SWEDISH AMERICAN HOSPITAL v. Sebelius, Civil Action No.: 08-2046 (RMU).

• Citation: 691 F. Supp.2d 80
• Decision Date: 05 March 2010
• Docket Number: Civil Action No.: 08-2046 (RMU).
• Parties: SWEDISH AMERICAN HOSPITAL, Plaintiff, v. Kathleen SEBELIUS, in her official capacity as Secretary of the Department of Health and Human Services, et al., Defendants.
• Court: United States District Courts. United States District Court (Columbia)

691 F. Supp.2d 80

SWEDISH AMERICAN HOSPITAL, Plaintiff,
v.
Kathleen SEBELIUS, in her official capacity as Secretary of the Department of Health and Human Services, et al., Defendants.

Civil Action No.: 08-2046 (RMU).

United States District Court, District of Columbia.

March 5, 2010.

691 F. Supp.2d 81

Charles G.F. MacKelvie, McDonald Hopkins LLC, Chicago, IL, Sonal Hope Mithani, Miller, Canfield, Paddock & Stone, PLC, Ann Arbor, MI, for Plaintiff.

Kirsten Friedel Roddy, U.S. Department of Health and Human Services, Mitchell P. Zeff, U.S. Attorney's Office, Washington, DC, for Defendants.

MEMORANDUM OPINION

GRANTING IN PART AND DENYING IN PART THE DEFENDANTS' MOTION TO DISMISS; GRANTING THE PLAINTIFF'S MOTION TO COMPEL PRODUCTION OF THE ADMINISTRATIVE RECORD

RICARDO M. URBINA, District Judge.

I. INTRODUCTION

This matter comes before the court on the defendants' motion to dismiss and the plaintiff's motion to compel production of the administrative record. On September 30, 2008, the Secretary of the Department of Health and Human Services ("the Secretary") issued an administrative ruling that required the plaintiff, a hospital in Rockford, Illinois, to repay several million dollars to the Medicare program. The plaintiff commenced this action challenging the Secretary's decision under the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 701 et seq., and asserting tort claims against Mutual of Omaha ("Mutual"), the insurance company that advised the plaintiff with respect to its Medicare obligations, and Wisconsin Physicians Service Insurance Corporation ("WPS"), the insurance company to which Mutual's Medicare business was transferred in 2007. As discussed in more detail below, because the court lacks subject matter jurisdiction over the plaintiff's tort claims against the insurance companies, it grants in part the defendants' motion to dismiss. The court denies, however, the portion of the defendants' motion that calls for the dismissal of the plaintiff's APA claim against the Secretary. Finally, the court grants the plaintiff's motion to compel production of the administrative record.

II. BACKGROUND

A. The Medicare Program

Medicare provides health insurance to the elderly and disabled by entitling eligible beneficiaries to have payment made on their behalf for the care and services rendered by hospitals, termed "providers." See 42 U.S.C. §§ 1395 et seq. Providers, in turn, are reimbursed by insurance companies, known as "fiscal intermediaries," that have contracted with the Department of Health and Human Services to aid in administering the Medicare program. See

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id. § 1395h. Fiscal intermediaries determine the amount of reimbursement due to providers under the Medicare Act and applicable regulations. See id.

Providers that train residents in approved residency programs may be reimbursed for the costs of "graduate medical education" ("GME") and "indirect medical education" ("IME"). See 42 U.S.C. § 1395ww. One variable used to calculate the GME and IME costs to be allocated to a provider is the number of full-time equivalent ("FTE") residents in that provider's training program. See id. A high GME or IME FTE count yields a correspondingly high GME or IME payment for the provider. See id.

Providers obtain Medicare reimbursement by submitting cost reports to their fiscal intermediary demonstrating the costs they incurred during the previous fiscal year and the portion of those costs to be allocated to Medicare. See 42 C.F.R. § 413.20. After receiving a provider's cost report, the fiscal intermediary may audit the report before determining the total amount of reimbursement to which the hospital is entitled, which it then memorializes in a Notice of Program Reimbursement ("NPR"). See id. § 405.1803. The fiscal intermediary may reopen and revise a cost report within three years after the date of the NPR. Id. § 405.1885.

In the Balanced Budget Act of 1997 ("BBA"), Congress capped the amount that providers could be reimbursed for their GME and IME costs. See id. More specifically, for cost reporting periods beginning on or after October 1, 1997, teaching hospitals were limited to the number of GME FTEs and IME FTEs "for the hospital's most recent cost reporting period ending on or before December 31, 1996" for the purpose of calculating GME and IME payments. See id. Following the enactment of the BBA, the Secretary promulgated regulations implementing the caps imposed by the statute. See 42 C.F.R. §§ 413.86(g)(4), 412.105(f)(1)(iv) (1997). The Secretary subsequently revised the regulations concerning the GME and IME resident caps in 1998, 1999 and 2001. See 42 C.F.R. §§ 413.86, 412.105 (1998); 42 C.F.R. §§ 413.86(g)(8)(1999); 42 C.F.R. §§ 413.86(g)(8)(iii), 412.105(f)(1)(ix) (2001).

