Lion Health Services, Inc. v. Sebelius, 4:09-CV-493-A.

• Decision Date: 22 February 2010
• Docket Number: No. 4:09-CV-493-A.,4:09-CV-493-A.
• Citation: 689 F. Supp.2d 849
• Parties: LION HEALTH SERVICES, INC., Plaintiff, v. Kathleen SEBELIUS, Secretary, United States Department of Health and Human Services, Defendant.
• Court: U.S. District Court — Northern District of Texas

689 F.Supp.2d 849

LION HEALTH SERVICES, INC., Plaintiff, v. Kathleen SEBELIUS, Secretary, United States Department of Health and Human Services, Defendant.

No. 4:09-CV-493-A.

United States District Court, N.D. Texas, Fort Worth Division.

February 22, 2010.

Brian M. Daucher, Sheppard Mullin Ritcher & Hampton LLP, Costa Mesa, CA, Mark Ian Agee, Law Office of Mark Ian Agee, Dallas, TX, for Plaintiff.

Donna K. Webb, U.S. Attorney's Office, Fort Worth, TX, for Defendant.

MEMORANDUM OPINION and ORDER

JOHN McBRYDE, District Judge.

Now before the court is the motion of plaintiff, Lion Health Services, Inc., for summary judgment. This action is one of several pending in federal district courts nationwide in which a hospice care provider such as plaintiff seeks an order invalidating a federal regulation relating to the calculation of the annual Medicare hospice provider cap.¹ Having considered the motion the response thereto of defendant, Kathleen Sebelius, Secretary, United States Department of Health and Human Services (the "Secretary"), plaintiff's reply, and pertinent legal authorities, the court concludes that the motion should be granted.

I. Background

Plaintiff is a hospice care provider in Hurst, Texas. The Secretary heads the federal agency that administers the Medicare program. As a holder of a Medicare provider agreement, plaintiff is reimbursed for the cost of hospice care that it provides to eligible Medicare beneficiaries. As is true for all hospice care providers that participate in the Medicare program, the total reimbursement that plaintiff may receive for hospice care it provides in any given accounting year² is subject to a limit or "cap." Amounts reimbursed in excess of the cap are overpayments and must be refunded to the Medicare program.

On October 22, 2008, plaintiff's fiscal intermediary³ notified plaintiff that its total Medicare reimbursement had exceeded the cap for the 2006 accounting year by $1,137,113. On July 8, 2009, the fiscal intermediary notified plaintiff that its total reimbursement for the 2007 accounting year had exceeded the cap by $1,124,637. In letters notifying plaintiff of the cap determinations, plaintiff was asked to refund the amounts of its overpayments to the Medicare program.

Pursuant to 42 U.S.C. § 1395oo, plaintiff sought review of the intermediary's overpayment determinations before the Provider Reimbursement Review Board (the "PRRB"), an administrative review panel established to hear disputes Medicare providers have with final decisions of their fiscal intermediaries. Plaintiff argued to the PRRB that the intermediary's overpayment determinations were invalid in their entireties because they were calculated using a regulation, 42 C.F.R. § 418.309(b)(1), that conflicts with the statute describing how the annual provider cap should be calculated. In response to plaintiff's request to seek expedited judicial review of its claims in federal court, the PRRB found that it was without authority to decide the legal question of whether § 418.309(b)(1) was invalid, and, therefore, granted plaintiff's request.

Plaintiff initiated the instant action on August 19, 2009. In its "Complaint For Declaratory And Injunctive Relief And For Sums Due Under The Medicare Act," plaintiff alleged that § 418.309(b) (1) is contrary to the plain language of 42 U.S.C. § 1395f(i)(2)(A) and (C), is arbitrary and capricious, and is in excess of statutory authority. As relief, plaintiff seeks (a) declarations that (i) § 418.309(b)(1) is unlawful and set aside and (ii) the intermediary's overpayment determinations for accounting years 2006 and 2007, made under the unlawful regulation, are set aside; (b) an order enjoining the Secretary from (i) enforcing the intermediary's overpayment determinations and (ii) prospectively using § 418.309(b)(1) to calculate overpayments, if any, for plaintiff or any other hospice care provider; (c) an order requiring the Secretary to return to plaintiff all monies that plaintiff has paid toward repayment of the alleged 2006 and 2007 overpayments; and (d) an order requiring the Secretary to pay legal fees and costs of suit incurred by plaintiff.

