N. Oaks Med. Ctr., LLC v. Azar
| Decision Date | 25 March 2020 |
| Docket Number | CIVIL ACTION NO. 18-9088 |
| Citation | 611 F.Supp.3d 263 |
| Parties | NORTH OAKS MEDICAL CENTER, LLC, Plaintiff v. Alex M. AZAR, II, Defendant |
| Court | U.S. District Court — Eastern District of Louisiana |
Daniel Michael Mulholland, III, Pro Hac Vice, Joshua Adam Hodges, Pro Hac Vice, Horty, Springer & Mattern, PC, Pittsburgh, PA, Harry Joseph Philips, Jr., Taylor, Porter, Brooks & Phillips LLP, Baton Rouge, LA, for Plaintiff
Peter M. Mansfield, U.S. Attorney's Office (New Orleans), New Orleans, LA, for Defendant
SECTION: "E"
Before the Court is a motion to dismiss for lack of subject-matter jurisdiction filed by Defendant Alex M. Azar II, in his official capacity as Secretary (the "Secretary") of Health and Human Services ("HHS").1 Plaintiff North Oaks Medical Center, LLC ("North Oaks") opposes this motion.2 The Secretary filed a reply.3
Through Medicare, the federal government pays for health care for elderly and disabled individuals.4 Hospitals receive increased payments if they serve "a significantly disproportionate number of low-income patients."5 These increases are known as disproportionate share hospital payments, or "DSH payments."6 The payment at issue in this case is the "additional payment" described in 42 U.S.C. § 1395ww(r), which is made annually to each disproportionate share hospital. The payment is the product of three statutory "factors" estimated by the Secretary of HHS. The third factor, or "Factor 3," measures an individual hospital's share of all nationwide uncompensated care. Factor 3 is a percent that represents the quotient of:
In August 2013, HHS promulgated a rule setting forth the "data sources and methodologies for computing" the three factors for fiscal year 2014.8 The rule was later corrected in October 2013 by Centers for Medicare & Medicaid Services ("CMS"), which is a component of HHS.9 HHS decided to use data from 2010 or 2011, as provided on hospitals' then-most recent Medicare cost reports.10 In the regulatory preamble, HHS explained "a hospital's Factor 3 is calculated based on the data tied to its [certification number]."11 Thus, "[d]ata associated with a [hospital's certification number] that is no longer in use are not used to determine ... hospital payments under the surviving [hospital's certification number."12 For instance, "in the case of a merger between two hospitals ... Factor 3 will be calculated based on the [data] under the surviving [hospital's certification number]."13
The instant motion is a motion to dismiss based on lack of jurisdiction.14 "Federal courts are courts of limited jurisdiction; without jurisdiction conferred by statute, they lack the power to adjudicate claims."15 A motion to dismiss under Rule 12(b)(1) of the Federal Rules of Civil Procedure challenges a federal court's subject-matter jurisdiction.16 Under Rule 12(b)(1), "[a] case is properly dismissed for lack of subject matter jurisdiction when the court lacks the statutory or constitutional power to adjudicate the case."17 The burden of proof on a motion to dismiss under Rule 12(b)(1) is on the party asserting subject matter jurisdiction exists.18 In considering a Rule 12(b)(1) motion to dismiss for lack of subject-matter jurisdiction "a court may evaluate: (1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts."19 Accordingly, in this case, the Court may consider Plaintiff's complaint20 as well as the Administrative Record on Review.21 The Court must accept all factual allegations in the plaintiff's complaint as true.22
In this action, Plaintiff seeks, among other things, an order from the Court "[a]djudg[ing] and declar[ing] that the actions of the Secretary through CMS in determining the Medicare DSH payment rates of North Oaks for FFY 2015 and 2016 were arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with law."23 Although courts "presume" agency action is judicially reviewable, "that presumption, like all presumptions used in interpreting statutes, may be overcome by specific language that is a reliable indicator of congressional intent."24 For instance, when Congress provides "there shall be no administrative or judicial review" of specified agency actions, its intent to bar review is clear, and, accordingly, the Court determines only whether the challenged action falls "within the preclusive scope" of the statute.25 In this case, Congress has barred review of "[a]ny estimate" used by the Secretary to calculate a DSH additional payment.26 In interpreting a provision that precludes judicial review, courts "must determine whether the challenged agency action is of the sort shielded from review" and "may not inquire whether a challenged agency decision is arbitrary, capricious, or procedurally defective."27
