Gentiva Health Servs., Inc. v. Cochran

• Decision Date: 03 March 2021
• Docket Number: Civil Action No. 19-2271 (RDM)
• Citation: 523 F.Supp.3d 81
• Parties: GENTIVA HEALTH SERVICES, INC., Plaintiff, v. Norris COCHRAN, Defendant.
• Court: U.S. District Court — District of Columbia

523 F.Supp.3d 81

GENTIVA HEALTH SERVICES, INC., Plaintiff,

v.Norris COCHRAN,¹ Defendant.

Civil Action No. 19-2271 (RDM)

United States District Court, District of Columbia.

Signed March 3, 2021

W. Jerad Rissler, Pro Hac Vice, Arnall Golden Gregory LLP, Atlanta, GA, Adriaen M. Morse, Jr., Arnall Golden Gregory LLP, Washington, DC, for Plaintiff.

MEMORANDUM OPINION

RANDOLPH D. MOSS, United States District Judge When Congress failed to pass a budget in fiscal year 2013, the failure triggered a statutorily mandated process culminating in government-wide "sequestration," a tightening of purse strings across a broad range of programs. Budget Control Act of 2011, 2 U.S.C. § 900 et. seq. One of the many affected programs was Medicare. Id. § 906(d). Plaintiff Gentiva Health Services, Inc. ("Gentiva") brings this action pursuant to the Medicare statute, 42 U.S.C. § 1395oo(f), challenging the manner in which the Secretary of the Department of Health and Human Services ("Secretary") implemented the sequestration beginning in April 2013. Gentiva maintains that the Secretary miscalculated overpayments made to Gentiva for the hospice services it provided during that fiscal year.

The parties have cross-moved for summary judgment. For the reasons explained below, the Court concludes that the Secretary has the better of the argument. The Court will therefore DENY Gentiva's motion for summary judgment and will GRANT the Secretary's cross-motion for summary judgment.

I. BACKGROUND

A. Statutory Background

This case deals with Medicare and sequestration, two markedly complex regimes. Before moving to the specific facts of this case, therefore, the Court will lay out the legal framework at play.

1. Medicare Statute and Hospice Caps

The Medicare program, established in 1965 by Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq. ("Medicare Statute"), has long compensated healthcare providers for certain medical services on behalf of qualifying patients. Id. § 1395d(a); see also Social Security Act, Pub. L. No. 89-97, § 1812, 79 Stat. 286, 291–92. In 1982, Congress added payment for palliative and support services provided by hospice programs to terminally ill Medicare beneficiaries. Provisions Relating to Savings in Health and Income Security Programs, Pub. L. No. 97-248, 96 Stat. 324, 356–63 (1982). But to keep such costs in hand, the lawmakers mandated that each provider would be subject to an annual cap. Under this cap—known as the "aggregate cap"—"[t]he amount of payment ... for hospice care provided by (or under arrangements made by) a hospice program for an accounting year may not exceed the ‘cap amount’ for the year ... multiplied by the number of [M]edicare beneficiaries in the hospice program in that year." 42 U.S.C. § 1395f(i)(2)(A). "The intent of the hospice aggregate cap was to protect Medicare from spending more for hospice care than it would for conventional care at the end of life." Medicare Program; FY 2015 Hospice Wage Index and Payment Rate Update; Hospice Quality Reporting Requirements and Process and Appeals for Part D Payment for Drugs for Beneficiaries Enrolled in Hospice, 79 Fed. Reg. 50,452, 50,471 (Aug. 22, 2014) ("FY 2015 Final Rule"). The "cap amount" was originally set at $6,500 in 1983 and has grown each year since then based on the medical care category of the Consumer Price Index for All Urban Consumers, 42 U.S.C. § 1395f(i)(2)(B) ; 42 C.F.R. § 418.309, growing to $26,157.50 for the 2013 cap year, see FY 2015 Final Rule, 79 Fed. Reg. at 50,471. A further limitation—known as the "inpatient cap"—also keeps payments made to hospice providers in check. The Secretary reimburses providers for inpatient services only to a certain extent; if more than 20 percent of Medicare beneficiaries’ hospice care days are inpatient days, Medicare does not fully reimburse providers for the excess inpatient days. 42 U.S.C. § 1395x(dd)(2)(A)(iii) ; 42 C.F.R. § 418.302(f).

The Centers for Medicare and Medicaid Services ("CMS") oversees the Medicare program, and CMS relies on Medicare Administrative Contractors ("MACs") to administer the process for the payment of providers, including hospice caregivers. 42 C.F.R. §§ 421.100 – 421.104 ; 42 U.S.C. § 1395h(a). To do so, MACs must cope with the following difficulty: Although the Medicare statute requires MACs to reimburse hospice providers for services to Medicare beneficiaries throughout the fiscal year and "not less often than monthly," id. §§ 1395g(a), 1395h(c)(2), MACs do not know what a given hospice's annual aggregate cap will be until the end of the fiscal year. As a result, MACs may overpay providers during the year and need to collect those overpayments after the fiscal year closes.

