Estate of Landers v. Leavitt, Docket No. 06-4921-cv.

• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
• Citation: 545 F.3d 98
• Docket Number: Docket No. 06-4921-cv.
• Parties: ESTATE OF Marion LANDERS, as represented by its executor, Richard Landers, Marion A. Dixon, and Muriel Grigley, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants-Cross-Appellees, v. Michael O. LEAVITT, Secretary of the Department of Health and Human Services, Defendant-Appellee-Cross-Appellant.
• Decision Date: 01 October 2008

545 F.3d 98 ESTATE OF Marion LANDERS, as represented by its executor, Richard Landers, Marion A. Dixon, and Muriel Grigley, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants-Cross-Appellees,
v.
Michael O. LEAVITT, Secretary of the Department of Health and Human Services, Defendant-Appellee-Cross-Appellant. Docket No. 06-4921-cv. United States Court of Appeals, Second Circuit. Argued: May 7, 2008. Decided: October 1, 2008.

[545 F.3d 102]

Gill Deford, Willimantic, CT (Judith A. Stein, Brad S. Plebani, Wey-Wey Kwok, Willimantic, CT, Sally Hart, Tucson, AZ, Toby Edelman, Washington, D.C., on the brief), Center for Medicare Advocacy, for Plaintiffs-Appellants-Cross-Appellees.

Lewis S. Yelin, Attorney, Appellate Staff, Civil Division, U.S. Department of Justice, Washington, D.C. (Scott R. McIntosh, Attorney, Appellate Staff, Peter D. Keisler, Assistant Attorney General, Civil Division, U.S. Department of Justice, Washington, D.C., Kevin J. O'Connor, United States Attorney for the District of Connecticut, on the brief), for Defendant-Appellee-Cross-Appellant.

Carol C. Loepere (Elizabeth A. Ransom, on the brief), Reed Smith LLP, Washington, D.C., for Amici Curiae American Health Care Association, Alliance for Quality Nursing Home Care, American Association of Homes and Services for the Aging, National Association of Professional Geriatric Care Managers, Catholic Health Association of the United States, National Association for the Support of Long Term Care, and National Association of Health Care Assistances in Support of Plaintiffs-Appellants-Cross-Appellees.

Stuart R. Cohen, AARP Foundation Litigation (Bruce Vignery, Stacy Canan, AARP Foundation Litigation, Michael Schuster, AARP, on the brief), Washington, DC, for Amici Curiae AARP, Alliance for Retired Americans, California Advocates for Nursing Home Reform, Greater Boston Legal Services, Long-Term Care Community Coalition, Medicine Rights Center, Michigan Campaign for Quality Care, NCCNHR, and National Senior Citizens Law Center in Support of Plaintiffs-Appellants-Cross-Appellees.

Before: HALL and LIVINGSTON, Circuit Judges.^*

LIVINGSTON, Circuit Judge:

In this case—a dispute about how to count to three—the plaintiffs-appellants are Medicare beneficiaries who appeal from a grant of summary judgment of the United States District Court for the District of Connecticut (Hall, J.). Each of them spent at least three days in the hospital but was discharged less than three days after having been formally admitted, and each sought coverage under Part A of the Medicare program for a post-hospitalization nursing home stay. After their claims for coverage were initially denied, they brought this lawsuit challenging the denial. The district court granted summary judgment for the government, holding that the plaintiffs were not entitled to Medicare reimbursement because they had not spent the requisite amount of time as hospital inpatients. We agree and therefore affirm.

BACKGROUND

"Medicare is the federal government's health-insurance program for the elderly."

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Conn. Dep't of Soc. Servs. v. Leavitt, 428 F.3d 138, 141 (2d Cir.2005). It contains four distinct programs, the first of which, known as "Part A," is a hospital insurance program. See 42 U.S.C. §§ 1395c to 1395i-5. Part A "provides basic protection against the costs of hospital, related post-hospital, home health services, and hospice care" for, among others, eligible people over 65 years of age. Id. § 1395c; see also id. § 426 (establishing the entitlement to Part A benefits). "Under Part A, service providers such as hospitals are paid the lesser of the `reasonable cost' of covered services provided to program beneficiaries or `the customary charges with respect to such services,' and agree not to charge beneficiaries for these services." Yale-New Haven Hosp. v. Leavitt, 470 F.3d 71, 73 (2d Cir.2006) (citations omitted) (quoting 42 U.S.C. § 1395f(b)(1)); see also Kraemer v. Heckler, 737 F.2d 214, 215-16 (2d Cir.1984) (describing the basic categories of services covered by Part A).

