Hoag Memorial Hospital Presbyterian v. Price, 080717 FED9, 15-56547

Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
Attorney:Robert C. Leventhal (argued) and A. Joel Richlin, Foley & Lardner LLP, Los Angeles, California, for Plaintiffs-Appellants. Jeffrey Eric Sandberg (argued), Lindsey Powell, and Mark B. Stern, Attorneys, Appellate Staff; Eileen M. Decker, United States Attorney; Civil Division, United States Departm...
Judge Panel:Before: MILAN D. SMITH, JR. and N.R. SMITH, Circuit Judges, and GARY FEINERMAN, District Judge.
Opinion Judge:Milan D. Smith, Jr. Circuit Judge.
Party Name:Hoag Memorial Hospital Presbyterian, a California corporation; Kaweah Delta Health Care District, a California Local Health Care District; Anaheim Memorial Medical Center, a California corporation; Long Beach Memorial Medical Center, a California corporation; Orange Coast Memorial Medical Center, a California corporation; Saddleback Memorial ...
Case Date:August 07, 2017
Docket Nº:15-56547
 
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Hoag Memorial Hospital Presbyterian, a California corporation; Kaweah Delta Health Care District, a California Local Health Care District; Anaheim Memorial Medical Center, a California corporation; Long Beach Memorial Medical Center, a California corporation; Orange Coast Memorial Medical Center, a California corporation; Saddleback Memorial Medical Center, a California corporation; Pioneers Memorial Healthcare District, a California Local Health Care District; Salinas Valley Memorial Healthcare System, a California Local Health Care District; San Antonio Community Hospital, a California corporation; Sierra View Local Health Care District, a California Local Health Care District; SRM Alliance Hospital Services, a California nonprofit corporation, DBA Petaluma Valley Hospital; Mission Hospital Regional Medical Center, a California nonprofit corporation; Queen Of The Valley Medical Center, a California nonprofit corporation; Redwood Memorial Hospital of Fortuna, a California nonprofit corporation; Santa Rosa Memorial Hospital, a California nonprofit corporation; St. Joseph Hospital of Eureka, a California nonprofit corporation; St. Joseph Hospital of Orange, a California nonprofit corporation; St. Jude Hospital, a California nonprofit corporation; St. Mary Medical Center, a California nonprofit corporation; Tahoe Forest Hospital District, a California Local Health Care District; Tenet Healthsystem Desert Inc., a California corporation; Doctors Hospital of Manteca, Inc., a California corporation; Doctors Medical Center of Modesto, Inc., a California corporation; Fountain Valley Regional Hospital and Medical Center, a California corporation; JFK Memorial Hospital, Inc., a California corporation; San Ramon Regional Medical Center, Inc., a California corporation; Lakewood Regional Medical Center, Inc., a California corporation; Los Alamitos Medical Center, Inc., a California corporation; Placentia-Linda Hospital, Inc., a California corporation; Sierra Vista Hospital, Inc., a California corporation; Twin Cities Community Hospital, Inc., a California corporation; Tenet Healthsystem Knc, Inc., a California corporation; San Dimas Community Hospital, a California corporation; Community Hospital of Los Gatos, Inc., a California corporation; Tenet 1500 San Pablo, Inc., a California corporation, FKA Anaheim MRI Holding, Inc.; Medical Center of Garden Grove, a California corporation; Ami Hti Tarzana Joint Venture, a Delaware General Partnership; Amisub Irvine Medical Center, a California corporation; UHS-Corona, Inc., a California Corporation; Lancaster Hospital Corporation, a California corporation; Universal Health Services of Rancho Springs, Inc., a California corporation; San Gorgonio Memorial Hospital, a California corporation; Adventist Health Clearlake Hospital, a California corporation; Central Valley General Hospital, a California corporation; Feather River Hospital, a California corporation; Glendale Adventist Medical Center, a California corporation; Hanford Community Hospital, a California corporation; San Joaquin Community Hospital, a California corporation; Simi Valley Hospital and Health Care Services, a California corporation; Sonora Community Hospital, a California corporation; Ukiah Adventist Hospital, a California corporation; White Memorial Medical Center, a California corporation; Willits Hospital, Inc., a California Corporation; Santa Barbara Cottage Hospital, a California nonprofit corporation; Goleta Valley Cottage Hospital, a California nonprofit corporation, Plaintiffs-Appellants,

v.