B. Factual and Procedural History

The plaintiff is a certified Medicare provider that participates in the Family Practice Residency Program ("the residency program"), which is sponsored by the University of Illinois College of Medicine for the purpose of training residents as family practice physicians. Compl. ¶¶ 12-14. The plaintiff alleges that during fiscal years 1995 and 1996, another hospital, St. Anthony Medical Center ("St. Anthony"), also participated in the residency program. Id. ¶¶ 17-18. In 1996, however, St. Anthony withdrew from the program and the plaintiff absorbed the residents that St. Anthony would otherwise have trained. Id.

After the plaintiff took on the residents who had previously been trained by St. Anthony, the plaintiff contacted the fiscal intermediary, Mutual, which advised the plaintiff to adjust its GME and IME FTE resident caps upward to reflect the fact that the plaintiff had assumed the residents formerly trained by St. Anthony. Id. ¶¶ 18-19. The plaintiff's NPRs for fiscal years 1998 through 2002 were based on FTE resident caps that reflected both the residents trained by the plaintiff and the residents previously trained by St. Anthony. Id. ¶ 20.

In February 2005, Mutual reopened the cost reports for fiscal years 1999 through

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2002¹ and adjusted the plaintiff's FTE resident caps downward to omit consideration of the residents previously trained by St. Anthony. Id. ¶¶ 21-22. Likewise, Mutual omitted consideration of St. Anthony's residents in the NPR that it issued for fiscal year 2003. Id. ¶ 23. After the plaintiff appealed Mutual's determination to the Provider Reimbursement Review Board, the Secretary issued a ruling affirming Mutual's adjustments on September 30, 2008. Id. ¶ 25. This determination resulted in Medicare recouping nearly $5 million from the plaintiff. Id.

The plaintiff commenced the instant action in this court in November 2008 alleging that the Secretary's decision violated the APA and asserting estoppel and other tort claims against Mutual and WPS. See generally id. On April 9, 2009, the defendants filed a motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) and for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).² See generally Defs.' Mot. to Dismiss ("Defs.' Mot."). In response, the plaintiff filed a motion to compel production of the administrative record, see generally Pl.'s Mot. for Turnover of the Admin. R. ("Pl.'s Mot."), as well as an opposition to the defendants' motion to dismiss, see generally Pl.'s Opp'n to Defs.' Mot. ("Pl.'s Opp'n"). With both motions fully briefed, the court turns now to the applicable legal standards and the parties' arguments.

III. ANALYSIS

A. Legal Standard for a Motion to Dismiss Pursuant to Rule 12(b)(1)

Federal courts are courts of limited jurisdiction and the law presumes that "a cause lies outside this limited jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89, 58 S.Ct. 586, 82 L.Ed. 845 (1938); see also Gen. Motors Corp. v. Envtl. Prot. Agency, 363 F.3d 442, 448 (D.C.Cir.2004) (noting that "as a court of limited jurisdiction, we begin, and end, with an examination of our jurisdiction").

Because "subject-matter jurisdiction is an `Article III as well as a statutory requirement, no action of the parties can confer subject-matter jurisdiction upon a federal court.'" Akinseye v. District of Columbia, 339 F.3d 970, 971 (D.C.Cir. 2003) (quoting Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinea, 456 U.S. 694, 702, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982)). On a motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1), the plaintiff bears the burden of establishing by a preponderance of the evidence that the court has subject matter jurisdiction. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992).

Because subject matter jurisdiction focuses on the court's power to hear the claim, however, the court must give the plaintiff's factual allegations closer scrutiny when resolving a Rule 12(b)(1) motion

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than would be required for a Rule 12(b)(6) motion for failure to state a claim. Macharia v. United States, 334 F.3d 61, 64, 69 (D.C.Cir.2003); Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F.Supp.2d 9, 13 (D.D.C.2001). Thus, the court is not limited to the allegations contained in the complaint. Hohri v. United States, 782 F.2d 227, 241 (D.C.Cir.1986), vacated on other grounds, 482 U.S. 64, 107 S.Ct. 2246, 96 L.Ed.2d 51 (1987). When necessary, the court may consider the complaint supplemented by undisputed facts evidenced in the record, or the complaint supplemented by undisputed facts plus the court's resolution of disputed facts. Herbert v. Nat'l Acad. of Scis., 974 F.2d 192, 197 (D.C.Cir.1992)

B. Legal Standard for a Motion to Dismiss Pursuant to Rule 12(b)(6)

A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of a complaint. Browning v. Clinton, 292 F.3d 235, 242...