Select Specialty Hospital-Denver, Inc. v. Becerra, Civil Action 10-1356 (BAH)

CourtUnited States District Courts. United States District Court (Columbia)
Writing for the CourtBERYL A. HOWELL, CHIEF JUDGE
PartiesSELECT SPECIALTY HOSPITAL-DENVER, INC., et al., Plaintiffs, v. XAVIER BECERRA, [1] Secretary, U.S. Department of Health and Human Services, Defendant.
Decision Date20 September 2021
Docket NumberCivil Action 10-1356 (BAH)


XAVIER BECERRA, [1] Secretary, U.S. Department of Health and Human Services, Defendant.

Civil Action No. 10-1356 (BAH)

United States district Court, District of Columbia

September 20, 2021



In August 2019, this Court granted summary judgment in favor of plaintiffs-seventy-five long-term care hospitals (“LTCHs”) located in 26 states-on their claims for reimbursement from the Department of Health and Human Services (“HHS”) for unpaid co-insurance and deductible obligations (“bad debts”) of patients eligible for both Medicare and Medicaid. See Select Specialty Hosp.-Denver, Inc. v. Azar (“Select Specialty I”), 391 F.Supp.3d 53, 55 (D.D.C. 2019). Contravening the notice-and-comment rulemaking required by the Medicare Act, 42 U.S.C. § 1395hh(a)(2), in 2007, the Centers for Medicare and Medicaid Services (“CMS”) abruptly began to refuse reimbursement of bad debts under the must-bill policy and concomitant remittance advice (“RA”) requirement, which directed plaintiffs first to seek reimbursement from their state Medicaid programs prior to billing Medicare. Id. This Court ordered the CMS Administrator to “promptly . . . reconsider, ” on remand, “whether, absent the must-bill and RA requirements, the plaintiffs are entitled to bad debt reimbursement.” Id. At 70. Plaintiffs were also entitled to prejudgment interest pursuant to 42 U.S.C. § 1395oo(f)(2). Select Specialty Hosp.-Denver, Inc. v. Azar (“Select Specialty II”), 2019 WL 5697076, at *6-7 (D.D.C. Nov. 4, 2019). HHS unsuccessfully sought reconsideration of this Court's decision, see id., and then filed an appeal to the D.C. Circuit, which the agency subsequently voluntarily dismissed, see Select Specialty Hosp.-Denver, Inc. v. Azar, 391 F.Supp.3d 53 (D.D.C. 2019), appeal dismissed No. 20-5004 (D.C. Cir. Jan. 28, 2020).

After nearly a year and a half of negotiations between the parties, Pls.' Mem. in Supp. Pls.' Mot. to Enforce J. (“Pls.' Mem.”) at 1, ECF No. 101, CMS still had not calculated the total reimbursements owed, prompting plaintiffs to file, in December 2020, the instant motion for an order to enforce the August 2019 judgment and to direct HHS to “reimburse Plaintiffs for their dual eligible bad debts without any reduction for Medicaid liability, ” Pls.' Mot. to Enforce J. (“Pls.' Mot.”), ECF No. 101. Less than a month after plaintiffs sought this enforcement order, CMS agreed to reimburse $18, 656, 588 in bad debt and $4, 992, 904 in associated interest for most plaintiffs. Def.'s Notice, Ex. 1 (Jan. 12, 2021 Letter from Susan Burris, Director of Cost Reporting Division, CMS, to Jason Healy, plaintiffs' counsel) (“CMS Letter”), at 1, ECF No. 104-1.

Remaining in dispute is $1, 992, 629 in unpaid claimed reimbursements, plus interest, that HHS has reduced or otherwise denied to eight plaintiff LTCHs located in five states-Alabama, Arkansas, Mississippi, Nebraska, and Wisconsin. Parties' Joint Status Report ¶ 5, ECF No. 105; see also id. ¶ 1; Pls.' Suppl. Mem. Supp. Mot. to Enforce J. (“Pls.' Suppl. Mem.”) at 2, ECF No. 106.[2] HHS maintains that the disputed reimbursements do not reflect a “federal obligation, ” Def.'s Resp. Pls.' Suppl. Mem. Supp. Mot. to Enforce J. (“Def.'s Suppl. Opp'n”) at 5, ECF No. 109, but instead account for what state Medicaid programs would have been required to contribute pursuant to their cost-sharing obligations under the corresponding state Medicaid plans. Plaintiffs, for their part, insist that reducing bad debt reimbursement based on any “perceived Medicaid liability” flouts the Court's judgment holding that their receipt of reimbursement for the claims at issue could not be preconditioned on complying with the must-bill and RA requirements. Pls.' Suppl. Mem. at 4.

To effectuate the judgment of Select Specialty I, CMS cannot withhold or reduce reimbursement for bad debt claims that plaintiffs incurred while they were non-participants in state Medicaid programs during the 2005 to 2010 period at issue. Doing otherwise essentially denies plaintiffs the relief awarded to them in Select Specialty I, which held that CMS acted unlawfully in subjecting plaintiffs, while they were not enrolled in state Medicaid programs, to a new requirement of “Medicaid participation” (through the sudden imposition of the must-bill policy and RA requirement) without notice-and-comment. See Select Specialty I, 391 F.Supp.3d at 70. No aspect of the Court's judgment, however, prevents CMS from withholding or reducing reimbursements for claims that accrued after plaintiffs enrolled in state Medicaid programs and were the responsibility of those state Medicaid programs. Accordingly, for reasons set forth in detail below, plaintiffs' motion to enforce judgment will be granted in part and denied in part.


