Kindred Healthcare, Inc. v. Azar
| Decision Date | 28 June 2020 |
| Docket Number | Civil Case No. 18-650 (RJL) |
| Parties | KINDRED HEALTHCARE, INC., Plaintiff, v. ALEX M. AZAR, II Secretary, United States Department of Health and Human Services, Defendant. |
| Court | U.S. District Court — District of Columbia |
Kindred Healthcare, Inc. ("Kindred") brings various Administrative Procedure Act ("APA") and constitutional claims against the Secretary of Health and Human Services, challenging the Secretary's decision to deny several of Kindred's long-term care hospitals ("LTCHs") and a Skilled Nursing Facility ("SNF") Medicare reimbursements for services provided to Medicare beneficiaries from 2006 to 2014. During the relevant period, Kindred's LTCHs and its SNF (collectively, "the Providers") all participated in Medicare, but none participated in their respective states' Medicaid programs. When certain beneficiaries eligible for both Medicare and Medicaid failed to pay deductibles and coinsurance payments owed the Providers, the Providers sought reimbursement under Medicare. The Secretary ultimately denied their requests, concluding the Providers failed to satisfy the regulatory criteria for reimbursement of payments owed by the beneficiaries. Kindred filed suit. Pending before me are the parties' cross-motions for summary judgment, as well as Kindred's motion to strike evidentiary exhibits attached to the Secretary's motion. See Kindred Mot. for Summ. J. ("Kindred Mot.") [Dkt. # 13]; Def.'s Cross Mot. for Summ. J. ("Def.'s Mot.") [Dkt. # 21]; Kindred Mot. to Strike ("Mot. to Strike") [Dkt. # 25]. Kindred subsequently moved for oral argument or, alternatively, for leave to file a surreply [Dkt. # 34]. Upon consideration of the briefing, the relevant law, the entire record, and for the reasons stated below, Kindred's motion to strike is GRANTED, Kindred's motion for summary judgment is GRANTED, the Secretary's cross-motion for summary judgment is DENIED, and Kindred's motion for oral argument is DENIED AS MOOT.
The Medicare program "is a federally funded medical insurance program for the elderly and disabled." Fischer v. United States, 529 U.S. 667, 671 (2000). On behalf of the Secretary of Health and Human Services ("the Secretary"), Centers for Medicare and Medicaid Services ("CMS") administers the Medicare program "through contracts with [M]edicare administrative contractors," known as fiscal intermediaries ("the intermediaries"). 42 U.S.C. § 1395h. To receive reimbursement for services provided to Medicare patients under the program, a provider must submit annual cost reports to itsintermediary, which in turn determines the amount of reimbursement due that provider. 42 C.F.R. § 413.20(b), 413.24(f).
If a provider is "dissatisfied with a final determination" of the intermediary, it may appeal to the Provider Reimbursement Review Board ("the Board"). 42 U.S.C. § 1395oo(a). The Board's decision is "final unless the Secretary"—often through the CMS Administrator—"reverses, affirms, or modifies the Board's decision." Id. § 1395oo(f)(1); 42 C.F.R. § 405.1875 (). A provider may "obtain judicial review of any final decision" by the Board or the CMS Administrator ("the Administrator"). 42 U.S.C. § 1395oo(f)(1); 42 C.F.R. § 405.1877(a)(2).
"The Medicaid program is a cooperative federal-state program to provide medical care for eligible low-income individuals . . . jointly funded by federal and state governments." Grossmont Hosp. Corp. v. Burwell, 797 F.3d 1079, 1081 (D.C. Cir. 2015). For a state to qualify for federal funding, the Secretary must approve the state's Medicaid plan, which lists covered medical services. See 42 U.S.C. §§ 1396a, 1396b. Some beneficiaries are eligible for both Medicare and Medicaid. Those individuals, who are often elderly and low-income, are known as "dual eligibles." See Grossmont Hosp., 797 F.3d at 1081. "Medicare is the primary payor" in those circumstances, but "[s]tate Medicaid plans often mandate that the state Medicaid agency pay for part[,] or all[,] of the Medicare deductibles and coinsurance amounts incurred in connection with treating these dual eligibles." Id.
