empire's Motion for Summary Judgment, ECF No. 34, and the Secretary's Cross-Motion for Summary Judgment, ECF No. 46. Theresa Sherman and Daniel Hettich appeared on behalf of Empire. James Bickford appeared on behalf of the Secretary. Having considered the parties' filings and oral argument, the remaining record, and the relevant law, the Court is fully informed.

This case concerns the validity of the Secretary's 2005 Final Rule promulgation with regard to the Secretary's interpretation of the phrase "entitled to benefits under [Medicare Part A]" in 42 U.S.C. § 1395ww. Both parties have moved for summary judgment. For the reasons set forth below, Empire's motion is granted in part and denied in part, and the Secretary's motion is denied.

PROCEDURAL HISTORY

Effective October 1, 2004, the Secretary's 2005 Final Rule relating to Medicare Part A hospital coverage amended 42 C.F.R. § 412.106(b)(2) to reflect the Secretary's newly adopted policy regarding the assessment of Medicare Part A patient-days. ECF No. 11-2. The actual language of the 2004 amendment, which removed the word "covered" from 42 C.F.R. § 412.106(b)(2), appeared for the first time in the 2008 publication of the regulation. Id. Pursuant to the Medicare disproportionate share hospital ("DSH") reimbursement process, Wisconsin Physicians Services, the fiscal intermediary that was auditing the Hospital's cost reporting, applied the amended policy from the 2005 Final Rule to the Hospital's cost reporting period for the 2008 fiscal year. ECF No. 34 at 14. The Hospital timely filed an appeal with the Provider Reimbursement Review Board ("Board"). Id.

After filing its appeal, the Hospital sought expedited judicial review pursuant to 42 U.S.C. § 1395oo(f)(1), which states that providers "shall also have the right to obtain judicial review of any action of the fiscal intermediary which involves a question of law or regulations relevant to the matters in controversy whenever the Board determines ... that it is without authority to decide the question." See ECF No. 11-1. Finding that it was without authority to decide the legal issue in this case, the Board granted the Hospital's request for expedited judicial review regarding whether the regulation, 42 C.F.R. § 412.106(b)(2), is valid. ECF No. 11-2.

Empire, on behalf of the Hospital, filed the complaint in this matter alleging that the 2005 Final Rule amending 42 C.F.R. § 412.106(b)(2) is substantively and procedurally invalid and that the agency should be enjoined from applying the 2005 Final Rule against the Hospital. See ECF No. 1. Empire moves for summary judgment, challenging the Secretary's interpretation of the phrase "entitled to benefits under [Medicare Part A]" as inconsistent with the plain language of the statute, inconsistent with circuit precedent, and arbitrary and capricious. ECF No. 34 at 20-30. Empire also challenges the adequacy of the notice that the Secretary provided prior to the promulgation of the 2005 Final Rule. Id. at 17-20. Alternatively, if the Court agrees with the Secretary regarding the treatment of unpaid Medicare Part A days, Empire asks that the Court direct the Secretary "to include unpaid [supplemental security income (‘SSI’) ] eligible patient days in the numerator of the [Medicare fraction] utilizing SSI payment status codes that reflect the individuals' eligibility for SSI—even if the individuals did not receive SSI payments," as a matter of consistency. Id. at 23.

Empire also challenges the validity of the inclusion of Part C coverage days in the Hospital's 2008 fiscal year DSH calculation. Id. at 11. In a 2014 case, the D.C. Circuit Court of Appeals vacated the Medicare Part C regulatory revision on procedural grounds. See Allina Health Servs. v. Sebelius , 746 F.3d 1102, 1109 (D.C. Cir. 2014). Accordingly, both Empire and the Secretary have agreed that this Court should remand the Part C issue back to the Board.

The Secretary also moves for summary judgment, arguing that the Court should find the Secretary's 2005 Final Rule substantively and procedurally valid.

