Gentiva Health Servs., Inc. v. Becerra

• Decision Date: 15 April 2022
• Docket Number: 21-5091
• Citation: 31 F.4th 766
• Parties: GENTIVA HEALTH SERVICES, INC., Appellant v. Xavier BECERRA, in his official capacity as Secretary of the U.S Department of Health and Human Services, Appellee
• Court: U.S. Court of Appeals — District of Columbia Circuit

31 F.4th 766

GENTIVA HEALTH SERVICES, INC., Appellant

v.Xavier BECERRA, in his official capacity as Secretary of the U.S Department of Health and Human Services, Appellee

No. 21-5091

United States Court of Appeals, District of Columbia Circuit.

Argued February 7, 2022

Decided April 15, 2022

W. Jerad Rissler argued the cause for appellant. With him on the briefs was Adriaen M. Morse, Jr.

William A. Dombi was on the brief for amicus curiae National Association for Home Care & Hospice in support of appellant.

McKaye L. Neumeister, Attorney, U.S. Department of Justice, argued the cause for appellee. With her on the brief was Brian M. Boynton, Acting Assistant Attorney General at the time the brief was filed, Michael S. Raab, Attorney, Janice L. Hoffman, Associate General Counsel, U.S. Department of Health & Human Services, Susan Maxson Lyons, Deputy Associate General Counsel for Litigation, and W. Charles Bailey, Jr., Attorney. Alisa B. Klein, Attorney, U.S. Department of Justice, entered an appearance.

Before: Rogers, Millett and Pillard, Circuit Judges.

Rogers, Circuit Judge:

Every year, millions of Americans — most of them Medicare beneficiaries — receive hospice care. Br. for Nat'l Ass'n for Home Care & Hospice as Amicus Curiae at 5–6 (citing Nat'l Hospice & Palliative Care Org., NHCPO Facts and Figures 6–11, 22 (2020), https://bit-ly.ezproxy.lib.ntust.edu.tw/3gTXpmx). For eligible Medicare beneficiaries, the Medicare program reimburses hospice providers for services at per-diem rates in periodic disbursements throughout the fiscal year. That reimbursement is subject to certain fiscal-year-end adjustments, including a cap on the total reimbursement a provider may receive for inpatient hospice care ("inpatient cap") and a cap on the total reimbursement a provider may receive for all hospice services ("aggregate cap").

In 2013, budget sequestration under the Budget Control Act of 2011 forced spending reductions in nearly all federal programs, including Medicare, requiring a 2% reduction in all Medicare spending. Periodic disbursements to hospice providers were accordingly reduced by 2%. Because calculation of the aggregate cap was unaffected, the methodology initially used by Medicare's hospice reimbursement contractors meant a hospice that exceeded its aggregate cap would receive the same total annual reimbursement — the cap amount — as in a non-sequestration year, while a hospice that came in under its aggregate cap for the year would receive the full 2% cut. To remedy this problem, the Centers for Medicare and Medicaid Services ("CMS") adopted a methodology for end-of-year reconciliation whereby overpayments were to be calculated as if sequestration had not been in effect, and any resulting overpayment was to be reduced by 2% to account for the already reduced preliminary disbursements.

Gentiva Health Services, Inc., a hospice provider, challenges CMS's methodology, contending that it violates both the Medicare statute and the Budget Control Act, and that CMS did not follow the required administrative procedures for adopting it. For the following reasons, we affirm the district court's grant of summary judgment because the Secretary correctly interpreted the Medicare statute and the Budget Control Act in devising the sequestration methodology, and because adoption of the methodology did not deprive hospice providers of adequate notice or procedural protections.

I.

This case arises out of the interaction of two statutory schemes: the Medicare statute (specifically, the provision governing reimbursements to hospice care providers) and the Budget Control Act.

A.

CMS, a division of the Department of Health and Human Services, administers the Medicare program, including hospice benefits for terminally ill patients under Medicare Part A. See 42 U.S.C. § 1395c. Hospice coverage under Medicare takes the form of a per-patient, per-day, per-category-of-care reimbursement to the hospice care provider — that is, a flat daily rate — determined by Congress and the Secretary. Id. § 1395f(i)(1); see also 42 C.F.R. §§ 418.302, .306. The total amount of reimbursement a hospice provider may receive from Medicare in a year is subject to two caps: a cap on reimbursements for inpatient services, 42 U.S.C. § 1395x(dd)(2)(A)(iii) ; see 42 C.F.R. § 418.302(f), and, as relevant here, an "aggregate cap" on total reimbursements for all hospice services, 42 U.S.C. § 1395f(i)(2) ; see 42 C.F.R. §§ 418.301(b), .308(a).

