Flint v. Azar

• Decision Date: 31 May 2020
• Docket Number: Civil Action No. 18-2005 (RDM)
• Citation: 464 F.Supp.3d 1
• Parties: McLaren FLINT, Plaintiff, v. Alex M. AZAR II, Secretary, Department of Health and Human Services, Defendant.
• Court: U.S. District Court — District of Columbia

464 F.Supp.3d 1

McLaren FLINT, Plaintiff,

v.Alex M. AZAR II, Secretary, Department of Health and Human Services, Defendant.

Civil Action No. 18-2005 (RDM)

United States District Court, District of Columbia.

Signed May 31, 2020

N. Kent Smith, Hall Render Killian Health & Lyman, P.C., Indianapolis, IN, for Plaintiff.

Diana Viggiano Valdivia, U.S. Attorney's Office for the District of Columbia, Washington, DC, for Defendant.

MEMORANDUM OPINION

RANDOLPH D. MOSS, United States District Judge

Under the Medicare Statute, 42 U.S.C. § 1395 et seq. , a provider "dissatisfied with a final determination" of "the amount of total program reimbursement due to the provider" for Medicare-covered services (known as notice of program reimbursement or "NPR") may appeal the NPR within 180 days to the Provider Reimbursement Review Board (the "Board"), id. § 1395oo(a). Separate and apart from the statutory appeals process, the Secretary of the Department of Health and Human Services ("Secretary") has established a process that allows NPRs to be reopened and revised within three years. 42 C.F.R. § 405.1885(a)(1), (b)(1), (b)(2)(i). If an NPR is reopened, and if the initial NPR is revised, the revised NPR ("RNPR") is "considered a separate and distinct determination" that the provider may appeal within 180 days. Id. § 405.1889(a). Unlike the broad scope of the Board's review of an initial NPR, however, an appeal of a RNPR is "limited to the specific issues revisited on reopening." HCA Health Servs. of Okla., Inc. v. Shalala , 27 F.3d 614, 615 (D.C. Cir. 1994) (" HCA ").

Plaintiff, McLaren Flint, is a Medicare-participating hospital that joined a group appeal based on an RNPR in which the only item revised upon reopening was the hospital's number of "additional Medicaid days to be used" in calculating Plaintiff's reimbursement. AR 709; Dkt. 20-1 at 11–12. The providers in the group appeal, including Plaintiff, later requested expedited judicial review ("EJR"), which requires that the Board individually assess jurisdiction over each provider in the group appeal. Dkt. 20-1 at 12; see also 42 C.F.R. § 405.1842(f)(1), (e)(1) ; id. § 405.1840(b); id. § 405.1837(a). The Board determined that it lacked jurisdiction over Plaintiff's challenge because the common issue in the group appeal—the correct allocation of Medicare Part C days—was not a matter revised in the reopening of Plaintiff's NPR. AR 9. Plaintiff then brought this suit, alleging that the Board's determination was arbitrary and capricious because, according to Plaintiff, the number of Medicaid-eligible days is interconnected with the allocation of Medicare Part C days, and the Board incorrectly treated the number of Medicaid eligible days as a separate issue. Dkt. 1. Before the Court are the parties’ cross-motions for summary judgment. Dkt. 16; Dkt. 20. For the reasons explained below, the Court will GRANT Defendant's motion, and will DENY Plaintiff's motion.

I. BACKGROUND

A. Statutory and Regulatory Background

1. The DSH Adjustment

The Medicare Act, 42 U.S.C. § 1395 et seq. , established a federal health insurance program for the elderly and people with disabilities. See Fischer v. United States , 529 U.S. 667, 671, 120 S.Ct. 1780, 146 L.Ed.2d 707 (2000). The Medicare statute is divided into several "Parts," see Cares Cmty. Health v. U.S. Dep't of Health & Human Servs. , 944 F.3d 950, 953 (D.C. Cir. 2019), three of which are relevant here: Parts A, C, and E. Part A has existed since the Medicare statute was enacted in 1965, see Azar v. Allina Health Servs. , ––– U.S. ––––, 139 S. Ct. 1804, 1809, 204 L.Ed.2d 139 (2019), and is sometimes referred to (along with Part B) as "[t]raditional Medicare," see, e.g. , Cares Cmty. Health , 944 F.3d at 953. Under Part A, the federal government pays hospitals and other service providers "directly for providing covered patient care," Allina Health Servs. , 139 S. Ct. at 1809 ; see also 42 U.S.C. §§ 1395c –i-5. In 1997, "Congress created ‘Medicare Part C,’ sometimes referred to as Medicare Advantage." Allina Health Servs. , 139 S. Ct. at 1809. Under Part C, eligible persons "may choose to have the government pay their private insurance premiums rather than pay for their hospital care directly." Id. Part E, as relevant here, sets out the methods that the Secretary uses to calculate reimbursement rates for Medicare-participating hospitals. ¹

See Catholic Health Initiatives Iowa Corp. v. Sebelius , 718 F.3d 914, 916 (D.C. Cir. 2013) (citing 42 U.S.C. § 1395ww(d) ). One such method, the disproportionate share hospital ("DSH") adjustment, is central to this case. See Baptist Mem. Hosp. v. Sebelius , 603 F.3d 57, 60 (D.C. Cir. 2010) (discussing the DSH calculation).

