Pam Squared at Texarkana, LLC v. Azar

• Decision Date: 22 January 2020
• Docket Number: Case No. 1:18-cv-02542 (TNM)
• Parties: PAM SQUARED AT TEXARKANA, LLC, Plaintiff, v. Alex M. AZAR II, Defendant.
• Court: U.S. District Court — District of Columbia

436 F.Supp.3d 52

PAM SQUARED AT TEXARKANA, LLC, Plaintiff,

v.Alex M. AZAR II, Defendant.

Case No. 1:18-cv-02542 (TNM)

United States District Court, District of Columbia.

Signed January 22, 2020

Jason M. Healy, Law Office of Jason M. Healy, PLLC, Washington, DC, for Plaintiff.

Sean Michael Tepe, Jason Todd Cohen, U.S. Department of Justice, Doris Denise Coles-Huff, U.S. Attorney's Office for the District of Columbia, Washington, DC, for Defendant.

MEMORANDUM OPINION

TREVOR N. McFADDEN, U.S.D.J.

Medicare is a maze of statutes and regulations. One wrong turn and a Medicare provider becomes entangled in a system of penalties, appeals, and more regulations. Such is the fate of Post Acute Medical Squared at Texarkana, LLC (PAM Squared), a Medicare-certified long-term care hospital. Four years ago, PAM Squared made a routine, required submission of data to the Centers for Medicare & Medicaid Services (CMS). Or so it thought. As it turns out, the data was inputted but never received by CMS because of a typo in at least one of the data sets. Because of this typo, CMS imposed a two-percent Medicare payment reduction on PAM Squared for the coming year, costing the hospital almost $300,000. PAM Squared unsuccessfully appealed the penalty to both CMS and the Provider Reimbursement Review Board (PRRB or "the Board"). It now appeals to this Court, arguing that the Board's decision violated the Administrative Procedure Act (APA). The Court agrees.

Here, the agency—like PAM Squared—got lost in its own labyrinth of Medicare regulations. While affirming CMS's denial of reconsideration, the Board cited to and relied on an outdated final rule rather than the current regulation for CMS reconsideration. "One thing no agency can do is apply the wrong law to citizens who come before it." Caring Hearts Pers. Home Servs. v. Burwell , 824 F.3d 968, 970 (10th Cir. 2016) (Gorsuch, J.) (cleaned up). Since this error infected the Board's decision, the Court will grant summary judgment in part to PAM Squared and remand this case to the Secretary of Health and Human Services.

I.

Consider first the relevant regulatory regime. Medicare Part A authorizes payments for institutional care, including care provided at Long-Term Care Hospitals (LTCH). See 42 U.S.C. §§ 1395c – 1395i-5. These hospitals are statutorily required to submit to CMS "quality data" that measures, among other things, the incidence of certain diseases designated by the Secretary of Health and Human Services. See 42 U.S.C. § 1395ww(m)(5). After the hospitals input the data to the Centers for Disease Control and Prevention's National Healthcare Safety Network (NHSN), the NHSN sends completed data sets to CMS. See CMS LTCH Quality Reporting Program Manual Version 2.0, 5-10 (Nov. 2013), https://www-cms-gov.ezproxy.lib.ntust.edu.tw/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/-LTCH-Quality-Reporting-Archives. Hospitals that fail to report this information in the "form and manner, and at a time, specified by the Secretary" will have their Medicare payments reduced two-percent the next year. 42 U.S.C. § 1395ww(m)(5)(A)(i), (C) ; 42 C.F.R. § 412.523(c)(4). So a hospital that fails to report data for 2015 will have payments reduced in Fiscal Year (FY) 2017.

The Secretary announced that the hospitals should report six categories of quality data for FY 2015, including the "Facility-Wide Inpatient Hospital-onset Clostridium difficile Infection

(CDC) Outcome Measure." 80 Fed. Reg. 49,325, 49,750 (Aug. 17, 2015); A.R. at 103.¹ This data measured each hospital's incidence of a dangerous bacterial infection called C. diff.

See Def. Reply 2–4, ECF No. 26.

PAM Squared, as a LTCH, needed to submit all data specified by the Secretary. Compl. ¶ 10, ECF No. 1. Shortly after the final deadline for the 2015 data submission, CMS sent PAM Squared a "Notification of Non-Compliance." A.R. at 273. This notice stated that the hospital "failed to submit the required data" and that CMS would reduce its FY 2017 Medicare payment by two-percent. Id.

