Evangelical Cmty. Hosp. v. Becerra

• Decision Date: 30 September 2022
• Docket Number: 21-cv-01368 (APM)
• Parties: EVANGELICAL COMMUNITY HOSPITAL, et al., Plaintiffs, v. XAVIER BECERRA, Defendant.
• Court: U.S. District Court — District of Columbia

EVANGELICAL COMMUNITY HOSPITAL, et al., Plaintiffs,
v.
XAVIER BECERRA, Defendant.

No. 21-cv-01368 (APM)

United States District Court, District of Columbia

September 30, 2022

MEMORANDUM OPINION

Amit P. Mehta United States District Court Judge

I.

Plaintiffs Evangelical Community Hospital (“Evangelical”) and Memorial Healthcare Center (“Memorial”) are two acute-care hospitals that participate in the Medicare program. Medicare funding is provided to Plaintiffs in the form of a reimbursement from the Centers for Medicare and Medicaid Services (“CMS”). To obtain a reimbursement, providers such as Plaintiffs submit a cost report to a Medicare contractor, who reviews the report and determines the amount of reimbursement to which the provider is entitled.

Plaintiffs each received four separate reimbursement determinations from their Medicare contractor covering the cost reporting periods ending in December 2008, 2009, 2010, and 2012 (for Memorial) and in June 2011, 2012, 2013, and 2014 (for Evangelical). Finding fault with the reimbursement determinations, Plaintiffs initiated a formal hearing process by making a request for a hearing (“RFH”) before the relevant administrative body tasked with adjudicating Medicare reimbursement disputes, the Provider Reimbursement Review Board (“the Board”). Each of Plaintiffs' hearing requests raised four distinct issues, which were identical across all eight of the

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hearing requests they made. One of those issues, what the parties referred to as “Issue 4,” is the subject of the instant action.^[1] While the scope and specificity of Issue 4 is contested, Issue 4 raised the specter of an “incorrect[] calculati[on]” made when determining Plaintiffs' entitlement to a Disproportionate Share Hospital payment-an additional reimbursement available to providers who serve a high percentage of low-income patients.

Through the administrative hearing process, Plaintiffs sought expedited judicial review (“EJR”) of their claims-an expedited pathway to federal court, through which Plaintiffs can obtain review of questions of law over which the Board lacks authority. The Board denied Plaintiffs' EJR requests and dismissed Issue 4 from all eight appeals. The Board first determined that Plaintiffs' issue statements concerning Issue 4 in their RFH were overly vague, in violation of the agency's regulations and the Board's rules. The Board found, in the alternative, that to the extent Plaintiffs' RFH could be interpreted to encompass the more granular set of issues discussed in Plaintiffs' final moving papers before the Board, Plaintiffs' failure to raise those issues in their preliminary moving papers rendered the issues abandoned.

Plaintiffs filed suit before this court, asserting that the Board violated the Administrative Procedure Act (“APA”) by (1) improperly narrowing the Board's jurisdiction, as determined by Congress in the Medicare Act; and (2) arbitrarily and capriciously applying the agency's regulations and the Board's rules to Plaintiffs' claims. Plaintiffs also seek a writ of mandamus for the same alleged violations. Defendant in this matter is Secretary of Health and Human Services Xavier Becerra, in his official capacity.

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Before the court is Plaintiffs' Motion for Summary Judgment and Defendant's CrossMotion for Summary Judgment. See Pls.' Mot. for Summ. J., ECF No. 16 [hereinafter Pls.' Mot.]; Def.'s Cross-Mot. for Summ. J., ECF No. 18 [hereinafter Def.'s Cross-Mot.]. As discussed below, Plaintiffs have failed to demonstrate that the Board acted in an arbitrary and capricious manner in denying Plaintiffs' EJR request. Accordingly, Defendant's Cross-Motion for Summary Judgment is granted, and Plaintiffs' Motion for Summary Judgment is denied.

II.

Under the Medicare Prospective Payment System, hospitals that provide inpatient services to covered patients receive payment at a predetermined amount per discharged patient, irrespective of the actual costs the hospital incurs. 42 U.S.C. § 1395ww(d). However, the statute also provides for certain payment adjustments beyond the standard per patient payment.

The subject of Plaintiffs' RFH is an adjustment known as the Disproportionate Share Hospital adjustment. This additional reimbursement is available to hospitals that serve a disproportionate number of low-income patients. See id. § 1395ww(d)(5)(F). A provider's Disproportionate Share Hospital adjustment is determined by calculating the hospital's Disproportionate Patient Percentage-the sum of two fractions commonly known as the Medicaid Fraction and the Medicare-SSI Fraction. See id. § 1395ww(d)(5)(F)(vi). The Medicaid Fraction reflects the number of inpatient hospital days attributable to patients eligible for medical assistance under a state Medicaid plan but who are not entitled to Medicare Part A benefits. Id. § 1395ww(d)(5)(F)(vi)(II). The Medicare-SSI Fraction captures the number of inpatient hospital days attributable to patients who are entitled to both Medicare Part A and Supplemental Social Security Income (“SSI”) benefits. Id. § 1395ww(d)(5)(F)(vi)(I).

