Pomona Valley Hosp. Med. Ctr. v. Azar

• Decision Date: 30 September 2020
• Docket Number: Civil Action No. 18-2763 (ABJ)
• Parties: POMONA VALLEY HOSPITAL MEDICAL CENTER, Plaintiff, v. ALEX M. AZAR II, Secretary, United States Department of Health and Human Services, Defendant.
• Court: U.S. District Court — District of Columbia

POMONA VALLEY HOSPITAL MEDICAL CENTER, Plaintiff, v. ALEX M. AZAR II, Secretary, United States Department of Health and Human Services, Defendant.

Civil Action No. 18-2763 (ABJ)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

September 30, 2020

MEMORANDUM OPINION

In this lawsuit against the Secretary of the U.S. Department of Health and Human Services, plaintiff Pomona Valley Hospital Medical Center challenges certain payments it received for Fiscal Years 2006 through 2008 under the Medicare statute. Specifically, it asserts that the Secretary improperly calculated payments owed to it under the disproportionate share hospital ("DSH") adjustment, which provides an additional payment to hospitals that serve a disproportionately large number of low-income patients. Plaintiff filed an administrative appeal of the calculation to the Provider Reimbursement Review Board, which upheld the calculation. The Secretary adopted the Board's decision, and plaintiff has filed this lawsuit, arguing that since the calculation was not based on the best available data, the decision to uphold the calculation did not comport with the applicable statute and regulations. Because the Board's decision is not supported by substantial evidence, the Court will grant plaintiff's motion for summary judgment in part and remand the matter to the agency for further proceedings consistent with this decision.

BACKGROUND

I. Legal Framework

A. The Medicare Statue

The Medicare Act, 42 U.S.C. § 1395 et seq., provides health insurance to elderly and disabled individuals. The Secretary of the Department of Health and Human Services administers the Medicare program through the Centers for Medicare and Medicaid Services ("CMS"), a component of the department, and CMS contracts with Medicare Administrative Contractors ("MACs"),¹ typically private insurance companies, to determine amounts to be paid to Medicare providers, including hospitals such as plaintiff. 42 U.S.C. § 1395kk; id. § 1395h(a); 42 C.F.R. § 413.24(f).

Medicare is divided into five parts, Parts A through E. Ne. Hosp. Corp. v. Sebelius, 657 F.3d 1, 2 (D.C. Cir. 2011), citing 42 U.S.C. §§ 1395c-1395i-5. Among other things, Medicare Part A provides payments to hospitals for inpatient services provided to Medicare beneficiaries. 42 U.S.C. § 1395c et seq. Hospitals are reimbursed for these services based on their operating costs using standardized rates subject to certain adjustments, such as the DSH adjustment at issue here. 42 U.S.C. § 1395ww(d); Baystate Med. Ctr. v. Leavitt, 545 F. Supp. 2d 20, 22 (D.D.C. 2008).

B. The DSH Adjustment

The DSH adjustment provides additional payments to hospitals that serve a disproportionately large number of low-income patients. 42 U.S.C. § 1395ww(d)(5)(F); Adena Reg'l Med. Ctr. v. Leavitt, 527 F.3d 176, 177-78 (D.C. Cir. 2008) (explaining that Congressdetermined any hospital that serves a disproportionately large percentage of low-income patients should be reimbursed at a higher rate "because the more low-income patients a hospital treats, the more it costs on average to care for Medicare patients"). The Medicare statute provides that a hospital's DSH adjustment is established using the "disproportionate patient percentage" ("DPP"), 42 U.S.C. § 1395ww(d)(5)(F)(v) and (vi), which is a "proxy" calculation of how many low-income patients a hospital serves. Ne. Hosp. Corp., 657 F.3d at 3. The higher the DPP proxy, the larger the DSH adjustment and the higher the DSH payment a hospital receives. See Cath. Health Initiatives Iowa Corp. v. Sebelius, 718 F.3d 914, 916 (D.C. Cir. 2013).

1. The Disproportionate Patient Percentage

DPP is the sum of two fractions. Cath. Health, 718 F.3d at 916. The first fraction seeks to capture those patients served by a hospital who are eligible for Medicare and Supplemental Security Income ("SSI"), which is income provided by the federal Social Security Administration ("SSA") to financially needy individuals who are aged, blind, or disabled. Smith v. Berryhill, 139 S. Ct. 1765, 1772 (2019); see 42 U.S.C. § 1381 et seq. This fraction is referred to as the Medicare/SSI fraction or simply the SSI fraction. See Cath. Health, 718 F.3d at 916. The second fraction seeks to account for patients who are not eligible for Medicare, but who receive Medicaid, which is a state-administered program for low-income individuals and families. See id. The two fractions provide separate indicators of low income that, when added together, serve as "an indirect, proxy measure for low income." Id.

This lawsuit concerns the SSI fraction, specifically, the numerator of this fraction.