Tom Price, Secretary of United States Department of Health and Human Services, [*]Defendant-Appellee.

No. 15-56547

United States Court of Appeals, Ninth Circuit

August 7, 2017

          Argued and Submitted April 5, 2017 Pasadena, California

         Appeal from the United States District Court For the Central District of California, No. 2:11-cv-10638-SVW-MAN Stephen V. Wilson, District Judge, Presiding

          Robert C. Leventhal (argued) and A. Joel Richlin, Foley & Lardner LLP, Los Angeles, California, for Plaintiffs-Appellants.

          Jeffrey Eric Sandberg (argued), Lindsey Powell, and Mark B. Stern, Attorneys, Appellate Staff; Eileen M. Decker, United States Attorney; Civil Division, United States Department of Justice, Washington, D.C.; for Defendant-Appellee.

          Before: MILAN D. SMITH, JR. and N.R. SMITH, Circuit Judges, and GARY FEINERMAN, District Judge. [**]

         SUMMARY[***]

         Medicaid

         The panel reversed the district court's summary judgment entered in favor of the Secretary of U.S. Department of Health and Human Services, and held that the Secretary's approval of a state plan amendment retroactively implementing a 10% rate reduction for outpatient services provided to beneficiaries of California's Medicaid program violated 42 U.S.C. § 1396(a)(30)(A)("§ 30(A)"), and was arbitrary and capricious.

         The panel held that the Secretary erred in approving the state plan amendment pursuant to § 30(A) without requiring any evidence regarding "the extent that such care and services are available to the general population in the geographic area." The panel held that the Secretary's implicit interpretation of § 30(A) conflicted with the statute's plan language, and was not entitled to Chevron deference. The panel remanded for further proceedings.

          OPINION

          Milan D. Smith, Jr. Circuit Judge.

         In 2011, the Secretary of Health and Human Services (HHS) implicitly interpreted 42 U.S.C. § 1396(a)(30)(A) (§ 30(A)) to permit approval of a state Medicaid plan rate reduction where the Secretary had not considered evidence comparing beneficiaries' access to medical services to that of the general public. This appeal considers what deference we owe the Secretary's interpretation of the portion of § 30(A) requiring that state plans provide for rates "sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area." (emphasis added). In light of this express statutory language, we hold that the Secretary erred in approving a state plan amendment pursuant to § 30(A) without requiring any evidence regarding "the extent that such care and services are available to the general population in the geographic area."

         FACTUAL AND PROCEDURAL BACKGROUND

         Appellants, who are 57 hospitals that provide outpatient services to Medicaid beneficiaries, challenge the Secretary's approval of a state plan amendment (SPA) retroactively implementing a 10% rate reduction for outpatient services provided to beneficiaries of California's Medicaid program (Medi-Cal).[1] The rate reduction in question applied from July 2008 through February 2009. California (the State) first submitted the SPA to the Centers for Medicare and Medicaid Services (CMS) for the Secretary's approval in September 2008. The Secretary initially declined to approve the SPA because "the State did not provide information concerning the impact of the proposed reimbursement reductions on beneficiary access to services, even though available national data indicate[d] that this [might] be an issue for California."

         The State requested that the Secretary reconsider the decision, and submitted additional information in support of the SPA. This new data included a study reflecting trends in provider participation in Medi-Cal, as well as beneficiary use of hospital outpatient services over a period of three years. The study reflected a relatively constant level of Medi-Cal beneficiary utilization of hospital outpatient services during that period. The study additionally considered whether the percentage of hospitals providing outpatient services to Medi-Cal beneficiaries had changed over time, and found that it generally had not. The study concluded that Medi-Cal beneficiary "access and utilization were clearly not impacted by the 10% provider payment reduction in effect from July 2008 through February 2009."

         On October 27, 2011, the Secretary approved the State's resubmitted SPA, including the temporary 10% rate reduction for hospital...

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