Fla. Health Scis. Ctr., Inc. v. Sec'y U.S. Dep't of Health & Human Servs.

• Decision Date: 31 March 2015
• Docket Number: Civil Action No. 14–0791ABJ
• Citation: 89 F.Supp.3d 121
• Parties: Florida Health Sciences Center, Inc., d/b/a Tampa General Hospital, Plaintiff, v. Secretary U.S. Department of Health and Human Services, Defendant.
• Court: U.S. District Court — District of Columbia

89 F.Supp.3d 121

Florida Health Sciences Center, Inc., d/b/a Tampa General Hospital, Plaintiff

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

Civil Action No. 14–0791ABJ

United States District Court, District of Columbia.

Signed March 31, 2015

Stephanie Ann Webster, Akin Gump Strauss Hauer & Feld LLC, Washington, DC, for Plaintiff.

Daniel Schwei, U.S. Department of Justice, Washington, DC, for Defendant.

MEMORANDUM OPINION

AMY BERMAN JACKSON, United States District Judge

Plaintiff Florida Health Sciences Center, Inc., also known as Tampa General Hospital, has sued the Secretary of the Department of Health and Human Services to challenge the agency's calculation of the amount the hospital will receive under the Medicare program for uncompensated care for fiscal year 2014. The Medicare statute requires this payment to be calculated using a number of factors, including “the amount of uncompensated care ... for a period selected by the Secretary (as estimated by the Secretary, based on appropriate data ...).” 42 U.S.C. § 1395ww(r)(2)(C)(i). Tampa General claims that the Secretary used inappropriate data when she selected hospital cost data updated in March 2013 instead of data updated in April 2013 in calculating these payments, and it maintains that this violated the Medicare statute and the Administrative Procedure Act, 5 U.S.C. § 551 et seq. (“APA”). The Secretary moved to dismiss because, among other reasons, the statute precludes review of “[a]ny estimate of the Secretary for purposes of determining the factors” used to calculate the payment and “[a]ny period selected by the Secretary” for those purposes. 42 U.S.C. § 1395ww(r)(3). Because the Court finds that plaintiff's claims fall within the scope of the preclusion provision, the Court will grant the motion to dismiss.

BACKGROUND

I. Statutory Framework

The federal Medicare program was established by Title XVIII of the Social Security Act of 1935 to provide health insurance to the elderly and disabled. Amgen, Inc. v. Smith, 357 F.3d 103, 105 (D.C.Cir.2004). The Department of Health and Human Services (“HHS”) administers Medicare. See 42 U.S.C. §§ 1395h, 1395u.

Part A of the Medicare program provides insurance coverage for hospital care, home health care, and hospice services. Amgen, 357 F.3d at 105, citing 42 U.S.C. § 1395c. Hospitals are paid for inpatient services under the Inpatient Prospective Payment System, and they receive a fixed, predetermined amount based on each patient's category of illness. See 42 U.S.C. § 1395ww(d).

Hospitals that serve “a significantly disproportionate number of low-income patients” receive additional payments under 42 U.S.C. § 1395ww(d)(5)(F)(i)(I). A hospital that receives this payment is called a “disproportionate share hospital,” and the payment is called the “DSH adjustment.”

The amount hospitals receive is based in part on annual cost reports that are submitted to a Medicare contractor at the end of each cost reporting period. See 42 U.S.C. § 1395h. The agency maintains the data in the Hospital Cost Report Information System (“HCRIS”) database, and hospitals periodically update their cost reports in the database as new information becomes available. See Provider Reimbursement Manual (Part I), § 2931.2; see also Medicare Financial Management Manual, ch. 8, § 10.4 (requiring contractors to timely update the database). As a result, the database may contain a series of data sets for any hospital's costs for a single period. This case concerns the use of this data for the calculation of the DSH adjustment.

A. The Disproportionate Share Hospital Adjustment

The DSH adjustment used to be a retrospective payment based on a hospital's actual patient data. But in 2010, Congress established a new procedure as part of the Patient Protection and Affordable Care Act (“ACA”). Pub.L. No. 111–148, as amended by Health Care and Education Reconciliation Act of 2010, Pub.L. No. 111–152. Now, the adjustment is a combination of the traditional retrospective payment added to a new prospective payment, based in part on the agency's estimate of each hospital's amount of uncompensated care.

1. The Traditional DSH Adjustment

Before the ACA, a hospital's DSH adjustment was calculated by adding two fractions: the hospital's Medicare fraction and its Medicaid fraction. The Medicare fraction reflects the number of inpatient days a hospital experienced for patients entitled to both Medicare Part A and Supplemental Security Income (“SSI”) benefits. 42 U.S.C. § 1395ww(d)(5)(F)(vi)(I). The Medicaid fraction reflects the number of inpatient days a hospital experienced for patients eligible for state Medicaid assistance but not Medicare Part A. 42 U.S.C. § 1395ww(d)(5)(F)(vi)(II). A hospital's patient days are reported in the annual cost reports submitted to the agency and maintained in the HCRIS database.

