Goldstar Home Health Sys., Inc. v. Sebelius

• Decision Date: 17 June 2013
• Docket Number: NO. 4:12-CV-906,4:12-CV-906
• Parties: GOLDSTAR HOME HEALTH SYSTEM, INC., Plaintiff, v. KATHLEEN SEBELIUS, SECRETARY, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Defendant.
• Court: U.S. District Court — Northern District of Texas

GOLDSTAR HOME HEALTH SYSTEM, INC., Plaintiff,

v.KATHLEEN SEBELIUS, SECRETARY, UNITED STATES DEPARTMENT

OF HEALTH AND HUMAN SERVICES, Defendant.

NO. 4:12-CV-906

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS FORT WORTH DIVISION

SIGNED June 17, 2013

MEMORANDUM OPINIONandORDER

Before the court for decision is the motion of defendant, Kathleen Sebelius, Secretary, United States Department of Health and Human Services (the "Secretary"), to dismiss the complaint of plaintiff, Goldstar Home Health System, Inc., pursuant to Rule 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, for lack of subject matter jurisdiction and for failure to state a claim upon which relief may be granted. Having considered such motion, plaintiff's response, the Secretary's reply, plaintiff's sur-reply, all supporting documents, and applicable legal authorities, the court concludes that the Secretary's motion to dismiss pursuant to Rule 12(b)(1) should be granted on the groundthat plaintiff's claims have become moot.

Also pending is plaintiff's motion for class certification, in which plaintiff seeks to maintain this action as a class action on behalf of unnamed parties similarly situated to plaintiff. For reasons discussed below, the court concludes that the motion for class certification should be denied as moot.

I.Background

Plaintiff is a hospice care provider located in Arlington, Texas, and provides services to patients in northern Texas, many of whom are eligible for such services through the Medicare program. The Secretary heads the United States Department of Health and Human Services, which contains the Center for Medicare and Medicaid Services, which in turn is responsible for administering the Medicare program according to the Medicare statute, 42 U.S.C. §§ 1395 et seq.

Hospice care is a benefit covered by the Medicare program, and hospice providers such as plaintiff are reimbursed by the Medicare program for the costs of such care. The total amount of reimbursement payments a hospice may receive is statutorily capped for each year under the Medicare Statute, 42 U.S.C. § 1395f(i)(2), and this amount is referred to as a hospice's aggregate cap. If the amount of reimbursement paid by Medicareto a provider exceeds the cap amount for a given year, the provider must refund the excess amount to the Medicare program.

The regulation that implements 42 U.S.C. § 1395f(i)(2) and establishes the methodology for calculating the aggregate cap, 42 C.F.R. § 418.309(b), has been the subject of litigation in numerous courts nationwide during the past several years,¹ and has recently been amended as a result. See 42 C.F.R. § 418.309(b)-(d) (effective Oct. 1, 2011); Aggregate Cap Calculation Methodology, 76 Fed. Reg. 47308 (Aug. 4, 2011). In 2010, this court held that the methodology in place at that time for calculating the aggregate cap established by 42 C.F.R. § 418.309(b)(1) (effective through Sept. 30, 2011) was contrary to 42 U.S.C. § 1395f(i)(2), arbitrary and capricious, an abuse of discretion, and not in accordance with the law. Lion Health Servs., Inc. v. Sebelius, 689 F. Supp. 2d 849, 857 (2010). The court enjoined the Secretary from prospectively using § 418.309(b)(1) to calculate the aggregate cap for the hospice that was the plaintiff in that action. Id. at 858. The court'sholding that the methodology was invalid was affirmed by the Fifth Circuit, Lion Health Servs., Inc. v, Sebelius, 635 F.3d 693 (5th Cir. 2011).²

The Medicare statute governing the aggregate cap, 42 U.S.C. § 1395f(i)(2) provides:

(A) 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 (computed under subparagraph (B)) multiplied by the number of medicare beneficiaries in the hospice program in that year (determined under subparagraph (C)).

* * *

(C) For purposes of subparagraph (A), the number of medicare beneficiaries in a hospice program in an accounting year is equal to the number of individuals who have made an election under subsection (d) of this section with respect to the hospice program and have been provided hospice care by (or under arrangements made by) the hospice program under this part in the accounting year, such number reduced to reflect the proportion of hospice care that each such individual was provided in a previous or subsequent accounting year or under a plan of care established by another hospice program.