The statutory, regulatory, factual, and procedural background for this case is fully set out in Select Specialty 1, 391 F.Supp.3d at 56-66, and Select Specialty II, 2019 WL 5697076, at *1-3, and thus only the background necessary to resolving the instant motion is summarized below.

A. Statutory and Regulatory Background

“Medicare is a federally funded program that reimburses healthcare providers for delivering medical care to qualifying elderly and disabled individuals, ” whereas “Medicaid is a cooperative-federal state program-administered by states, and subject to federal guidelines- that pays for medical care provided to eligible low-income individuals.” New LifeCare Hosps. of N.C., LLC v. Becerra, 7 F.4th 1215, 1219 (D.C. Cir. 2021) (citations omitted).[3] The federal government covers most of the costs incurred for the care provided to Medicare patients, who nonetheless continue to be responsible for both deductible and coinsurance payments for hospital care. See 42 U.S.C. § 1395e; 42 C.F.R. §§ 409.82, 409.83. Individuals eligible for both Medicare and Medicaid (“dual-eligible patients”), however, often lack the financial means “to afford the coinsurances and deductibles required of them under Medicare.” New LifeCare Hosps., 7 F.4th at 1219. In such circumstances, the unpaid obligations, or bad debts, of these dual-eligible patients may be charged to a state Medicaid agency if required by that state's Medicaid program. See id. (citing Grossmont Hosp. Corp. v. Burwell, 797 F.3d 1079, 1081 (D.C. Cir. 2015). Only when states do “not cover the deductibles and coinsurances of dual-eligible patients through Medicaid” can “healthcare providers . . . seek reimbursement through Medicare.” Id. (citing 42 C.F.R. § 413.89). Thus, if a state Medicaid program is “obligated either by statute or under the terms of its plan to pay all, or any part, of the Medicare deductible or coinsurance amounts, those amounts are not allowable as bad debts under Medicare.” CMS Provider Reimbursement Manual Part I § 322 (1967). Conversely, a bad debt that “the State is not obligated to pay can be included as a bad debt under Medicare, ” provided that other conditions not at issue here are met. Id. (emphasis added).[4]

To implement the statutory requirement that state Medicaid programs determine their cost-sharing obligations regarding Medicare deductible and coinsurance amounts payable by dual-eligible beneficiaries, CMS adopted a must-bill policy, which requires hospitals to “(1) bill the state Medicaid program to determine whether Medicaid will cover the bad debts first, and (2) obtain a document known as a remittance advice (‘RA') indicating whether the state refuses payment, before seeking reimbursement under Medicare.” New LifeCare Hosps., 7 F.4th at 1220 (citations omitted). HHS explains that, due to this statutory directive, CMS, “[e]ven absent the must-bill policy and the RA requirements . . . must still consider states' liabilities for Medicare cost-sharing in order to determine the amount of Plaintiffs' bad debt reimbursement due from the federal government.” Def.'s Opp'n to Pls.' Mot. to Enforce J. (Def.'s Opp'n”) at 12, ECF No. 102.

B. Factual Background

Before 2007, CMS generally “had not applied the must-bill policy and the concomitant RA requirement to the plaintiffs, ” as LTCHs, Select Specialty I, 391 F.Supp.3d at 61, and “[b]illing state Medicaid programs was regarded as unnecessary, because the states were not liable for Medicare bad debts incurred at LTCHs, ” id. at 55. As a result, “none of the plaintiffs participated in their respective state Medicaid programs, ” id. at 60, given that their participation had never been required to obtain reimbursement from Medicare.

In 2007, however, CMS “began denying [reimbursement] requests” from plaintiffs and “consistently cited the must-bill policy and the plaintiffs' lack of RAs as reasons for the denials.” Id. at 61. Reacting to these unanticipated denials, plaintiffs attempted to obtain RAs and enroll in their respective state Medicaid programs to qualify for reimbursement under the must-bill policy and RA requirement, id. at 63, but their efforts yielded little fruit. When plaintiffs “began submitting bills to state Medicaid programs in which they were not enrolled, in an attempt to obtain RAs, ” they were typically rejected because they were “not, or could not, be enrolled in Medicaid.” Id. Similarly, when plaintiffs “attempted to enroll in Medicaid for the limited purpose of obtaining RAs, ” they were either “unable to enroll, ” or were able to enroll but were still not able to obtain “the requisite RAs for earlier periods, ” as was the case for the majority of plaintiffs. Id. at 63-64. Beginning in 2007, CMS thus preconditioned plaintiffs' ability to obtain reimbursement for bad debts from dual-eligible patients on “Medicaid participation, ” despite the fact that plaintiffs were barred in many states from participating in Medicaid because of their status as long-term care facilities. See id. at 70.

C. Procedural History


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