2. The Amended DSH Adjustment

The ACA revised the DSH adjustment as of fiscal year 2014. The calculation is now based on a combination of the traditional DSH adjustment and a prospective estimate of each hospital's amount of uncompensated care. First, the agency provides an “[e]mpirically justified” DSH payment pursuant to section 1395ww(r)(1), which is twenty-five percent of the traditional DSH payment described above. 42 U.S.C. §§ 1395ww(d)(5)(F)(i), 1395ww(r)(1). Second, it provides an “additional payment” pursuant to section 1395ww(r)(2), which is each hospital's share of “75 percent of what otherwise would have been paid as Medicare DSH payments ... after the amount is reduced for changes in the percentage of individuals that are uninsured.” Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long–Term Care Hospital Prospective Payment System and Fiscal Year 2014 Rates, 78 Fed. Red. 50495, 50505 (Aug. 19, 2013) (“final rule”).

The additional payment is calculated by multiplying three factors: (1) an estimate of the remaining seventy-five percent of the DSH payments nationwide; (2) an estimate of the decline in the national uninsured rate for the fiscal year as compared to the prior fiscal year; and (3) each qualifying hospital's share of the total amount of uncompensated care. 42 U.S.C. §§ 1395ww(d)(5)(F)(i), 1395ww(r)(2).

This case concerns the third factor, which the statute defines as follows:

(2) Additional payment

* * *

(C) Factor three

A factor equal to the percent, for each subsection (d) hospital, that represents the quotient of—

(i) the amount of uncompensated care for such hospital for a period selected by the Secretary (as estimated by the Secretary, based on appropriate data (including, in the case where the Secretary determines that alternative data is available which is a better proxy for the costs of subsection (d) hospitals for treating the uninsured, the use of such alternative data)); and

(ii) the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under this subsection for such period (as so estimated, based on such data).

42 U.S.C. § 1395ww(r)(2)(C) (emphasis added). In other words, the numerator in factor three is each hospital's “amount of uncompensated care ... as estimated by the Secretary,” and the denominator is the total amount of uncompensated care for all hospitals as estimated by the Secretary.

The statute also limits judicial and administrative review of the DSH adjustment as follows:

(3) Limitations on review

There shall be no administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or otherwise of the following:

(A) Any estimate of the Secretary for purposes of determining the factors described in paragraph (2).

(B) Any period selected by the Secretary for such purposes.

42 U.S.C. § 1395ww(r)(3). Since Congress clearly provided that “[t]here shall be no administrative or judicial review ... of ... [a]ny estimate of the Secretary” used for purposes of calculating the factors, including factor three, or “[a]ny period selected by the Secretary for such purposes,” the question before the Court in this case at this juncture is whether the Court has subject matter jurisdiction to hear plaintiff's claims at all.

B. Regulatory Implementation of the Amended DSH Adjustment

To implement the amendments to the DSH adjustment, along with other changes to the Medicare statute, HHS issued a proposed rule in May 2013. 78 Fed. Reg. 27486 (May 10, 2013) (“proposed rule”). After receiving public comment, it issued the final rule in August 2013. 78 Fed. Reg. 50496.

With respect to factor three, the agency proposed and received comments on how to select the “appropriate data source” to calculate the additional payment. Id. at 50635. It ultimately determined that at least for fiscal year 2014, it would use “alternative data” as permitted by statute¹ —the same Medicare and Medicaid fractions used to calculate the traditional DSH adjustment. 78 Fed. Reg. at 50636. “The numerator of Factor 3 would be the estimated Medicaid and Medicare SSI patient days for the individual hospital based on its most recent 2010/2011 Medicare cost report data.” Id. at 50640. HHS chose the Medicare cost report data because it has been “historically publicly available, subject to audit, and used for payment purposes,” and it proposed to use “the most recently available cost report” of each hospital's 2010/2011 data. Id. at 50638. Most commenters supported the agency's proposal to use the traditional DSH calculation as an interim measure for purposes of determining factor three. Id. at 50639.

In the proposed rule published in May 2013, the numerator for factor three was estimated using the December 2012 update in the HCRIS database of each hospital's 2010/2011 cost report. 78 Fed. Reg. at 27590. HHS stated that the final rule would use more recent data. Id. A number of hospitals, including plaintiff, submitted comments on the proposed rule concerning the accuracy of the data used for factor three. 78 Fed. Reg. at 50642. Some hospitals expressed...