42 U.S.C. § 1395f(i)(2). The prior version of 42 C.F.R. § 418.309(b)(1) provided only one method for calculating theaggregate cap amount:

Each hospice's cap amount is calculated by the intermediary by multiplying the adjusted cap amount determined in paragraph (a) of this section by the number of Medicare beneficiaries who elected to receive hospice care from that hospice during the cap period. For purposes of this calculation, the number of Medicare beneficiaries includes-

(1) Those Medicare beneficiaries who have not previously been included in the calculation of any hospice cap and who have filed an election to receive hospice care, in accordance with § 418.24, from the hospice during the period beginning on September 2 8 (35 days before the beginning of the cap period) and ending September 2 7 (35 days before the end of the cap period).

42 C.F.R. § 418.309(b)(1) (effective through Sept. 30, 2011). This methodology, referred to as the "streamlined methodology," does not follow the requirements described in § 1395f (i)(2)(C), that the cap must "reflect the proportion of hospice care that each such individual was provided in a previous or subsequent accounting year." 42 U.S.C. § 1395f(i)(2)(C). After several courts invalidated § 418.309(b)(1), the Secretary determined that it was in the best interest of the Medicare program to amend the regulation. On April 14, 2011, the Centers for Medicare and Medicaid Services issued Ruling CMS-1355-R, entitled, "Medicare Program; Hospice Appeals for Review of an Overpayment Determination," and published notice of the ruling in the Federal Register. 76 Fed. Reg. 26731 (May 9, 2011). The ruling providednotice of the Secretary's determination to grant relief to hospice providers who challenge the validity of the streamlined methodology, and wish to have a patient-by-patient proportional methodology applied to calculate their aggregate cap. Id. The ruling provides, among other things, that the Medicare contractor who conducts the aggregate cap calculation is required to recalculate the cap under the proportional methodology for those providers who have filed a timely appeal with the appropriate administrative board.³ Id. The ruling also explains that, because the Medicare contractor is required to do the recalculation under the proportional methodology, the administrative appeals tribunal will no longer have jurisdiction over an appeal challenging the streamlined methodology but must remand such an appeal to the Medicare contractor for recalculation. Id.

After the requisite period for commentary, a final rule was promulgated and published in the Federal Register, and 42 C.F.R. § 418.309 was amended to create a methodology consistent with therequirements of the governing statute and to allow providers to take advantage of the new methodology, but still continues to provide an option for the use of the streamlined methodology. See Aggregate Cap Calculation Methodology, 76 Fed. Reg. 47302, 47308-314 (Aug. 4, 2011); 42 C.F.R. § 418.309. The regulation, as amended, provides:

A hospice's aggregate cap is calculated by multiplying the adjusted cap amount (determined in paragraph (a) of this section) by the number of Medicare beneficiaries, as determined by one of two methodologies for determining the number of Medicare beneficiaries for a given cap year described in paragraphs (b) and (c) of this section:

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(b) Streamlined methodology defined. A hospice's aggregate cap is calculated by multiplying the adjusted cap amount determined in paragraph (a) of this section by the number of Medicare beneficiaries as determined in paragraphs (b)(1) and (2) of this section. For purposes of the streamlined methodology calculation--

(1) In the case in which a beneficiary received care from only one hospice, the hospice includes in its number of Medicare beneficiaries those Medicare beneficiaries who have not previously been included in the calculation of any hospice cap, and who have filed an election to receive hospice care in accordance with § 418.24 during the period beginning on September 28 (34 days before the beginning of the cap year) and ending on September 27 (35 days before the end of the cap year), using the best data available at the time of the calculation.

(2) In the case in which a beneficiary received care from more than one hospice, each hospice includes in its number of Medicare beneficiaries only that fraction which represents the portion ofa patient's total days of care in all hospices and all years that was spent in that hospice in that cap year, using the best data available at the time of the calculation. The aggregate cap calculation for a given cap year may be adjusted after the calculation for that year based on updated data.

(c) Patient-by-patient proportional methodology defined. A hospice's aggregate cap is calculated by multiplying the adjusted cap amount determined in paragraph (a) of this section by the number of Medicare beneficiaries as described in paragraphs (c)(1) and (2) of this section. For the purposes of the patient-by-patient proportional methodology--

(1) A hospice includes in its number of Medicare beneficiaries only that fraction which represents the portion of a patient's total days of care in all hospices and all years that was spent in that hospice in that cap year, using the best data available at the time of the calculation. The total number of Medicare beneficiaries for a given hospice's cap year is determined by summing the whole

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