Silverado Hospice, Inc. v. Becerra

• Decision Date: 01 August 2022
• Docket Number: 20-56348
• Citation: 42 F.4th 1112
• Parties: SILVERADO HOSPICE, INC., a Delaware corporation; ProCare Hospice, LLC, a Delaware limited liability corporation, Plaintiffs-Appellants, v. Xavier BECERRA, Secretary of United States Department of Health and Human Services, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

42 F.4th 1112

SILVERADO HOSPICE, INC., a Delaware corporation; ProCare Hospice, LLC, a Delaware limited liability corporation, Plaintiffs-Appellants,

v.Xavier BECERRA, Secretary of United States Department of Health and Human Services, Defendant-Appellee.

No. 20-56348

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 18, 2022 San Francisco, California

Filed August 1, 2022

Brian M. Daucher (argued), Sheppard Mullin Richter & Hampton LLP, Costa Mesa, California; Matthew G. Halgren, Sheppard Mullin Richter & Hampton LLP, San Diego, California; for Plaintiffs-Appellants.

McKaye L. Neumeister (argued) and Michael S. Raab, Appellate Staff; Tracy L. Wilkison, Acting United States Attorney; Brian M. Boynton, Acting Assistant Attorney General; Civil Division, United States Department of Justice, Washington, D.C.; Daniel J. Barry, Acting General Counsel; Janice L. Hoffman, Associate General Counsel; Susan Maxson Lyons, Deputy Associate General Counsel for Litigation; W. Charles Bailey Jr., Attorney; United States Department of Health & Human Services, Washington, D.C.; for Defendant-Appellee.

W. Jerad Rissler, Arnal Golden Gregory LLP, Atlanta, Georgia; William A. Dombi, Director, Center for Health Law, Washington, D.C.; for Amicus Curiae National Association for Home Care & Hospice.

Before: Morgan Christen and Daniel A. Bress, Circuit Judges, and Barbara M. G. Lynn,^* District Judge.

BRESS, Circuit Judge:

This case involves the complex interaction between two statutory limits on federal Medicare spending relating to hospice care. Hospices that treat Medicare beneficiaries receive periodic reimbursements throughout the year from the Centers for Medicare and Medicaid Services (CMS), but the Medicare statute caps hospices' aggregate annual reimbursement. The Budget Control Act separately requires the federal government to implement across-the-board cuts—commonly known as "sequestration"—to direct spending programs (including Medicare) when certain statutory conditions are met, as they were here.

The plaintiffs are hospice providers who allege that CMS's method of implementing sequestration for hospice reimbursements is contrary to the Medicare statute and the Budget Control Act. We conclude that the plaintiffs' challenge is without merit. CMS adopted a method that harmonized the Budget Control Act and the Medicare statute, ensuring the necessary percentage reduction to Medicare spending without altering the statutorily mandated calculation of the annual hospice cap. Plaintiffs' preferred method, by contrast, would not achieve sequestration's required spending reductions. For these reasons and those that follow, we affirm the district court's grant of summary judgment to the government.

I

Silverado Hospice, Inc. and ProCare Hospice, LLC operate Medicare-certified hospices in Southern California, five of which are at issue here. Some of the hospices' patients are elderly or disabled individuals who receive palliative care and whose treatment is covered by their insurance under Medicare Part A. 42 U.S.C. § 1395d(d). A Medicare beneficiary is eligible for hospice benefits if he or she is terminally ill, meaning a life expectancy of six months or less. Id. § 1395f(a)(7)(A) ; id. § 1395x(dd)(3)(A).

CMS administers the hospice benefit on behalf of the Department of Health and Human Services (HHS). Part of the agency's responsibility entails controlling the program's costs, while ensuring that hospices are properly reimbursed for their care of Medicare beneficiaries. We start with the relevant background on hospice reimbursements, which frames this dispute.

A

Medicare reimbursements for hospice care are partially a matter of timing. So that hospices receive funds throughout the year for the care they provide to Medicare beneficiaries, CMS periodically reimburses hospices using a Medicare Administrative Contractor (MAC) as intermediary. See 42 U.S.C. § 1395g(a) ; id. § 1395h(c)(2)(A)–(B); 42 C.F.R. § 418.302(d) – (e). The reimbursements are based on a pre-set, per-patient amount for each day that a hospice provides care to a Medicare beneficiary. 42 U.S.C. § 1395f(i)(1) ; see also 42 C.F.R. §§ 418.302, 418.306 ; Back v. Sebelius , 684 F.3d 929, 930 (9th Cir. 2012).

However, the reimbursements are subject to an aggregate annual cap per hospice facility. See 42 U.S.C. § 1395f(i)(2)(A) ; 42 C.F.R. § 418.308(a) ; L.A. Haven Hospice, Inc. v. Sebelius , 638 F.3d 644, 649–50 (9th Cir. 2011). The Medicare statute provides:

The amount of payment made under this part for hospice care provided by ... a hospice program for an accounting year may not exceed the "cap amount" for the year (computed under subparagraph (B)) multiplied by the number of medicare beneficiaries in the hospice program in that year (determined under subparagraph (C)).

