Trust Under the Will of James Wills v. Burwell

• Citation: 306 F.Supp.3d 684
• Decision Date: 25 January 2018
• Docket Number: CIVIL ACTION NO. 16–6615
• Parties: TRUST UNDER the WILL OF James WILLS, City of Philadelphia, Acting by the Board of Directors of City Trusts, Trustee, Plaintiff, v. Sylvia Mathews BURWELL, Secretary, United States Department of Health and Human Services, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

306 F.Supp.3d 684

TRUST UNDER the WILL OF James WILLS, City of Philadelphia, Acting by the Board of Directors of City Trusts, Trustee, Plaintiff,

v.Sylvia Mathews BURWELL, Secretary, United States Department of Health and Human Services, Defendant.

CIVIL ACTION NO. 16–6615

United States District Court, E.D. Pennsylvania.

Signed January 25, 2018

Mark H. Gallant, Robert Anthony Chu, Cozen O'Connor, Philadelphia, PA, for Plaintiff.

Peter T. Wechsler, Dept. of Justice, Washington, DC, Paul W. Kaufman, U.S. Department of Justice, Philadelphia, PA, for Defendant.

MEMORANDUM

EDUARDO C. ROBRENO, District Judge

Plaintiff Wills Eye Hospital appeals the agency decision denying its application to enroll in Medicare as a hospital. The agency denied the application on the basis that Wills Eye was not sufficiently engaged in providing inpatient care.¹

Before the Court are the parties' cross-motions for summary judgment on the administrative record. For the reasons discussed below, the Court will GRANT the Secretary's Motion for Summary Judgment.²

I. BACKGROUND

Medicare, established under Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq. (2001), provides a system of federally-funded health insurance for eligible elderly and disabled individuals. Medicare is administered by the Secretary of the Department of Health and Human Services. Heckler v. Ringer, 466 U.S. 602, 605, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984). The Secretary delegates responsibility for administering the Medicare program to the Centers for Medicare & Medicaid Services Program ("CMS"). See, e.g., Reg'l Med. Transp., Inc. v. Highmark, Inc., No. CIV.A. 04-1969, 2008 WL 936925, at *1 (E.D. Pa. Apr. 2, 2008). Under the Medicare statute, hospitals and other health care providers enter into written provider agreements with the Secretary in order to render services to Medicare beneficiaries and receive reimbursement. § 1395cc.

A. Factual Background

The Wills Eye Trust, doing business as Wills Eye Hospital, is a testamentary trust administered by the Commonwealth of Pennsylvania. See Compl. ¶ 12, ECF No. 11. From 2002 to 2006, Wills Eye operated a hospital at 900 Walnut Street in Philadelphia. In 2006, Wills Eye sold its inpatient program at 900 Walnut Street to Thomas Jefferson University Hospital and partnered with Jefferson as an academic affiliate for the provision of inpatient care. Id. at ¶¶ 31–32; Admin. Rec. ("AR") 977. In 2002, Wills Eye created a separate facility at 840 Walnut Street, and that facility began participating in the Medicare program as an Ambulatory Surgical Center. Compl. ¶¶ 31–21. In 2011, Wills Eye renovated the 840 Walnut facility and added four inpatient beds. Id. at ¶¶ 34, 36; AR 3, 14, 40. In 2013, Wills Eye received state licensure of the 840 Walnut Street facility as a hospital from the Pennsylvania Department of Health, and applied for Medicare enrollment as a hospital. AR 14.

To participate in Medicare as a hospital, an entity must enroll in the program by filing an enrollment form; receive approval of a Medicare intermediary; and obtain a hospital license from the state in which it is located. The state licensing agency conducts a survey of all prospective enrollees to determine, on behalf of CMS, if the applicant satisfies the Medicare Conditions of Participation for hospitals. See 42 C.F.R. §§ 482.11 through 482.58. Additionally, such an applicant must qualify as a "hospital" under section 1861 of the Medicare Act. See 42 C.F.R. § 488.3(a)(1).

The Medicare Act defines "hospital," in relevant part, as an institution that "is primarily engaged in providing, by or under the supervision of physicians, to inpatients (A) diagnostic services and therapeutic services for medical diagnosis, treatment, and care of injured, disabled, or sick persons, or (B) rehabilitation services for the rehabilitation of injured, disabled, or sick persons ...". 42 U.S.C. § 1395x(e)(1). Similarly, CMS's regulations provide, in relevant part, that a "qualified hospital" is a facility that "[i]s primarily engaged in providing, by or under the supervision of doctors of medicine or osteopathy, inpatient services for the diagnosis, treatment, and care or rehabilitation of persons who are sick, injured, or disabled ...". 42 C.F.R. § 409.3.

The parties do not dispute that Wills Eye fulfilled the state licensing requirements as a hospital, and was surveyed and recommended for Medicare enrollment as a hospital by the Medicare intermediary. Pl. Mot. 20, ECF No. 20; Def. Mot. 13–14, ECF No. 22. Even so, CMS denied Wills Eye's application to enroll in Medicare as a hospital. Pl. Mot. 22, ECF No. 20. CMS based this denial on its determination that Wills Eye was not a "hospital" as defined by § 1395x(e)(1) because it "[was] not primarily engaged in providing inpatient services." Id. at 22.