The entitlements under Part A include an extended care benefit, which provides coverage for "post-hospital extended care services for up to 100 days during any spell of illness." 42 U.S.C. § 1395d(a)(2). Part A does not cover all extended care services that follow hospital stays, however. Rather, Part A requires that the hospital stay be a "qualifying" hospital stay before it covers the subsequent extended care. Specifically, the statute defines "post-hospital extended care services" to mean "extended care services furnished an individual after transfer from a hospital in which he was an inpatient for not less than 3 consecutive days before his discharge from the hospital in connection with such transfer." Id. § 1395x(i). In turn, it defines "extended care services" to mean "services furnished to an inpatient of a skilled nursing facility." Id. § 1395x(h). These services include nursing care, bed and board, physical and occupational therapy, and drugs. Id. If post-hospital extended care services are not covered by Part A, they still may be covered by Part B. Part B is a voluntary program, however, and unlike Part A beneficiaries, Part B enrollees must pay a monthly premium. Matthews v. Leavitt, 452 F.3d 145, 146 n. 1 (2d Cir.2006); Conn. Dep't of Soc. Servs., 428 F.3d at 141 n. 2; Furlong v. Shalala, 238 F.3d 227, 229 (2d Cir.2001).

Marion Landers, Marion Dixon, and Muriel Grigley, the first of whom is now deceased and is represented here by her estate, were Medicare beneficiaries who each received inpatient hospital care followed by care at a skilled nursing facility, or "SNF"—essentially, a nursing home. See 42 U.S.C. § 1395i-3(a) (defining SNF). Each of them spent three consecutive days in the hospital before moving to the SNF. Yet the Centers for Medicare and Medicaid Services ("CMS")—the federal agency situated within the Department of Health and Human Services ("HHS") that administers the Medicare program on behalf of the Secretary of HHS¹—denied their claims for coverage with respect to their post-hospitalization SNF stays. CMS did so in accordance with its own rules for determining whether a patient is eligible for post-hospital SNF coverage. According

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to one such rule, known as the "three-midnight rule," a patient is eligible for SNF coverage only if he or she has been "hospitalized ... for medically necessary inpatient hospital or inpatient [critical access hospital] care, for at least 3 consecutive calendar days, not counting the date of discharge." 42 C.F.R. § 409.30(a)(1). And according to another rule, "a patient is considered an inpatient if [he or she is] formally admitted as [an] inpatient." Ctrs. for Medicare & Medicaid Servs., Publ'n No. 100-02, Medicare Benefit Policy Manual, ch. 1, § 10 (45th rev.2006) [hereinafter Medicare Benefit Policy Manual], available at http://www.cms.hhs.gov/Manuals/IOM/list.asp. Landers, Dixon, and Grigley all spent three—but only three—consecutive midnights in hospitals and then moved to nursing homes, where they received extended care services. But while in the hospital, each of them spent at least one midnight either in the emergency room or on observation status before being formally admitted. Accordingly, CMS determined that, because they had not spent three consecutive midnights hospitalized after having been formally admitted, Part A did not cover their SNF stays.

Landers, Dixon, and Grigley challenged CMS's interpretation of the qualifying hospital stay requirement in a putative class action. They sought a permanent injunction and a writ of mandamus prohibiting the Secretary from excluding Medicare beneficiaries' time in the emergency room and on observation status from counting toward the qualifying stay requirement. The district court granted class certification, Landers v. Leavitt (Landers I), 232 F.R.D. 42 (D.Conn.2005), and on cross-motions for summary judgment, ruled in favor of the Secretary, Landers v. Leavitt (Landers II), No. 3:04-cv-1988 (JCH), 2006 WL 2560297 (D.Conn. Sept. 1, 2006). The plaintiffs now appeal.

DISCUSSION

The plaintiffs challenge the district court's ruling on three grounds. First, they argue that the Medicare statute entitles them to coverage for their post-hospitalization SNF stays. Second, they contend that CMS's interpretation of the statute violates the equal protection guarantee of the U.S. Constitution. Third, they argue that the district court erred by basing its decision exclusively on the administrative record.

I.

The Medicare statute provides coverage for a post-hospitalization SNF stay for a beneficiary who receives extended care services in an SNF after having been "an inpatient for not less than 3 consecutive days" in a hospital. 42 U.S.C. § 1395x(i). Neither the statute nor any applicable regulation defines "inpatient." CMS's policy manual defines an inpatient as a person who has been formally admitted to a hospital. The government urges us to credit the interpretation of the statute that it has set forth in the policy manual. We only consider whether we should defer to the agency's interpretation of the statute, however, upon finding the statute ambiguous. Gen. Dynamics Land Sys. v. Cline, 540 U.S. 581, 600, 124 S.Ct. 1236, 157 L.Ed.2d 1094 (2004) ("[D]eference to [an agency's] statutory interpretation is called for only when the devices of judicial construction have been tried and found to yield no clear sense of congressional intent." (citing INS v. Cardoza-Fonseca, 480 U.S. 421, 446, 107 S.Ct. 1207, 94 L.Ed.2d 434 (1987))); Kruse v. Wells Fargo Home Mortg., Inc., 383 F.3d 49, 55 (2d Cir.2004) ("If the provisions of the statute are unclear or ambiguous ... we must decide whether to defer to [the agency's] reading of them.... If we decide that

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we are to defer, we must then decide the appropriate level of deference."). We have little difficulty...