Plaintiff North Oaks is an acute care hospital in Hammond, Louisiana participating in the federal government's Medicare program, and serves a significantly disproportionate number of low-income patients.29 As such, Plaintiff receives DSH payments. Plaintiff alleges it underwent a corporate restructuring effective January 1, 2012.30 Prior to the corporate restructuring, Hospital Service District No. 1 of Tangipahoa Parish (the "Hospital Service District") owned and operated the North Oaks hospital. The corporate restructuring transferred control of operations of the hospital from the Hospital Service District to a limited liability company, North Oaks Medical Center, LLC.31 As a result, North Oaks Medical Center, LLC now owns and operates the North Oaks hospital.32 The Hospital Service District is the sole member of the North Oaks limited liability company.33
After the corporate restructuring, Plaintiff used the certification number previously used by the Hospital Service District.34 North Oaks Medical Center, LLC filed a cost report for the first six months of 2012, from January 1 through June 30, reporting 8,889 Medicaid days, and the Hospital Service District filed a six-month cost report for July 1, 2011 to December 31, 2011.35 Plaintiff alleges CMS used the Medicaid days from the six-month cost report period of North Oaks from January 1 through June 30, 2012 to calculate Factor 3 for the North Oaks' DSH payments for FFY 2014.36 Plaintiff alleges CMS relied upon "incorrect information" in calculating Factor 3,37 because CMS should have used the full year in calculating the DSH adjustment for FFY 2014.38 By using the cost report reflecting a half year, the number of Medicaid days was substantially less than what it would have been for a full year, thereby reducing Factor 3 and reducing Plaintiff's Medicare reimbursement for FFY 2014 by roughly $2,093,000.39
On February 10, 2014, Plaintiff filed an appeal with the Provider Reimbursement Review Board ("PRRB") of CMS's determination of the FFY 2014 DSH payment for Plaintiff.40 The PRRB is an independent panel established pursuant to Section 1878 of the Medicare Act.41 On April 29, 2014, CMS corrected its determination of the DSH payment for Plaintiff, using the 18,981 Medicaid days reported on the last full year cost report filed by North Oaks for July 1, 2010 through June 30, 2011.42 Plaintiff then withdrew its appeal of the FFY 2014 DSH payment determination.43 As a result, Plaintiff's FFY 2014 DSH payment is not at issue in this case.
In August 2014, CMS promulgated rules for determining DSH payments for FFY 2015.44 The rule was later corrected in October 2014.45 Plaintiff alleges CMS again incorrectly determined the DSH payment rate for North Oaks for FFY 2015 by using the 8,889 Medicaid days from the half-year period reported by North Oaks on its cost report for its Fiscal Year Ending December 31, 2011.46 Plaintiff argues that, had this estimate been calculated correctly, the estimate for Plaintiff would have been based on the cost report for July 1, 2010 through June 30, 2011.47
In August 2015, CMS promulgated rules for determining DSH payments for FFY 2016.48 The rule was later corrected in October 2015.49 In responding to comments on the proposed rule, CMS stated:
With regard to the comments from hospitals that found their Factor 3 was calculated using a cost report that was less than 12 months, we are finalizing our proposal to use the 2012 cost report, unless that cost report is unavailable or reflects less than a full 12-month year. In the event the 2012 cost report is for less than 12 months, we will use the cost report from 2012 or 2011 that is closest to being a full 12-month cost report. In the case where a less than 12-month cost report is used to calculate a hospital's Factor 3, this would indicate that both the 2012 and 2011 cost reports were less than 12 months. In such a case, we will use the longer of the two cost reports to calculate a hospital's Factor 3.50
Plaintiff alleges CMS once again used the 8,889 Medicaid days reported by North Oaks on its cost report for the reporting period ending on December 31, 2011 to calculate Factor 3 for FFY 2016.51 Plaintiff "pointed this out to CMS and asked that the correct cost report data be used to calculate its Factor 3 for FFY 2016."52 In response, CMS "adjust[ed] the Factor 3 calculation for North Oaks in the Supplemental Data File published with the Final Rule and...
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