Although the federal government bears most of the costs of Medicare, "individual Medicare patients are 'often responsible for both deductible and coinsurance payments for hospital care.'" Mercy Gen. Hosp. v. Azar, 344 F. Supp. 3d 321, 326-27 (D.D.C. 2018) (quoting Cmty. Health Sys., Inc. v. Burwell, 113 F. Supp. 3d 197, 203-04 (D.D.C. 2015)). If a Medicare patient fails to make those payments to a provider, the provider may seek reimbursement from CMS for those amounts, known as "bad debts." See 42 C.F.R. § 413.89(e); see also 42 C.F.R. § 413.89(b)(1) (). To obtain bad debt reimbursement, providers must demonstrate that the debt satisfies four long-standing criteria, in effect since 1966:
42 C.F.R. § 413.89(e); see also 31 Fed. Reg. 14808, 14813 (Nov. 22, 1966).
CMS's Provider Reimbursement Manual, Part I ("PRM") provides guidance as to what constitutes a "reasonable collection effort." Section 310 provides that "reasonable collection efforts . . . must involve the issuance of a bill on or shortly after discharge or death of the beneficiary to the party responsible for the patient's personal financialobligations." PRM § 310; see also Admin. Record ("AR") at 12. Section 312, however, provides an exception to PRM § 310 for bad debts incurred by indigent patients: "Once indigence is determined and the provider concludes that there ha[s] been no improvement in the beneficiary's financial condition, the debt may be deemed uncollectible without applying the § 310 procedures." PRM § 312 (emphasis added). It further explains that individuals who are eligible for Medicaid "may be automatically deemed indigent," though the provider must still "determine that no source other than the patient would be legally responsible for the patient's medical bill." PRM § 312.
Finally, § 322 provides further guidance with respect to bad debts incurred by dual eligibles specifically. It explains that "[w]here the State is obligated either by statute or under the terms of its [Medicaid] plan to pay all, or any part, of the Medicare deductible or coinsurance amounts, those amounts are not allowable as bad debts under Medicare." PRM § 322. Nonetheless, "[a]ny portion of such deductible or coinsurance amounts that the State is not obligated to pay can be included as a bad debt under Medicare, provided that the requirements of §[ ]312 or, if applicable, §[ ]310 are met." Id. (emphasis added). Additionally, if "the State has an obligation to pay, but either does not pay anything or pays only part of the deductible or coinsurance," a provider is entitled to "any portion of the deductible or coinsurance that the State does not pay that remains unpaid by the patient, . . . as a bad debt under Medicare, provided that the requirements of § 312 are met." Id.
Apart from those PRM provisions, CMS also imposes two other requirements on providers, which it adopted through adjudication: (1) the provider must bill the relevantstate Medicaid program ("the Billing Requirement") and (2) the provider must receive a remittance advice ("RA") from the state denying payment ("the RA Requirement"). AR at 20; see also Compl. ¶ 39; Ans. ¶ 39. The Secretary refers to these two requirements together as the "must-bill" policy. AR at 2; Ans. ¶ 39.
Omnibus Budget Reconciliation Act of 1987 ("OBRA"), Pub. L. No. 100-203, tit. IV, § 4008(c), 101 Stat. 1330-55 (codified at 42 U.S.C. § 1395f note). In 1988, Congress amended the Medicare Act to clarify that its Moratorium meant that no policy changescould be made to the "criteria for what constitutes a reasonable collection effort . . . includ[ing] criteria for indigency determination procedures, for record keeping, and for determining whether to refer a claim to an external collection agency." Technical and Miscellaneous Revenue Act of 1988, Pub. L. No. 100-647, tit. VIII, § 8402, 102 Stat. 3342, 3798 (codified at 42 U.S.C. § 1395f note) (emphasis added).
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