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At the close of each fiscal year, a hospital submits to a Medicare contractor a cost report that accounts for its costs during a particular reporting period. See 42 C.F.R. § 405.1801(b) (2022). The Medicare contractor is responsible for issuing a Notice of Program Reimbursement, which informs the provider of their final reimbursement payment for the fiscal year. See id. § 405.1803. If a provider is dissatisfied with the payment amount, then the provider may ultimately appeal to the Board via the administrative process set forth in the Medicare statute and attendant regulations. See 42 U.S.C. § 1395oo(a); 42 C.F.R. § 405.1835 (2022).

The Medicare statute lays out three jurisdictional prerequisites that must be met for the Board to have authority to hear an appeal:

(1) [the] provider . . . is dissatisfied with a final determination of the Secretary as to the amount of the payment [they received]

(2) the amount in controversy is $10,000 or more; and

(3) [the] provider files a request for a hearing within 180 days after notice of the intermediary's final determination.

42 U.S.C. § 1395oo(a).

Final decisions of the Board are subject to judicial review pursuant to the Medicare statute. See 42 U.S.C. § 1395oo(f)(1); 42 C.F.R. § 405.1875 (2022); id. § 405.1877 (2014). As relevant here, the statute also provides for EJR of a legal question if the Board has jurisdiction over the appeal but determines that it lacks the authority to decide the question of law. 42 U.S.C. § 1395oo(f)(1); 42 C.F.R. § 405.1842 (2022). Importantly, the Secretary and the Board establish the procedural rules governing appeals to the Board, which, as pertinent to this case, are discussed in greater detail below. See generally 42 C.F.R. §§ 405.1801-405.1873 (2022).

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III.

Under the APA, final agency action can be set aside only if it is “arbitrary, capricious, an abuse of discretion,” “otherwise not in accordance with law,” or “unsupported by substantial evidence.” 5 U.S.C. § 706(2)(A), (E); Citizens to Pres. Overton Park, Inc., v. Volpe, 401 U.S. 402, 413-14 (1971), abrogated on other grounds by Califano v. Sanders, 430 U.S. 99 (1977). The Secretary's compliance with the Medicare statute and regulations is reviewable under the arbitrary and capricious standard, and the adequacy of record support for the Board's decision is reviewable under the substantial evidence standard, both of which “involve the same level of scrutiny.” Mem'l Hosp./Adair Cty. Health Ctr., Inc. v. Bowen, 829 F.2d 111, 117 (D.C. Cir. 1987); see 42 U.S.C. § 1395oo(f)(1). Under the arbitrary and capricious standard, final agency action may be invalidated only if it is based on an unlawful interpretation of the statute or regulations or is “not rational and based on consideration of the relevant factors.” FCC v. Nat'l Citizens Comm. for Broad., 436 U.S. 775, 803 (1978); see HCA Health Servs. of Okla., Inc. v. Shalala, 27 F.3d 614, 616-17 (D.C. Cir. 1994). Substantial evidence is “something less than the weight of the evidence, and the possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency's finding from being supported by substantial evidence.” Consolo v. Fed. Mar. Comm'n, 383 U.S. 607, 619-20 (1966).

IV.

Plaintiffs advance two claims under the APA and also petition the court for a writ of mandamus. First, Plaintiffs assert that the Board's dismissal of Plaintiffs' Issue 4 claims was jurisdictional and improperly narrowed the Board's mandatory jurisdiction as set forth in the Medicare statute. In the alternative, Plaintiffs assert that the Board's application of its rules to the facts of their claims was arbitrary and capricious. Finally, Plaintiffs have petitioned the court for

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a writ of mandamus stemming from the same facts upon which their APA claims are premised. The court will address each claim in turn.

A.

The court begins with Plaintiffs' APA challenge asserting that the Board's decision improperly narrowed the Board's jurisdiction. Plaintiffs argue that the Board “characterized the dismissals as jurisdictional,” and as such, “[t]he Board's dismissals impermissibly constrict[ed] Congress's jurisdictional mandate.” Pls.' Reply in Supp. of Pls.' Mot., ECF No. 20 [hereinafter Pls.' Reply], at 1-2. Defendant counters that the Board's decision was not jurisdictional, but instead clearly rested on procedural grounds short of the merits. Def.'s Cross-Mot., Mem. of P. & A. in Supp. of Def.'s Cross-Mot., ECF No. 18, [hereinafter Def.'s Mem.], at 15-19. Defendant further argues that the Board's procedural rules are proper under the Medicare statute's “broad [grant of] authority to establish procedural rules for purposes of managing its substantial docket of appeals.” Def.'s Mem. at 13. The court agrees with Defendant that the Board's...