B. The Administrative Appeals

Wills Eye sought reconsideration and contended, inter alia, that CMS was subjecting it to a new enrollment standard without having first adopted that standard through rulemaking. Pl. Mot. at 22, ECF No. 20. Wills Eye also noted that, according to hospital survey data obtained through the American Hospital Association and the Department of Health, eighty-four percent of hospitals then enrolled in Medicare did not have a "greater inpatient than outpatient volume," and that thirty-seven percent of hospitals participating in Medicare had lower percentages of inpatient care than did Wills Eye. Id. at 23. This data included other specialty eye and ear hospitals that CMS had enrolled in Medicare. Id. Nevertheless, CMS denied Wills Eye's request on reconsideration, reiterating its reasoning and justification. Id.

Then, Wills Eye requested a hearing before an administrative law judge ("ALJ"). At that hearing, Wills Eye contended that it qualified for Medicare enrollment as a hospital because it met the licensing and other requirements. Pl. Mot. at 24, ECF No. 20. The ALJ sustained CMS's determination. Id. at 25.

Next, Wills Eye requested review of the ALJ's decision by the Health and Human Services Department Appeals Board ("Board") pursuant to 42 C.F.R. §§ 498.5(1)(3), 498.82(a). Pl. Mot. at 24, ECF No. 20. The Board affirmed the ALJ's decision. Id. The Board noted that an institution seeking to enroll in Medicare as a "hospital" must show both that it is "primarily engaged ... in providing the services" described in § 1861(e)(1), and that it provides those services "primarily to inpatients." AR 29–30, 32–34. The Board declined to endorse "any single numerical test" for comparative volume, concluding that a "hospital" must treat a "significant number of patients"—which it found Wills Eye did not do. AR 15, 33.

In the Board hearing, Wills Eye also argued that, in order to consider relative inpatient-outpatient volume, the Secretary had to formally amend the regulations. AR 34, 35, 48, ECF No. 19. See also 42 U.S.C. § 1395hh(a) (providing that changes to substantive legal standards may not take effect "unless ... promulgated by ... regulation"). The Board rejected this argument, concluding that the comparative volume test was not a "change." The Board first reasoned that the comparative volume factor could be inferred from the general language of § 1861(e)(1) and 42 C.F.R. § 488.3(a)(1). AR 34, 35, 48. Further, the Board indicated that CMS's intent to apply a comparative volume consideration was clear from the Board's prior opinions. See AR 32–34. Wills Eye now seeks judicial review of the agency decision. Before the Court are the parties' cross-motions for summary judgment on the administrative record.³ On January 11, 2018, the Court heard oral argument from the parties.

II. DISCUSSION

A. Legal Standard

Summary judgment is awarded under Federal Rule of Civil Procedure 56 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) ; Liberty Mut. Ins. Co. v. Sweeney, 689 F.3d 288, 292 (3d Cir. 2012).

Judicial review of the agency's decision is conducted pursuant to the standards set forth in the Administrative Procedure Act ("APA"), 5 U.S.C. § 706. 42 U.S.C. § 1395oo(f)(1). Under the APA, a court's review is limited to the explanations of the agency in the administrative record. Smith v. Holder, 487 Fed.Appx. 731, 734 (3d Cir. 2012) (citing State Farm., 463 U.S. at 50, 103 S.Ct. 2856 ).

The Court reviews the administrative record taken as a whole.

5 U.S.C. § 706(2)(A),(E). Therefore, the Court reviews the entire agency record, including, as relevant here, the actions of both CMS and the Board. See id. See also Heckler, 466 U.S. at 619, 104 S.Ct. 2013 ("[T]he purpose of the exhaustion requirement is to prevent "premature interference with agency processes" and to give the agency a chance "to compile a record which is adequate for judicial review." ") (citing Weinberger v. Salfi, 422 U.S. 749, 765, 95 S.Ct. 2457, 45 L.Ed.2d 522 (1975) ). If, after reviewing the record, the Court is satisfied "that the materials before the Secretary sufficed for a consideration of the relevant factors by [the Secretary] and that there was no clear error of judgment on [the Secretary's] part," then the Court may not disturb the Secretary's decision. C.K. v. New Jersey Dep't of Health & Human Servs., 92 F.3d 171, 183 (3d Cir. 1996) (internal citation omitted).

Accordingly, a court "can set aside the Administrator's decision only if it is ‘unsupported by substantial evidence,’ is ‘arbitrary, capricious, an abuse of discretion, or [is] otherwise not in accordance with law.’ " Albert Einstein Med. Ctr. v. Sebelius, 566 F.3d 368, 372–73 (3d Cir. 2009) (citing Mercy Home Health v. Leavitt, 436 F.3d 370, 377 (3d Cir. 2006) ). "Substantial evidence is ‘more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.’ " Id. (quoting Mercy Home Health, 436 F.3d at 380 ).

Additionally, a court "must afford substantial deference to an agency's...