Mem'l Hosp. of S. Bend v. Becerra

• Decision Date: 25 March 2022
• Docket Number: Civil Action 20-3461 (JEB)
• Parties: MEMORIAL HOSPITAL OF SOUTH BEND, et al., Plaintiffs, v. XAVIER BECERRA, Secretary of Health and Human Services, Defendant.
• Court: U.S. District Court — District of Columbia

MEMORIAL HOSPITAL OF SOUTH BEND, et al., Plaintiffs,
v.
XAVIER BECERRA, Secretary of Health and Human Services, Defendant.

Civil Action No. 20-3461 (JEB)

United States District Court, District of Columbia

March 25, 2022

MEMORANDUM OPINION

JAMES E. BOASBERG UNITED STATES DISTRICT JUDGE

In 2009, Plaintiffs Memorial Hospital of South Bend and Union Hospital appealed to the Department of Health and Human Services' Provider Reimbursement Review Board (PRRB) a determination by the Centers for Medicare and Medicaid Services (CMS) regarding the formula for the hospitals' Medicare reimbursement. When the PRRB sua sponte dismissed the appeal for jurisdictional reasons, they brought suit here. The parties have now cross-moved for summary judgment on the appropriateness of the jurisdictional dismissal. As the Court ultimately agrees with Defendant and upholds the PRRB's decision, it will address only the jurisdictional determination and not reach the substantive reimbursement claim that formed the basis of Plaintiffs' appeal.

I.Background

A. Factual Background

Although this Opinion will not delve into the underlying merits and the reader need not commit to memory the specific reimbursement methodology, a brief detour into how healthcare

1

providers are paid under the Medicare Program is nonetheless valuable for understanding why this case arose and the PRRB's jurisdictional decision. CMS, a part of HHS, operates the provider-reimbursement system for Medicare patients. See ECF No. 14 (Pls. MSJ) at 2; ECF No. 16 (Def. Cross-MSJ) at 2-4. CMS, in turn, works with “Medicare Administrative Contractors” or “MACs, ” which are private insurance companies or other entities that compute the specific reimbursement amount each provider is to receive annually. To calculate that amount, a provider must file a cost report with its MAC at the end of each fiscal year, which the MAC then reviews. See 42 C.F.R. § 405.1801(b). After such review, the MAC must within a year “furnish the provider and other parties as appropriate . . . a written notice reflecting the contractor's final determination of the total amount of reimbursement due the provider” for that fiscal year. Id. § 405.1803(a); id. § 405.1835(c)(1) (laying out time requirements). This is known as a Notice of Program Reimbursement (NPR). See Pls. MSJ at 9.

Providers' reimbursements for providing acute inpatient care under Medicare Part A, which “covers inpatient hospital expenses and other institutional health care costs for certain individuals aged 65 years old and older, as well as certain individuals with disabilities, ” are based on a Prospective Payment System (PPS). See Def. Cross-MSJ at 2; 42 U.S.C. § 1395c et seq. Under the PPS model, hospitals receive a predetermined rate according to the diagnosis-related group into which each patient's condition is classified, but they may also receive payment adjustments based on certain characteristics of their facilities. See Pls. MSJ at 3; Def. Cross-MSJ at 3. One such adjustment is the “disproportionate share hospital” (DSH) adjustment, which provides a bump-up in payment to hospitals that “serve[] a significantly disproportionate number of low-income patients, ” since treating this group frequently incurs higher costs. See 42 U.S.C. § 1395ww(d)(5)(F)(i)(I). Whether a hospital is eligible for the DSH adjustment is

2

determined based on its “disproportionate patient percentage, ” which is calculated through the sum of two fractions set out in 42 U.S.C. § 1395ww(d)(5)(F)(vi). These fractions, which help determine the share of low-income Medicare and non-Medicare patients treated by a hospital, are the Medicare-Supplemental Security Income (SSI) Fraction and the Medicaid Fraction. These are best represented through their respective equations:

Medicare-SSI Fraction = Inpatient Days for Patients Entitled to Both Medicare Part A and SSI Inpatient Days for Patients Entitled to Medicare Part A

Medicaid Fraction = Inpatient Days for Patients Eligible for Medicaid but Not Medicare Part A Total Patient Days

See Pls. MSJ at 5; Def. Cross-MSJ at 3-4; 42 U.S.C. § 1395ww(d)(5)(F)(vi)(I)-(II).

If that were not technical enough, the substantive dispute that led to this case revolves around where to place days from a different category of Medicare coverage - Medicare Part C. Part C, also known as Medicare Advantage, allows individuals eligible for Medicare to “enroll in private health insurance plans.” Pls. MSJ at 2. The placement of Medicare-Part-C days has been the subject of considerable litigation because “if Part C beneficiaries are included in the Medicaid fraction rather than the Medicare fraction, the hospitals receive a great deal more compensation.” Allina Health Servs. v. Sebelius (Allina I), 746 F.3d 1102, 1105 (D.C. Cir. 2014). This result arises from the fact that relatively few individuals are entitled to both Medicare Part C and SSI. When Medicare-Part-C days are added to the Medicare-SSI fraction, the numerator thus does not expand nearly as much as the denominator does, with the denominator becoming the sum of inpatient days for patients entitled to Medicare Part A and Part C. Ne. Hosp. Corp. v. Sebelius, 657 F.3d 1, 5 (D.C. Cir. 2011). This cuts down the hospitals' potential DSH adjustment in a way that including Medicare-Part-C days in the

3

Medicaid fraction would not, since the denominator of that fraction already includes all patient days.

Significant for our case, on June 24, 2009, CMS published Medicare-SSI fractions “for every hospital in the country, including the Plaintiff Hospitals, for cost years beginning in Federal Fiscal Year 2007, ” and it included Medicare-Part-C days in those fractions. See Pls. MSJ at 10; see also ECF No. 24 (Joint Appendix) at 87-88 (listing fractions). Unsurprisingly, Plaintiffs were displeased by this publication, as they contend that Part C days “should not be included in either the numerator or denominator of the” Medicare-SSI fraction because Medicare-Part-C patients are not entitled to benefits under Medicare Part A. See J.A. at 2.

Dissatisfied providers can seek relief through the PRRB and they may cite several bases. First, a provider can appeal if it is “dissatisfied with a final determination of . . . [its MAC] . . . as to the amount of total program reimbursement due the provider.” 42 U.S.C. § 1395oo(a)(1)(A)(i). Second, and at issue in this case, a provider can file before the PRRB if it is “dissatisfied with a final determination of the Secretary as to the amount of the payment under subsection (b) or (d) of section 1395ww, ” which includes the DSH adjustment. Id. § 1395oo(a)(1)(A)(ii). Third, a provider may also appeal if it does not receive an NPR within a year of filing its cost report with its MAC. Id., § 1395oo(a)(1)(B); 42 C.F.R. § 405.1835(c)(1). Providers may bring their appeals individually or in a group, as was done here. See J.A. at 1. In a group appeal, the amount in controversy must be $50, 000 or more in the aggregate. See 42 U.S.C. § 1395oo(b); 42 C.F.R. § 405.1837. The appeal must also be filed within 180 days after “notice of the intermediary's final determination, ” “notice of the Secretary's final determination, ” or when an NPR would have been timely received depending on the basis for the appeal. See 42 U.S.C. § 1395oo(a)(3). A decision of the PRRB is final unless it is reversed,

4

affirmed, or modified by the HHS Secretary within 60 days of the date the provider receives notice of the Board's decision. Id. § 1395oo(f)(1). Providers then “have the right to obtain judicial review of any final decision of the Board.” Id.

B. Procedural Background

On December 18, 2009, seven hospitals filed an appeal before the PRRB challenging the Medicare-SSI ratios published by CMS on June 24, 2009. The PRRB acknowledged the filing of the appeal on December 24, 2009. See J.A. 71. In 2019, still waiting for a decision, five of the hospitals withdrew, id. at 5, but the two Plaintiffs - Memorial Hospital of South Bend and Union Hospital - remained. After sitting on Plaintiffs' appeal for nearly eleven years, the PRRB finally ruled on September 29, 2020, dismissing it for lack of jurisdiction on the ground that the June 2009 Medicare-SSI fractions were not a “final determination of the Secretary as to the amount of the payment” or any other final determination that could be the basis for an appeal. Plaintiffs sought review of the PRRB's decision in this Court in November 2020. See ECF No. 1 (Complaint).

II. Standard of Review

Both parties here have moved for summary judgment on the administrative record. See Pls. MSJ at 1; Def. Cross-MSJ at 25. Although brought as summary-judgment motions, the standard set forth in Federal Rule of Civil Procedure 56(c) does not apply to these claims because of the limited role of a court in reviewing the administrative record. See Sierra Club v. Mainella, 459 F.Supp.2d 76, 89-90 (D.D.C. 2006); see also Bloch v. Powell, 227 F.Supp.2d 25, 30 (D.D.C. 2002), aff'd, 348 F.3d 1060 (D.C. Cir. 2003). “[T]he function of the district court is to determine whether or not as a matter of law the evidence in the administrative record permitted the agency to make the decision it did.” Sierra Club, 459 F.Supp.2d. at 90 (quotation marks and citations omitted).

5

“Summary judgment is the proper mechanism for deciding, as a matter of law, whether an agency action is supported by the administrative record and consistent with the APA standard of review.” Loma Linda Univ. Med. Ctr. v. Sebelius, 684 F.Supp.2d 42, 52 (D.D.C. 2010) (citation omitted), aff'd, 408 Fed. App'x 383 (D.C. Cir. 2010).

Here, because Plaintiffs “challenge[] the PRRB's determination that it lacks jurisdiction over an issue, ” the Court's summary-judgment review must be “‘limit[ed] . . . to the PRRB's jurisdiction determination' and not reach the merits of the claim.” Clarian Health W., LLC v. Burwell, 206 F.Supp.3d 393...