With respect to the aggregate cap, the Medicare statute provides that reimbursements for hospice services are capped annually: "The amount of payment made under this part 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) ; see 42 C.F.R. § 418.309. "The intent of the [aggregate] cap was to ensure that payments for hospice care would not exceed what would have been expended by [M]edicare if the patient had been treated in a conventional setting." H.R. REP. NO. 98-333, at 1 (1983).

Medicare reimbursements for hospice services follow a two-step process. The Medicare Administrative Contractors that process reimbursements to providers make regular disbursements throughout the cap year (November 1 to October 31) based on the per-diem reimbursement rates. See 42 C.F.R. § 418.302(d) – (e). Then, at the end of the cap year, the hospice provider works with the contractor on a reconciliation process to determine, among other things, whether those periodic disbursements exceeded the aggregate cap (which can only be determined after the end of the cap year). See 42 C.F.R. § 418.308(c) – (d) ; 79 Fed. Reg. 50,452, 50,472 –73 (Aug. 22, 2014). Hospices must repay any overpayments. 42 C.F.R. § 418.308(d). If a hospice concludes a contractor's determination of its overpayment obligation (if any) is mistaken, it can administratively challenge that determination before the Provider Reimbursement Review Board. See 42 U.S.C. § 1395oo(a) ; 42 C.F.R. § 418.311.

The Budget Control Act of 2011, Pub. L. No. 112-25, 125 Stat. 240, aimed to reduce federal government spending via certain budgetary devices. The Act provides that, should Congress fail to enact legislation that reduces the deficit by a specified amount, sequestration is triggered, meaning that federal government spending must be reduced by a certain percentage across the board (with certain programs exempted). See 2 U.S.C. § 901a. The Office of Management and Budget ("OMB") calculates, and the President implements, the percentage reduction based on statutory guidelines. Id.

Medicare spending is subject to sequestration, but enjoys certain special rules, including that the maximum percentage reduction that may be applied to Medicare spending is 2%. 2 U.S.C. § 901a(6)(A). With respect to Medicare Parts A and B, the Budget Control Act provides that "[t]o achieve the total percentage reduction in those programs required by section 902 or 903 of this title ... OMB shall determine, and the applicable Presidential order ... shall implement, the percentage reduction that 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 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. § 906(d)(1).

B.

On March 1, 2013, the conditions for sequestration were triggered and OMB determined that the maximum 2% reduction to Medicare spending was required. See Office of Management & Budget, OMB Report to Congress on the Joint Comm. Sequestration for Fiscal Year 2013 , at 1, 5 (2013), https://go.usa.gov/xVMJb ("OMB 2013 Sequestration Report"). CMS soon announced how this would impact Medicare providers, explaining that claims "with dates-of-service or dates-of-discharge on or after April 1, 2013, will incur a 2 percent reduction in Medicare payment." Provider Reimbursement Review Board Decision, Case No. 15-3457GC, at 5 n.32 (May 31, 2019). But at the time, CMS did not specifically address how the reduction would interact with the hospice care reimbursement process.

On March 3, 2015, CMS issued to its contractors a Technical Direction Letter providing additional guidance on the sequestration methodology for hospice reimbursement calculations while sequestration was in effect. The contractors would first determine the amount by which a given provider's periodic reimbursements were reduced by sequestration and add that figure to the net payments actually disbursed to the provider during the year, arriving at the amount that would have been disbursed in the absence of sequestration (infra "Figure A"). Then the contractors were to determine the provider's aggregate cap and apply the aggregate cap to Figure A, resulting in the amount of overpayment the provider would owe were sequestration not in effect (infra "Figure B"). Finally, to account for the sequestration reduction that had already been applied to the periodic disbursements, the contractors were to reduce Figure B by 2%, arriving at the amount of overpayment actually owed under sequestration (infra "Figure C"). As the district court illustrated by a simplified example, that process resulted in uniform 2% reductions in Medicare reimbursements to hospice providers, whether or not the providers had received excess disbursements during the year and thus exceeded their aggregate cap:

                                                 Net Payments Methodology
                                                            Hospice A    Hospice B
                                           Aggregate        $1,000       $1,000
                                           Cap
                                           Net              $980         $1,176
                                           Disbursements
                                           Overpayment

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