The DSH adjustment is used to calculate whether and how large an "adjustment" (an increased reimbursement) a provider should receive because the hospital "serves a significantly disproportionate number of low-income patients." 42 U.S.C. § 1395ww(d)(5)(F)(i)(I). The DSH adjustment "is made because hospitals with an unusually high percentage of low-income patients generally have higher per-patient costs; [and], Congress therefore found [that such hospitals] should receive higher reimbursement rates." Sebelius v. Auburn Reg'l Med. Ctr. , 568 U.S. 145, 150, 133 S.Ct. 817, 184 L.Ed.2d 627 (2013) (citing H.R. Rep. No. 99-241, pt. 1, p.16 (1985)). A DSH adjustment is calculated, in part, based on the hospital's "disproportionate patient percentage" ("DPP"), which is a "proxy" for the "number of low-income patients a hospital serves." Ne. Hosp. Corp. v. Sebelius , 657 F.3d 1, 3 (D.C. Cir. 2011) (citing 42 U.S.C. § 1395ww(d)(5)(F)(v)–(vii) ; H.R. Rep. No. 99–241, pt. 1, at 17 (1985)) (quotation marks omitted). The DPP, in turn, "represents the sum of two fractions, commonly called the ‘Medicare fraction’ and the ‘Medicaid fraction.’ " Id. The bigger the sum, the bigger the DSH adjustment. See Allina Health Servs. , 139 S. Ct. at 1809.

The Medicare fraction (sometimes called the SSI fraction) "asks how much of the care the hospital provided to Medicare patients in a given year was provided to low-income Medicare patients." Allina Health Servs. , 139 S. Ct. at 1809 ; Baystate Med. Ctr. v. Leavitt , 545 F. Supp. 2d 20, 24 (D.D.C. 2008) (explaining that "the Medicare fraction ... is often referred to as the SSI fraction"). The fraction's numerator is the total number of patient days "the hospital spent caring for Part-A-entitled patients who were also entitled to income support payments under the Social Security Act." Allina Health Servs. , 139 S. Ct. at 1809 ; (citing 42 U.S.C. § 1395ww(d)(5)(F)(iv)(I) ); Baystate Med. Ctr. , 545 F. Supp. 2d at 24 (explaining that the time is measured by "the number of hospital inpatient days"). The fraction's denominator is the total number of patient days "the hospital spent caring for patients who were ‘entitled to benefits’ under Part A." Allina Health Servs. , 139 S. Ct. at 1809.

The Medicaid fraction, in turn, "accounts for the number of Medicaid patients—who, by definition, are low income—[who are] not entitled to Medicare." Allina Health Servs. v. Sebelius , 746 F.3d 1102, 1105 (D.C. Cir. 2014). "The numerator is the number of patient days attributable to patients who (for such days) were eligible for Medicaid, but ‘not entitled to benefits under [Medicare] Part A.’ " Id. (quoting 42 U.S.C. § 1395ww(d)(5)(F)(iv)(II) ). The denominator is the hospital's "total number of patient days, regardless of whether the patients were enrolled in a federal medical benefits program." Id. (citing 42 U.S.C. § 1395ww(d)(5)(F)(iv) ). The following chart, helpfully provided by the Court Appeals in Northeast Hospital Corp. v. Sebelius , 657 F.3d 1, 3 (D.C. Cir. 2011), summarizes the two fractions:

Medicare Fraction	Medicaid Fraction
Numerator	Patient days for patients "entitled to benefits under Part A" and "entitled to SSI benefits"	Patient days for patients "eligible for [Medicaid]" but not "entitled to benefits under Part A"
Denominator	Patient days for patients "entitled to benefits under Part A"	"Total number of patient days"

Since the enactment of Medicare Part C in 1997, Balanced Budget Act of 1997, Pub. L. No. 105-33, 111 Stat. 251 (codified as amended at 42 U.S.C. §§ 1395w-21 to w-28), several cases have addressed whether and how Medicare Part C patient days should be counted, see Allina Health Servs. , 139 S. Ct. at 1810 (discussing this history). The heart of the issue is whether "Part C patients should be counted as ‘entitled to benefits under’ Part A when calculating a hospital's Medicare fraction." Id. Because Part C patients "tend to be wealthier than patients who opt for traditional Part A coverage," counting Part C patient days in the Medicare fraction "makes the [Medicare] fraction smaller and reduces hospitals’ payments considerably." Id. In addition, because "the statute unambiguously requires that Part C days be counted in one fraction or the other," Allina Health Servs. , 746 F.3d at 1108, if Part C days are excluded from the Medicare fraction, they must then be counted in the Medicaid fraction, which could potentially increase the payments to hospitals. The decision about how to allocate Part C days has serious financial ramifications for Medicare-participating hospitals. See id. (observing that the "binary choice" could have a potential financial impact "in the hundreds of millions of dollars"). This issue has yet to be fully resolved. See Allina Health Servs. , 139 S. Ct. at 1810 ("Challenges to the [agency's most recent] rule are pending.").

2. Statutory Appeals and Reopening Appeals

To obtain Medicare reimbursement payments, participating hospitals must "submit cost reports to contractors acting on behalf of HHS" known as Medical administrative contractors ("MACs"). Auburn Reg'l Med. Ctr. , 568 U.S. at 150, 133 S.Ct. 817 ; see also Saint Francis Med. Ctr. v. Azar , 894 F.3d 290, 291 (D.C. Cir. 2018) (noting that MACs were previously referred to as fiscal intermediaries...