University Medical Center of So. Nev. V. Thompson
| Decision Date | 20 August 2004 |
| Docket Number | No. 02-17278.,02-17278. |
| Citation | 380 F.3d 1197 |
| Parties | UNIVERSITY MEDICAL CENTER OF SOUTHERN NEVADA, Plaintiff-Appellant, v. Tommy G. THOMPSON, Secretary United States Department of Health and Human Services, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Edith S. Marshall, Powers, Pyles, Sutter & Verville, P.C., Washington, DC, Stewart
L. Bell, Janet F. Stewart, Mark E. Wood, Office of the District Attorney, Las Vegas, NV, for the appellant.
Robert D. McCallum, Jr., Daniel G. Bogden, Anthony J. Steinmeyer, Anne Murphy, Department of Justice, Civil Division, Washington, DC, for the appellee.
Appeal from the United States District Court for the District of Nevada; Lloyd D. George, District Judge, Presiding. D.C. No. CV-S-01-0797-LDG.
Before: TASHIMA and CLIFTON, Circuit Judges, and LEIGHTON,* District Judge.
University Medical Center of Southern Nevada ("UMC") appeals a decision of the district court rejecting its interpretation of the qualifications for a "disproportionate share adjustment" under that portion of the Medicare statute authorizing additional payments to hospitals serving disproportionate numbers of low-income patients.
Medicare provides health insurance benefits to participating individuals over the age of sixty-five, qualifying disabled individuals and those suffering from end-stage renal disease. 42 U.S.C. § 1395c. Until 1983, Medicare reimbursed health care providers for the reasonable cost of their services — which, in most instances, meant their actual cost so long as it did not exceed certain limits. Id. §§ 1395f(b)(1), 1395x(v). Beginning in 1983, Medicare began reimbursing hospitals according to predetermined rates based on diagnosis and geographic location. Id. § 1395ww(d). Although Congress intended this change to promote efficiency and cost-effectiveness, Congress recognized that certain adjustments might be required for those hospitals with actual costs that regularly exceeded the new rates. H.R. REP. NO. 98-25, at 132 (1983), U.S.Code Cong. & Admin.News 1983, pp. 219, 351. Congress explained that urban hospitals serving a disproportionately high number of low income patients can be disadvantaged by the diagnosis-based rates because such patients "may be more severely ill than average." Id. at 141, U.S.Code Cong. & Admin.News 1983, pp. 219, 360. The resulting "disproportionate share adjustment" allows these hospitals to qualify for additional payments to better ensure that they are properly compensated for their services. 42 U.S.C. § 1395ww(d)(5)(F).
Congress ultimately established two methods by which hospitals can qualify for additional payments. The method at issue in this case, the so-called "Pickle Method," authorizes additional payments to hospitals serving disproportionately higher numbers of indigent patients as determined by comparing revenue from non-federal, state and local sources with revenue from all sources. 42 U.S.C. § 1395ww(d)(5)(F)(i)(II). As originally enacted, the Pickle Method provided an adjustment for any hospital that:
is located in an urban area, has 100 or more beds, and can demonstrate that its net inpatient care revenues (excluding any of such revenues attributable to [Medicare or Medicaid])... for indigent care from State and local government sources exceed 30 percent of its total of such revenues during the period.
Congress amended this statutory language one year later. As amended, the statute authorizes an adjustment for any hospital that:
is located in an urban area, has 100 or more beds, and can demonstrate that its net inpatient care revenues (excluding any of such revenues attributable to [Medicare or Medicaid])... for indigent care from State and local government sources exceed 30 percent of its total of such net inpatient care revenues during the period.
Omnibus Budget Reconciliation Act of 1987, Pub.L. No. 100-203 § 40009(j)(3)(A), 101 Stat. 1330, 1130-59 (1987). In so doing, Congress replaced the phrase "total of such revenues" with the phrase "total of such net inpatient care revenues." Congress appears to have intended to clarify that a hospital's care of indigent patients is measured against net revenue — i.e., gross revenue ("revenues the hospital would receive if all patients paid the hospital's full charges") less certain specific deductions ("bad debts, contractual allowances and charity care"). H.R. CONF. REP. NO. 100-495, at 543 (1987), U.S.Code Cong. & Admin.News 1987, pp. 2313-1245, 2313-1289.