II. Plaintiff's Motion for Summary Judgment

Plaintiff recites in its motion for summary judgment that it moves for summary judgment "on its claim that the hospice cap regulation found at 42 C.F.R. § 418.309(b)(1) is invalid as contrary to the express statutory mandate on the method for calculations codified at 42 U.S.C. § 1395f(i)(2)(C)." Pl.'s Mot. for Summ. J. at 1. The court assumes that plaintiff intends to request by its motion that the court grant all relief that would follow from a declaration that § 418.309(b)(1) is invalid. Accordingly, the court will consider all of plaintiff's requested relief in deciding plaintiff's motion.

III. Description of Pertinent Medicare Act Provisions and Related Regulations

Title XVIII of the Social Security Amendments of 1965, commonly known as the Medicare Act, established a federally subsidized health insurance program for the aged and disabled. Pub.L. No. 89-97, 79 Stat. 286 (codified as amended in scattered sections of 42 U.S.C.). In 1982, Congress amended Part A of the Medicare Act to authorize coverage for hospice care. Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub.L. No. 97-248, § 122, 96 Stat. 356, 356-63 (codified as amended in scattered sections of 42 U.S.C.). "Hospice care is an approach to treatment that recognizes that the impending death of an individual warrants a change in focus from curative care to palliative care," and the goal of hospice care is to help terminally ill individuals live their remaining days comfortably, in a home setting. 48 Fed.Reg. 56,008, 56008 (Dec. 16, 1983). Items and services covered by the Medicare hospice care benefit include nursing care, physical and occupational therapy, speech language pathology services, medical-social services, homemaker-home health aide services, physicians' services, short-term inpatient care, counseling, medical supplies, and drugs. 42 U.S.C. § 1395x(dd)(1).

To be eligible to receive hospice care benefits, an individual must be certified by two physicians as "terminally ill," defined by statute as having a medical prognosis that the individual's life expectancy is six months or less. Id. §§ 1395f(a)(7)(A), 1395x(dd)(3)(A). An eligible individual may elect to receive hospice care benefits for two initial periods lasting ninety days each. Id. § 1395d(d)(1). An individual may extend his election of benefits for an unlimited number of subsequent periods lasting sixty days each, provided that he is recertified as "terminally ill" at the beginning of each subsequent period. Id. §§ 1395d(d)(1); 1395f(a)(7)(A).

Medicare reimburses a hospice care provider at one of four predetermined rates for each day that an eligible beneficiary is under the hospice provider's care. 42 C.F.R. §§ 418.301(a), 418.302(a)-(d); see 42 U.S.C. § 1395f(i)(1)(A) (authorizing the Secretary to promulgate regulations for estimating the reasonable cost of hospice care). The applicable rate is determined by the type and intensity of services provided by the hospice on a given day. 42 C.F.R. § 418.302(a)-(d). Although an individual may receive benefits for an unlimited number of days, the total Medicare reimbursement that any hospice care provider may receive for care it provides to that individual in a given accounting year is limited to a "cap amount."⁴ 42 U.S.C. § 1395f(i)(2)(A). According to legislative history, "the intent of the cap was to ensure that payments for hospice care would not exceed what would have been expended by medicare if the patient had been treated in a conventional setting." H. Rep. No. 98-333, at 1 (1983), as reprinted in 1983 U.S.C.C.A.N. 1043, 1043.

A hospice provider is also subject to an overall Medicare reimbursement cap for all hospice care it provides in an accounting year. The overall cap for a given accounting year is calculated by multiplying the "cap amount" for the year by the "number of medicare beneficiaries in the hospice program in that year." 42 U.S.C. § 1395f(i)(2)(A). As defined by the statute,

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.

Id. § 1395f(i)(2)(C).

The Secretary purportedly implemented § 1395f(i)(2)(A) and (C) by promulgating the regulation appearing at 42 C.F.R. § 418.309(b). That regulation, which plaintiff now claims is invalid, provides:

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 28 (35 days before the beginning of the cap period) and ending September 27 (35 days before the end of the cap period).

42 C.F.R. § 418.309(b).

IV. Analysis

A. Summary Disposition Is Appropriate In This Action

Rule 56(c) of the Federal Rules of Civil Procedure provides that a court should render summary judgment "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine...