Metro. Hosp. v. U.S. Dep't of Health & Human Servs., 11-2465
| Decision Date | 27 March 2013 |
| Docket Number | No. 11-2465,No. 11-2466,11-2465,11-2466 |
| Parties | METROPOLITAN HOSPITAL, a Michigan non-profit corporation, Plaintiff-Appellee/Cross-Appellant, v. UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES; KATHLEEN SEBELIUS, Secretary of the United States Department of Health and Human Services, Defendants-Appellants/Cross-Appellees. |
| Court | U.S. Court of Appeals — Sixth Circuit |
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 13a0076p.06
Appeal from the United States District Court
for the Western District of Michigan at Grand Rapids.
No. 1:09-cv-128—Paul Lewis Maloney, Chief District Judge.
Before: CLAY, GILMAN, and McKEAGUE, Circuit Judges.
ARGUED: Stephanie R. Marcus, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellants/Cross-Appellees. Leah E. Pogoriler, COVINGTON & BURLING LLP, Washington, D.C., for Appellee/Cross-Appellant. ON BRIEF: Stephanie R. Marcus, Anthony J. Steinmeyer, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellants/Cross-Appellees. Leah E. Pogoriler, Caroline M. Brown, COVINGTON & BURLING LLP, Washington, D.C., for Appellee/Cross-Appellant. Kenneth R. Marcus, HONIGMAN MILLER SCHWARTZ AND COHN LLP, Detroit, Michigan, Jeffrey A. Lovitky, Washington, D.C., for Amici Curiae.
McKEAGUE, J. (pp. 34-42), delivered a separate dissenting opinion.
OPINIONRONALD LEE GILMAN, Circuit Judge. This case involves a challenge to regulation 42 C.F.R. § 412.106(b), promulgated in 2004 by the United States Department of Health and Human Services (HHS). The regulation deals with the amount that certain hospitals are entitled to receive as enhancements to their regular reimbursement payments from the Medicare program. In connection with this program, Congress has created a statutory formula to identify hospitals that serve a disproportionate number of low-income patients and to calculate the increased payments due such hospitals.
Metropolitan Hospital (Metro) challenges the way that the Secretary of HHS (Secretary) interprets this statutory formula to exclude certain patients who are simultaneously eligible for benefits under both Medicare and Medicaid. According to the Complaint, the exclusion of such dual-eligible patients cost Metro more than $2.1 million in the 2005 fiscal year.
Addressing the parties' cross-motions for summary judgment, the district court ruled that the challenged HHS regulation is invalid because it violates the statute that it purports to implement. Metro. Hosp., Inc. v. U.S. Dep't of Health & Human Servs., 702 F. Supp. 2d 808, 825-26 (W.D. Mich. 2010). HHS then timely filed this appeal, and Metro timely filed a cross-appeal regarding the district court's decision to remand the case to HHS for the calculation of damages and interest due Metro. For the reasons set forth below, we REVERSE the judgment of the district court and REMAND the case with instruction to enter judgment in favor of HHS. Metro's cross-appeal is DISMISSED as moot.
The Medicare program's Prospective Payment System (PPS) reimburses a hospital a fixed dollar amount for each Medicare patient it discharges on the basis of the patient's diagnosis, regardless of the actual cost of the treatment provided. Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 406 n.3 (1993). Recognizing "the higher costs incurred by hospitals that serve a large number of low income patients," Jewish Hosp., Inc. v. Sec'y of Health & Human Servs., 19 F.3d 270, 272 (6th Cir. 1994), Congress in 1983 required the Secretary to make "exceptions and adjustments to the PPS program" that would account for these higher costs, id. at 280 (Batchelder, J., dissenting) (internal quotation marks omitted).
But the Secretary failed to establish "a system to estimate the number of poor patients served in such hospitals and [to] issue payments," and again failed to act when subsequent legislation set a deadline of December 31, 1984 for the Secretary to define and identify the "disproportionate share hospitals" (DSHs) that would receive these adjusted payments. See id.; see also Deficit Reduction Act, Pub. L. 98-369, § 2315(h), 98 Stat. 494, 1080 (1984) (). Congress in 1985 therefore established its own measure for assessing whether a hospital "serves a significantly disproportionate number of low income patients." See 42 U.S.C. § 1395ww(d)(5)(F)(v). That measure is called the "disproportionate patient percentage" (DPP). 42 U.S.C. § 1395ww(d)(5)(F)(vi).
The DPP is the sole variable in the "disproportionate share adjustment percentage" that ultimately determines the dollar amount of any enhanced payment due to a DSH. Id. § 1395ww(d)(5)(F)(vii). A higher DPP produces a higher adjustment percentage, which in turn produces a larger adjustment payment. See id. In sum, the DPP is the key figure in determining whether a hospital will receive additional Medicare dollars for serving low-income patients and, if so, in what amount.
Two separate fractions are added together to produce the DPP: the Medicare fraction and the Medicaid fraction. Id. § 1395ww(d)(5)(F)(vi). The basic unit of measurement in both fractions is a hospital's "patient days." Id. In the numerator of the Medicare fraction is the number of patient days in a cost-reporting period that are attributable to patients who were both "entitled to benefits under [Medicare] part A" and "entitled to supplemental security income [SSI] benefits." Id. § 1395ww(d)(5)(F)(vi)(I). The denominator is the total number of patient days in the fiscal year that are attributable to patients who were "entitled to benefits under [Medicare] part A." Id. In other words, the Medicare fraction measures the portion of a hospital's Medicare-entitled patient population that is also entitled to SSI, a cash benefit provided to low-income elderly, blind, or disabled individuals. See id. §§ 1381-1383f. This fraction can be expressed visually as follows:
Medicare fraction = # of a hospital's patient days for people entitled to both Medicare and SSI / # of a hospital's patient days for people entitled to Medicare
The Medicaid fraction has both a different numerator and a different denominator. Its numerator is the number of patient days in a cost-reporting period that are attributable to patients who were "eligible for [Medicaid] . . . but who were not entitled to benefits under [Medicare] part A." Id. § 1395ww(d)(5)(F)(vi)(II). The denominator is the total number of the hospital's patient days in the same cost-reporting period for all patients. Id. This fraction measures the proportion of a hospital's total patient population that is Medicaid-eligible, with the caveat of excluding patients who are also entitled to Medicare benefits. The Medicaid program, codified at 42 U.S.C. §§ 1396-1396w, is a federal-state cooperative program that "provides financial assistance to low-income individuals seeking medical care." Marka v. Haveman, 317 F.3d 547, 550 (6th Cir. 2003). This fraction can be expressed visually as follows:
Medicaid fraction = # of a hospital's patient days for people eligible for Medicaid, but not entitled to Medicare / # of all the hospital's patient days
The Medicare fraction and the Medicaid fraction are expressed as percentages and then added together to produce the DPP. 42 U.S.C. § 1395ww(d)(5)(F)(vi). These fractions summarize the following relevant portion of the DPP statute:
The Medicaid fraction's numerator accounts for the fact that some Medicaid-eligible patients are also entitled to Medicare benefits (known as dual-eligible patients). Central to the dispute in the present case is which fraction, if any, is the appropriate place to count the patient days of dual-eligible patients who have exhausted theirMedicare benefits for inpatient hospital care during a particular "spell of illness." See id. § 1395d.
All Medicare beneficiaries—not just dual-eligible patients—are entitled to have Medicare pay for inpatient hospital services for up to 90 days during any spell of illness (the period from when a person enters a hospital for an injury or illness until he or she has been out of the hospital for 60 consecutive days). Id.; see also id. § 1395x(a) (). They also receive an additional 60 days of such coverage that can be spread across all spells of illness during a beneficiary's lifetime. Id. § 1395d. In other words, Medicare will cover: (1) hospital services for any spell of illness lasting up to 90 days; and (2) an additional lifetime cap of 60 days for hospital services for care in excess of 90 days per spell of illness.
This means that a Medicare patient who receives 150 days of Medicare-paid...
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...of the phrase in the Medicaid fraction—a reading that has remained unchanged—is the result of measured, reasoned analysis. See Metro. Hosp., 712 F.3d at 269 (opining that such a “correction further demonstrates that the Secretary's interpretation of this statutory phrase [42 U.S.C. § 1395ww......