2. The SSI Fraction and Its Numerator

The Medicare statute defines the SSI fraction as follows:

[T]he numerator . . . is the number of such hospital's patient days for such period which were made up of patients who (for such days) were entitled to benefits under part A of this subchapter and were entitled to supplementary security income benefits (excluding any State supplementation) under subchapter XVI of this chapter, and the denominator . . . is the number of such hospital's patient days for such fiscal year which were made up of patients who (for such days) were entitled to benefits under part A of this subchapter . . . .

42 U.S.C. § 1395ww(d)(5)(F)(vi)(I). This means that the numerator seeks to count the hospital's number of patient days - meaning, overnight stays - of patients who were entitled to benefits under both Medicare Part A and SSI at the time they were receiving inpatient services at the hospital, and the denominator is the total number of the hospital's overnight stays for all patients, who for such days, were entitled to Medicare Part A benefits. Id. The fraction "effectively asks, out of all patient days from Medicare beneficiaries, what percentage of those days came from Medicare beneficiaries who also received SSI benefits?" Cath. Health, 718 F.3d at 917 (emphasis in original).

The Secretary, through his delegate the Centers for Medicare and Medicaid Services, is responsible for computing each hospital's SSI fraction. See 51 Fed. Reg. 31,454, 31,459 (Sept. 3, 1986) (making CMS responsible for this task because hospitals would have difficulty identifying their Medicare patients who are also SSI recipients).

Pursuant to a regulation issued in 2010, CMS computes the SSI fraction by matching data from the Social Security Administration with Medicare inpatient data in CMS's own files by looking for one of three codes appearing in SSA's files - C01, M01, and M02 - to identify a patient's entitlement to SSI benefits. See Medicare Program, Final Rule, 75 Fed. Reg. 50,041,50,281 (Aug. 16, 2010) (stating that using SSI codes "C01, M01, and M02 accurately captures all SSI-entitled individuals during the month(s) that they are entitled to receive SSI benefits").² CMS matches individuals appearing in the SSA data denoted with these three codes with individuals appearing in its own Medicare Provider Analysis and Review ("MedPAR") file, which contains information for all Medicare beneficiaries using hospital inpatient services. See Baystate, 545 F. Supp. 2d at 23-24; see also 75 Fed. Reg. at 50,276; 51 Fed. Reg. 16,772, 16,777. CMS identifies the individuals appearing in both two data sets to determine the number of patients, and the inpatient days for those patients at each hospital, for the applicable fiscal year to calculate the hospital's SSI numerator. See Cath. Health, 718 F.3d at 916.

The Medicare Administrative Contractor then uses the SSI fraction calculated by CMS to determine what a hospital will receive under the DSH adjustment, which is a component of the total Medicare payment to a given hospital. See 42 C.F.R. § 412.106(b)(2)-(5).

C. Providers' Access to SSA Data

The Medicare statue requires the Secretary to "arrange to furnish . . . hospitals . . . the data necessary for such hospitals to compute the number of patient days used in computing the disproportionate patient percentage . . . for that hospital for the current cost reporting year."Medicare Modernization Act, Pub. L. No. 108-173, § 951, 117 Stat. 2066, 2427 (2003) (codified at 42 U.S.C. § 1395ww Note); see 70 Fed. Reg. 47,278, 47,439 (explaining that a hospital will be provided this data "to calculate and verify its Medicare fraction, and to decide whether it prefers to have the fraction determined on the basis of its fiscal year rather than a Federal fiscal year" and that it "will be the same data set CMS uses to calculate the Medicare fractions for the Federal fiscal year"). To accomplish this, CMS gives hospitals data from its MedPAR Limited Data Set³ "contain[ing] the matched patient-specific Medicare Part A inpatient days/SSI eligibility data on a month-to-month basis." 70 Fed. Reg. at 47,440.

But given the confidentiality of information retained by the Social Security Administration, CMS does not give the hospital the complete SSI eligibility file that it receives from SSA. See id. (rejecting proposal that CMS release the data file of SSI eligibility information that the Social Security Administration gives CMS because CMS is prohibited from disclosing SSI eligibility information).

D. Administrative Review

A hospital may obtain administrative review of a MAC's payment determination by requesting a hearing before the Provider Reimbursement Review Board ("PRRB" or the "Board"). See 42 U.S.C. § 1395oo(a). A decision of the Board must be

based upon the record made at such hearing, which shall include the evidence considered by the intermediary and such other evidence as may be obtained or received by the Board, and shall be supported by substantial evidence when the record is viewed as a whole.

42 U.S.C. § 1395oo(d). A hospital bears the "burden of production of evidence and burden of proof by establishing, by a preponderance of the evidence, that the provider is entitled to relief on the merits of the matter at issue." 42 C.F.R. § 405.1871(a)(3).

A Board decision is final "unless the...