Oak Knoll Health Care Ctr. v. Leavitt
| Decision Date | 22 September 2011 |
| Docket Number | CIVIL ACTION NO. 08-12051-DPW |
| Parties | OAK KNOLL HEALTH CARE CENTER Plaintiff, v. MICHAEL LEAVITT Defendant. |
| Court | U.S. District Court — District of Massachusetts |
Oak Knoll Health Care Center ("Oak Knoll") appeals a decision of the Administrator of the Centers for Medicare and Medicaid Services ("CMS"), acting on behalf of the Defendant the Secretary of the Department of Health and Human Services. The Administrator concluded that Oak Knoll does not qualify for favorable reimbursement rates during a transition to a new Medicare rate structure for skilled nursing facilities ("SNFs"). Oak Knoll has moved for summary judgment, and the Defendant moves to affirm the agency's decision.
Judge Gertner, to whom this case was initially assigned, referred the motions to Magistrate Judge Sorokin for a Report and Recommendation. After the case was redrawn and assigned to my session, Magistrate Judge Sorokin issued the opinion attached to this memorandum in which he recommended that the Court deny Oak Knoll's motion and allow that of the Defendant. Report & Recommendation, Dkt. No. 25 (July 25, 2011). Oak Knoll filed anobjection to the Report and Recommendation (Dkt. No. 26) which is now before me.
After reviewing the underlying submissions and Oak Knoll's objection, I find that the Report and Recommendation should be adopted for the reasons stated therein. Although it is unnecessary to replow the ground covered by Magistrate Judge Sorokin, I will offer additional comments regarding Oak Knoll's arguments in its objection.
Oak Knoll objects to Magistrate Judge Sorokin's finding that the statutory provision at issue is ambiguous and that the Administrator's interpretation is reasonable. The statute at issue provides that SNFs "that first received payment for services under this subchapter on or after October 1, 1995," are ineligible for favorable payments during a transition from one Medicare payment structure to another. 42 U.S.C. § 1395yy(e)(2)(E). CMS' implementing regulation explains that SNFs are excluded from the favorable payments if they first received a Medicare payment on or after October 1, 1995 "under present or previous ownership." 42 C.F.R. § 413.340(e). The Administrator has interpreted the regulation to mean that an SNF that received its first payment "under its current provider number" after the deadline is ineligible for favorable payments, even if the SNF received payments prior to that time under a different providernumber. CMS Publication No. 15-1, Provider Reimbursement Manual Part 1, § 2834A.
Oak Knoll is the successor to two prior entities, one of which had participated in Medicare prior to October 1995 and both of which had operated as SNFs for over three years. A.R. 2898-90. The two entities were consolidated into the entity known as Oak Knoll, which began operations in 1995 and received a new Medicare provider number in November of 1995, after the statutory deadline. Statement of Material Facts, Dkt. No. 15 ¶ 5. Because Oak Knoll did not receive payment from Medicare under the new provider number until after the deadline, the Administrator found that it was not entitled to favorable transition payments.
Oak Knoll argues, in part, that this determination must be overturned because it is inconsistent with CMS' denial of "new provider" treatment for Oak Knoll after its consolidation. Like Magistrate Judge Sorokin, I find that CMS' application of the new provider exemption does not bear on Oak Knoll's eligibility for transitional payments. Specifically, I agree that it is immaterial that the Administrator disregarded Oak Knoll's transition to a new provider number for purposes of the "new provider" regulation, but relied on it as determinative for whether Oak Knoll could claim receipt of payments prior to October 1, 1995.
At the time Oak Knoll was established, CMS' regulations exempted "new providers" from Medicare's cost limits. 42 C.F.R. § 413.30(e) (1995).1 A "new provider" was defined as "a provider of inpatient services that has operated as the type of provider (or the equivalent) for which it is certified for Medicare, under present or previous ownership, for less than three full years." Id. The new provider exemption was promulgated under the Medicare Act's general authorization for the Secretary to create exemptions from the reimbursement limits. 42 U.S.C. § 1395yy(c). The purpose of the new provider exemption was to address the "problem of initial underutilization," when a new facility opens and cannot immediately fill all of its beds. Limitations on Reimbursable Costs, 44 Fed. Reg. 31,802, 31,802 (June 1, 1979).