The hospital's staff immediately began reviewing the data to determine where the noncompliance occurred. A.R. at 123–24, 345. They verified that all the data appeared in the system, but for an unknown reason, CMS could not view the data. Id. at 134–35. The next day, Nurse Manager Brooke Buras contacted the NHSN to troubleshoot the issue. Id. at 346. After reviewing the hospital's submission, NHSN found the error: for at least one of the months from April to September 2015, someone had populated the "Location Code" field with the hospital's Medicare number and name rather than the phrase "FACWIDEIN- Facility-wide Inpatient (FacWIDEIn)."² Id. at 346. This typo prevented the NHSN system from forwarding PAM Squared's quarterly data to CMS. Id. at 138. In other words, PAM Squared had indeed submitted the data to one arm of the Department of Health and Human Services, NHSN, but NHSN never sent the data to another arm of the Department because of the typo. No one at NHSN alerted PAM Squared to the problem, at least until after the submission deadline had passed. At NHSN's suggestion, Buras corrected the Location Code and saved the data. Id. at 347. CMS could then access the hospital's reports. Id.

PAM Squared asked CMS to reconsider the two-percent payment reduction. A.R. at 299–300. PAM Squared submitted screenshots showing that it had entered the data into NHSN before CMS's deadlines. Id. at 306–27. CMS responded with a form letter informing the hospital that it had "reviewed [PAM Squared's] reconsideration request" but was "upholding the decision to reduce the annual payment" for FY 2017. Id. at 260.

The hospital next turned to the Provider Reimbursement Review Board. A.R. at 254. The Board conducted a full evidentiary hearing, id. at 111–47, and ultimately upheld CMS's decision to impose the two-percent payment reduction, id. at 10. The Secretary declined to review the Board's decision, rendering that decision final. Id. at 2–3; 42 U.S.C. § 1395oo(f). PAM Squared now contends that the Board violated the APA. See Pl. Mot. for Summ. J. 2, ECF No. 21.

II.

Courts may review the PRRB's final decisions under the APA's standards of review. 42 U.S.C. § 1395oo(f). Normally, a court will grant summary judgment when there "is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; see also Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). But Rule 56's standards do not apply to a court's review of a final agency action under the APA. See Sierra Club v. Mainella , 459 F. Supp. 2d 76, 89 (D.D.C. 2006). In these cases, summary judgment "serves as the mechanism for deciding, as a matter of law, whether the agency action is supported by the administrative record and otherwise consistent with the APA standard of review." Sierra Club , 459 F. Supp. 2d at 90 (citing Richards v. INS , 554 F.2d 1173, 1177 & n. 28 (D.C. Cir. 1977) ).

Under the APA, the Court will set aside the Board's decision only if "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." Grant Med. Ctr. v. Hargan , 875 F.3d 701, 705 (D.C. Cir. 2017) (quoting 5 U.S.C. § 706(2)(A) ). Though a court's review of agency action under the arbitrary and capricious standard is "narrow," it must determine whether the agency "examined the relevant data and articulated a satisfactory explanation for its action including a rational connection between the facts found and the choice made." Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co. , 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983) (cleaned up). If the agency's reasoning is deficient, the "court should not attempt itself to make up for such deficiencies" or "supply a reasoned basis for the agency's action that the agency itself has not given." Id. But it may still "uphold a decision of less than ideal clarity if the agency's path may reasonably be discerned." Id. (cleaned up).

III.

PAM Squared appeals the Board's final decision to uphold a two-percent reduction of the hospital's Medicare payment for FY 2017. The Board's decision can be taken in three parts. First, it determined independently—based on briefing and an evidentiary hearing—that PAM Squared failed to submit the data in the correct form and manner, as required by statute. A.R. at 8. Next, it rejected PAM Squared's invitation to provide equitable relief because nothing authorized the Board to "reduce the full impact of the two percent reduction." Id. at 9. Finally, it determined that CMS's denial of reconsideration was not arbitrary or capricious. Id. at 9–10. PAM Squared now challenges all these conclusions under the APA.

A.

The Court begins where the Board ended: with its conclusion that the CMS reconsideration was not arbitrary or capricious. Though much of PAM Squared's case turns on this part of the Board's decision, the Secretary argues that the Board's review of the CMS reconsideration is irrelevant for two reasons. Def. Suppl. Br. 8–10, ECF No. 31.

First, PAM Squared cannot challenge CMS's reconsideration denial, he argues, because that was an interim agency decision that has no further relevance after the Board rendered its own final opinion. Def. Suppl. at 8–9. True enough. Federal courts are empowered to review final, not interim, agency actions. See Nat'l Ass'n of Home Builders v. Defs. of Wildlife , 551 U.S. 644, 659, 127 S.Ct. 2518, 168 L.Ed.2d 467 (2007). But PAM Squared is not asking the Court to directly review CMS's reconsideration decision. To be sure, PAM Squared believes that CMS's reconsideration was arbitrary and capricious, and it argued as much before the Board. A.R. at 38–47. But here, PAM Squared is seeking review of the Board's legal conclusions, not CMS's. Pl. Suppl. Br. 9–11, ECF No. 29. The Court can certainly review whether the Board violated the APA when it affirmed CMS's decision. See, e.g. , Dillmon...