42 U.S.C. § 1395f(i)(2)(A). The aggregate cap is calculated retrospectively at the close of each fiscal year, based on how many unique patients a hospice treated that year. 42 C.F.R. § 418.308(c). A hospice whose Medicare reimbursements exceeded the aggregate cap must repay the difference. Id. at § 418.308(d). For example, if a MAC made $1,200 in periodic payments throughout the year but the hospice is subject to a $1,000 annual cap, the hospice would need to remit $200 at the end of the fiscal year. About ten percent of hospices exceeded the cap in 2010.

The precise calculation of the aggregate cap amount is determined based on 42 U.S.C. § 1395f(i)(2)(B)–(C). Section 1395f(i)(2)(B) provides the calculation for the per-patient cap amount, which is in turn multiplied by the "number of medicare beneficiaries" as determined by § 1395f(i)(2)(C). Id. § 1395f(i)(2)(A). In 1984, the aggregate cap's first year, the per-patient cap amount was $6,500. Id. § 1395f(i)(2)(B)(i). But the per-patient amount was indexed to inflation and rose to $26,157.50 in 2013, the first fiscal year at issue here. Id. ; Medicare Program; FY 2015 Hospice Wage Index and Payment Rate Update , 79 Fed. Reg. 50,452, 50,471 (Aug. 22, 2014). The Medicare regulations also provide detailed rules for counting the "number of medicare beneficiaries" a hospice treats in a fiscal year. See 42 U.S.C. § 1395f(i)(2)(C) ; 42 C.F.R. § 418.309(b)(2). The parties do not dispute the method of calculating the per-patient cap amount. Nor do they dispute the method for determining the "number of medicare beneficiaries."

Once a fiscal year ends, hospices have five months to self-determine their aggregate cap amounts, file notice with their MACs, and "remit any overpayment due." 42 C.F.R. § 418.308(c). The MAC then "issues the final cap determination" and "reconcile[s] the final payments" to the hospice. 79 Fed. Reg. at 50,473. If the MAC determines that a hospice exceeded the aggregate cap and has an outstanding overpayment, the MAC's letter containing the "final determination of program reimbursement" also includes a demand for repayment. 42 C.F.R. § 405.1803(a) – (b) ; id. § 418.308(c).

If a hospice disputes the MAC's final cap determination, and the amount in controversy is at least $10,000, the hospice can appeal to the Provider Reimbursement Review Board (PRRB), an HHS tribunal. See 42 U.S.C. § 1395oo (a). Unless the Administrator of CMS elects to review it, the PRRB's decision constitutes HHS's final decision. 42 U.S.C. § 1395oo (f)(1) ; 42 C.F.R. § 405.1875(a). A hospice can then obtain judicial review of the agency's final decision in federal court. 42 U.S.C. § 1395oo (f)(1).

B

The aggregate annual cap is not the only restriction on Medicare's hospice spending. The Balanced Budget and Emergency Deficit Control Act of 1985, Pub. L. No. 99-177, 99 Stat. 1038, as amended by the Budget Control Act of 2011, Pub. L. No. 112-25, 125 Stat. 240, requires the President to make automatic spending cuts (the aforementioned "sequestration") to federal spending when certain statutory conditions are triggered. See 2 U.S.C. §§ 900 – 03. When sequestration is triggered, the President must reduce the federal government's direct spending by a certain percentage based on the Budget Control Act's mandates.

The Budget Control Act generally requires the Office of Management and Budget (OMB) to calculate a uniform percentage by which the budgets of nonexempt spending programs are to be sequestered. See 2 U.S.C. §§ 901a(6), 935(a)(1). Certain spending programs, however, are exempt from sequestration. 2 U.S.C. § 905. Although Medicare Part A is not exempt, the Budget Control Act has special rules for Medicare sequestration. See id. §§ 901a(6)(A), 906(d).

Relevant here, the Budget Control Act limits the sequestration of spending for certain Medicare programs to a flat two percent across-the-board reduction. Id. § 901a(6)(A). One type of Medicare spending subject to the two-percent reduction is "individual payments for services furnished" under Medicare Part A, which covers hospice care. Id. §§ 901a(6)(A), 906(d)(1)(A). To secure the proper "total percentage reduction" in covered "programs," the Budget Control Act requires that the two-percent reduction in "individual payments for services furnished" during a given fiscal year be applied "such that the reduction made in payments ... shall achieve the required total percentage reduction in those payments for that period." Id. § 906(d)(1).

In March 2013, the statutory conditions for sequestration were triggered. The President accordingly signed a sequestration order requiring federal agencies to implement spending reductions, as calculated by OMB. See Sequestration Order for Fiscal Year 2013 , 78 Fed. Reg. 14,633 (Mar. 1, 2013). Beginning the following month, MACs reduced their periodic reimbursements to hospices by two percent. When these periodic payments were made, it remained to be seen whether the hospices would ultimately exceed their cap amounts at the end of the year. Although only the 2013 and 2014 fiscal years are at issue here, sequestration has also been implemented every year since.

C

The triggering of sequestration...