Oak Knoll was denied treatment as a "new provider" in 1995 because CMS determined it had operated for three or more years through the predecessor institutions prior to consolidation. A.R. 175-177. Contrary to Oak Knoll's assertion, the finding that it had "operated" as an SNF for over three years for purposes of the "new provider" exemption is not the same as a determination that it "first received payment for services" or"received [its] first payment from Medicare, under present or previous ownership."
Although both regulations contain the descriptive phrase "under present or previous ownership," this similarity does not necessarily import a uniform meaning. There is ample basis for the Administrator's disparate interpretations of the two regulations based on their different context, authorization, meaning and goals. First, the new provider exemption looks at whether the entity has operated for the last three years (either within or outside the Medicare system), while the second looks at the entity's participation in the Medicare system, specifically through the receipt of payment. Second, the two regulations are authorized by separate statutes, and the "new provider" regulation is based on permissive authority while the transitional payments are explicitly required. Finally, the two have different goals. The first has the goal of ensuring that new providers are able to deal with initial underutilization, and the second deals with a transition from one payment system to another.
I agree with Magistrate Judge Sorokin that the regulations are ambiguous. The First Circuit specifically held that the "new provider" provision is "vague (and, therefore, manifestly ambiguous)" in part because it "hinges on the meaning of the phrase 'previous ownership,'" a phrase undefined in theregulations. South Shore Hosp., Inc. v. Thompson, 308 F.3d 91, 98 (1st Cir. 2002) (Selya, J.). The terms in the transitional payment regulation are similarly vague, and as a result, deference is due to the Secretary's interpretation. See id.
Although ideally agencies would interpret similarly worded phrases consistently across regulations, any inconsistency is not the basis for a reviewing court to reject an interpretation. Rather, I defer to the agency's interpretations of regulations of its own creation "unless the agency's position is 'plainly erroneous or inconsistent with the regulation.'" Castro-Soto v. Holder, 596 F.3d 68, 72 (1st Cir. 2010) (Howard, J.) (quoting Massachusetts v. United States, 552 F.3d 115, 127 (1st Cir. 2008)). In this case, although the Administrator's interpretation appears at first glance to be inconsistent across regulations, the interpretation of each regulation, taken in the context of the differing inquiries (history of operation as an SNF as opposed to history of participation and payment in the Medicare system), is consistent with the objects and purposes of the respective regulations.
Because both the statute and the regulation at issue are ambiguous, and the Administrator's interpretation2 is reasonable,I hereby ADOPT the Report and Recommendation and therefore DENY Oak Knoll's motion for summary judgment (Dkt. No. 25) and ALLOW the motion by the Defendant for an order affirming the Administrator's decision (Dkt. No. 18).
v.
MICHAEL LEAVITT, Defendant.
REPORT AND RECOMMENDATION ON
PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
SOROKIN, M.J.
The Administrator of the Centers for Medicare and Medicaid (CMS) (acting at the behest of the Defendant, the Secretary of the Department of Health and Human Services) made the seemingly contradictory determinations that the Plaintiff, Oak Knoll Health Care Center ("Oak Knoll"), both was, and was not, a pre-existing skilled nursing facility. The Administrator found that Oak Knoll was a pre-existing facility when ruling that it was not entitled to benefit from certain reimbursement regulations providing favorable treatment to brand-new nursing homes. The Administrator nevertheless found that Oak Knoll was not a pre-existing skilled nursing facility when ruling that it could not benefit from certain reimbursement regulations providing favorable treatment to pre-existing programs during a transition to a new Medicare rate structure.Oak Knoll now seeks judicial review and reversal of the Administrator's denial only of this latter determination.3
While at first glance, the Administrator's determinations present a Catch-22 like scenario,4 closer analysis reveals that the relevant statutes and regulations are not simply the reverse sides of the same coin, but rather implement differing policies utilizing slightly different language. In the context of the regulatory framework and the (largely undisputed) material facts, the Defendant made a permissible and reasonable interpretation of the governing laws which is entitled to deference and is supported by the record.
Accordingly, I RECOMMEND that the Court DENY Oak Knoll's Motion for Summary Judgment (Docket # 13) and ALLOW the Defendant's Motion to Affirm the Administrator's Decision (Docket # 18).
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