A regulatory process has emerged to navigate this difficulty. Throughout the fiscal year, MACs pay hospices a "fixed" amount "for each day during which the beneficiary is eligible and under the care of the hospice" depending on the "categor[y] of hospice care" provided "for any particular day." 42 C.F.R. § 418.302(c) & (e) ; see also id. § 418.302(d) ; 42 U.S.C. § 1395g(a). The hospices receive these reimbursements no less than monthly. Dkt. 9-1 at 18; 42 U.S.C. §§ 1395g(a), 1395h(c)(2). A hospice can keep track of its costs and monitor data relevant to estimating its annual inpatient and aggregate caps through the Medicare Provider Statistical and Reimbursement System ("PS&R"). Medicare Program; Hospice Wage Index for Fiscal Year 2012, 76 Fed. Reg. 47,302, 47,325 (Aug. 4, 2011). After the end of the fiscal year, the MACs calculate each hospice's inpatient and aggregate caps, an exercise that historically was not completed until 16 to 24 months after the close of the applicable fiscal period, see Medicare Program; FY 2015 Hospice Wage Index and Payment Rate Update; Hospice Quality Reporting Requirements and Process and Appeals for Part D Payment for Drugs for Beneficiaries Enrolled in Hospice, 79 Fed. Reg. 26,538, 26,557 (May 8, 2014) (" FY 2015 Proposed Rule"); Dkt. 9-1 at 11, although CMS has endeavored to expedite this process, FY 2015 Final Rule, 79 Fed. Reg. at 50,472. After the MAC makes a "final determination of program reimbursement," "[p]ayments made to a hospice during a cap period that exceed the [annual aggregate cap] are overpayments and must be refunded." 42 C.F.R. §§ 418.308, 405.1803(a). A similar process applies to the inpatient cap, and, if the MAC determines "[a]t the end of a cap period" that the hospice exceeded the cap, "any excess reimbursement must be refunded by the hospice." 42 C.F.R. § 418.302(f).

A hospice that "is dissatisfied with a final determination" may "file[ ] a request for a hearing within 180 days after notice of the [MAC's] final determination," to appeal the decision to the Provider Reimbursement Review Board ("Board" or "PRRB"), an independent administrative tribunal "composed of five members appointed by the [HHS] Secretary," with "the power to affirm, modify, or reverse a final determination." 42 U.S.C. § 1395oo(a), (d), (h) ; see also 42 C.F.R. § 418.311. In reviewing a MAC's final determination, the Board "must comply with all the provisions of [the Medicare statute] and regulations issued thereunder, as well as CMS [r]ulings" and must "afford great weight to interpretive rules, general statements of policy, and rules of agency organization, procedure, or practice established by CMS." 42 C.F.R. § 405.1867. The Board's decision is final unless the Secretary reverses, affirms, or modifies the decision within 60 days after the provider receives notice of the decision. 42 U.S.C. § 1395oo(f)(1). If the Secretary does act within that 60-day window, the provider may seek judicial review of the Board decision "within 60 days of the date on which notice of any final decision by the Board ... is received." Id.

2. Sequestration

This case also involves another complex statute: the Budget Control Act of 2011 ("Budget Control Act" or "BCA"). The Budget Control Act includes a "sequestration" provision that requires the President to reduce nonexempt spending programs across the board. See 2 U.S.C. § 901a. To achieve this goal, the BCA specifies formulas for applying sequestration to affected programs and charges the Office of Management and Budget ("OMB") with the responsibility of calculating these reductions, should they be triggered. Id. After OMB determines required reductions, the President must issue an order implementing the cuts. Id. § 904(f)(5). Medicare is among the covered programs. Id. § 906(d). The BCA specifies that "the percentage reduction ... shall apply ... to individual payments for services furnished during the one-year period beginning on the first day of the first month beginning after the date the [President's] order is issued ... such that the reduction made in payments under that order shall achieve the required total percentage reduction in those payments for that period." Id. "The percentage reduction for the Medicare programs," however, "shall not be more than 2 percent for a fiscal year." Id. § 901a(6)(A) ; see also Cmty. Oncology All., Inc. v. OMB , 987 F.3d 1137 (D.C. Cir. 2021).

Pursuant to the Budget Control Act, OMB issued a report to Congress on March 1, 2013 determining that Congress's failure to enact legislation reducing the deficit by $1.2 trillion had triggered the sequestration requirement for the 2013 fiscal year. See Office of Management and Budget Report to the Congress on the Joint Committee Sequestration for Fiscal Year 2013, at 1 (2013) ("OMB Report").² Among an array of other cuts, the 2013 sequestration required "reductions of 2.0 percent to Medicare." Id. That same day, President Obama issued an executive order directing "that budgetary resources in each non-exempt budget account be reduced by the amount calculated by the Office of Management and Budget in its report to the Congress of March 1, 2013." Executive Order, Sequestration Order for Fiscal Year 2013 Pursuant to Section 251A of the Balanced Budget and...