A hospital seeking reimbursement from Medicare submits a cost report to a "fiscal intermediary," an entity with which the Secretary of Health and Human Services ("Secretary") contracts for purposes of performing audit and payment functions under Medicare. 42 U.S.C. § 1395h; 42 C.F.R. §§ 413.20(b), 413.24(f). The fiscal intermediary audits the report and then informs the hospital of its calculation of the appropriate Medicare reimbursement to which the hospital is entitled. 42 C.F.R. § 405.1803.
A hospital that is dissatisfied with this decision may file an appeal with the Provider Reimbursement Review Board ("PRRB"), an administrative tribunal appointed by the Secretary. 42 U.S.C. §§ 1395oo(a), (h). The PRRB's decision constitutes a final administrative decision unless it is reversed, affirmed or modified by the Secretary. Id. § 1395oo(f)(1). A hospital that is dissatisfied with the decision of the PRRB may obtain judicial review. Id.
UMC's fiscal intermediary denied a disproportionate share adjustment under the Pickle Method for each of the fiscal years 1993, 1994 and 1995. UMC disagreed with the decision and appealed to the PRRB. The sole issue before the PRRB was whether, for purposes of qualifying for an adjustment under the Pickle Method, the extent to which a hospital cares for low-income patients is measured against net inpatient care revenues as a whole or net inpatient care revenues less Medicare and Medicaid payments. The PRRB adopted the former interpretation — meaning that to qualify, UMC would be required to show that more than thirty percent of its net inpatient care revenues (including Medicare and Medicaid payments) is obtained from non-federal, state and local sources. In reaching this decision, the PRRB relied upon North Broward Hosp. Dist. v. Shalala, 172 F.3d 90 (D.C.Cir.), cert. denied, 528 U.S. 1022, 120 S.Ct. 532, 145 L.Ed.2d 413 (1999), a case involving the same issue of statutory interpretation.
UMC sought review in the United States District Court for the District of Nevada. The district court likewise agreed with North Broward and affirmed the PRRB's decision. UMC thereafter appealed to this Court.
The technical question of statutory interpretation raised by UMC is whether the word "such" in the phrase "such net inpatient care revenues" refers back to "net inpatient care revenues (excluding any of such revenues attributable to [Medicare or Medicaid])" or simply to "net inpatient care revenues." UMC contends that the adjective "such" typically refers to a particular antecedent — in this case, "net inpatient care revenues (excluding any of such revenues attributable to [Medicare or Medicaid])." The Secretary counters that the adjective "such" occasionally refers to a general antecedent — in this case, "net inpatient care revenues." The Secretary argues that, in the context of this statute, the word "such" necessarily refers to a general antecedent because it is immediately preceded by the noun "total" — a word that implies an aggregation of the earlier-described net inpatient care revenues.
When asked to review the propriety of an agency's interpretation of a statute, a federal court is faced with two questions:
First ... is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute.
Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). This Court must determine, in the first instance, whether Congress clearly intended to exclude Medicare and Medicaid payments from net inpatient care revenues. If the statute does not evidence such an intention, the Court must then determine whether the Secretary's contrary interpretation (that such payments should be included in net inpatient care revenues) reflects a permissible construction of the statute. If the Secretary's interpretation reflects such a construction, then it is entitled to deference. American Rivers v. FERC, 201 F.3d 1186, 1194 (9th Cir.2000).
UMC argues that the statute clearly requires the exclusion of Medicare and Medicaid payments from net inpatient care revenues. Specifically, UMC argues that the word "such" unambiguously refers back to the particular antecedent "net inpatient care revenue (excluding any such revenue from [Medicare or Medicaid])." This argument is not supported by the statutory language, however.
UMC ignores the noun "total" immediately preceding the word "such" in the statutory provision — thereby violating the principle that every word in a statute must be given effect whenever possible. See, e.g., TRW Inc....
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