JURISDICTION

This case comes to the Court from the Provider Reimbursement Review Board, which hears appeals concerning DSH reimbursement payments to hospitals and other Medicare providers. The Board concluded that this case "involves a question of law or regulations" that it "is without authority to decide." See ECF No. 11-2 (citing 42 C.F.R. § 405.1842(f)(1), (g)(2) ). Pursuant to 42 U.S.C. § 1395oo(f)(1), the Board granted expedited judicial review of the legal questions raised by the Hospital in its appeal, now being prosecuted by Empire. The Board found that it "lacks the authority to decide whether regulation, 42 C.F.R. § 412.106(b)(2) is valid." ECF No. 11-2.

The Secretary disputes the Court's jurisdiction to hear Empire's challenge to the Secretary's assessment of SSI-entitlement. ECF No. 46 at 32. As the Court makes clear below, it finds that the Secretary's assessment of SSI-entitlement in the Medicare fraction of the disproportionate patient percentage provision is outside the scope of the Board's grant of expedited judicial review in this matter. See infra Part III. However, the Court has subject matter jurisdiction over the other questions of law presented in this matter pursuant to the Board's grant of expedited judicial review under 42 U.S.C. § 1395oo(f)(1), and pursuant to 28 U.S.C. § 1331, as a civil action arising under the laws of the United States, because Empire challenges the interpretation of a provision in the Medicare Act, 42 U.S.C. § 1395ww(d)(5)(F). See ECF No. 1.

LEGAL STANDARD FOR SUMMARY JUDGMENT

When parties file cross-motions for summary judgment, the Court considers each motion on its own merits. See Fair Housing Council of Riverside County, Inc. v. Riverside Two , 249 F.3d 1132, 1136 (9th Cir. 2001). A court may grant summary judgment where "there is no genuine dispute as to any material fact" of a party's prima facie case, and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett , 477 U.S. 317, 322-33, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; see also Fed. R. Civ. P. 56(c). Because Empire's claims arise under the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 701 - 706, resolution of its claims "does not require fact finding on behalf of [the] court." Nw. Motorcycle Ass'n v. USDA , 18 F.3d 1468, 1471-72 (9th Cir. 1994).

Here, there are no disputed facts, and the Court's grant of jurisdiction is limited to the legal question of the validity of 42 C.F.R. § 412.106(b)(2).

STATUTORY AND REGULATORY FRAMEWORK

Under Part A of the Medicare Act, the Medicare program reimburses providers for inpatient services based on the Prospective Payment System ("PPS"), which derives reimbursements from standardized reimbursable expenditure rates that are subject to adjustments based on certain hospital-specific factors. See 42 U.S.C. §§ 1395c to 1395i-5, 1395ww(d). The Hospital's challenge concerns the DSH adjustment, created to "compensate hospitals for the additional expense per patient associated with serving high numbers of low-income patients." Phoenix Mem. Hosp. v. Sebelius , 622 F.3d 1219, 1221 (9th Cir. 2010). As alleged in the complaint, the Hospital provided short-term acute care to patients insured under the federal health insurance program Medicare in the 2008 fiscal year. ECF No. 1 at 3.

Whether a hospital receives a DSH adjustment, and the amount of the adjustment received, is determined by a calculation of the hospital's disproportionate patient percentage ("DPP"). 42 U.S.C. § 1395ww(d)(5)(F)(v), (vii). The DPP is the sum of two fractions, commonly referred to as the Medicare fraction and Medicaid fraction. The relevant statutory language for determining the DPP is as follows:

(vi) In this subparagraph, the term "disproportionate patient percentage" means, with respect to a cost reporting period of a hospital, the sum of—

(I) the fraction (expressed as a percentage), the numerator of which is the number of such hospital's patient days for such period which were made up of patients who (for such days) were entitled to benefits under part A of this subchapter and were entitled to supplementary security income benefits (excluding any State supplementation) under subchapter XVI of this chapter, and the denominator of which is the number of such hospital's patient days for such fiscal year which were made up of patients who (for such days) were entitled to benefits under part A of this subchapter , and

(II) 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, but who were not entitled to benefits under 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) (emphasis added).

The regulation...