Williamsport Hosp. v. Sec'y

• Decision Date: 18 January 2019
• Docket Number: No. 18-1459,18-1459
• Parties: WILLIAMSPORT HOSPITAL, d/b/a Williamsport Regional Medical Center, Appellant v. SECRETARY, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES; UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES; ADMINISTRATOR CENTERS FOR MEDICARE & MEDICAID SERVICES; UNITED STATES CENTERS FOR MEDICARE AND MEDICAID SERVICES; ROBERT G. EATON, Chairman, Medicare Geographic Classification Review Board; THE MEDICARE GEOGRAPHIC CLASSIFICATION BOARD
• Court: U.S. Court of Appeals — Third Circuit

WILLIAMSPORT HOSPITAL, d/b/a Williamsport Regional Medical Center, Appellant v. SECRETARY, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES;

UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES;

ADMINISTRATOR CENTERS FOR MEDICARE & MEDICAID SERVICES;

UNITED STATES CENTERS FOR MEDICARE AND MEDICAID SERVICES;

ROBERT G. EATON, Chairman, Medicare Geographic Classification Review Board;

THE MEDICARE GEOGRAPHIC CLASSIFICATION BOARD

No. 18-1459

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Argued on November 6, 2018

January 18, 2019

NOT PRECEDENTIAL

On Appeal from the United States District Court for the Middle District of Pennsylvania

(District Court No. 4-17-cv-00393)

District Judge: Honorable Mathew W. Brann

Before: AMBRO, SCIRICA and RENDELL, Circuit Judges

Matthew G. Boyd

Elliott Greenleaf, P. C.

201 Penn Avenue, Suite 202

Scranton, PA 18503

Thomas B Helbig, Jr.

Timothy T. Myers (Argued)

Elliott Greenleaf, P.C.

925 Harvest Drive

Suite 300

Blue Bell, PA 19422

Counsel for Appellant

Samuel S. Dalke

Office of United States Attorney

228 Walnut Street

P. O. Box 1754

220 Federal Building and Courthouse

Harrisburg, PA 17108

Anna T. Greene (Argued)

United States Department of Health and Human Services

Office of General Counsel CMS Division

200 Independence Avenue, S.W.

Washington, DC 20201

Counsel for Appellee

OPINION¹

RENDELL, Circuit Judge:

Williamsport Hospital ("Williamsport") sued the Department of Health and Human Services ("Department") after the Medicare Geographic Classification Review Board ("Board") denied its application to reclassify to a different wage index for purposes of Medicare reimbursement. Williamsport raised claims under theAdministrative Procedure Act ("APA"), the Medicare Act and the Equal Protection Clause of the United States Constitution. We do not reach the merits of those claims, however, because Williamsport's suit amounts to a request to review the Board's decision denying its application, and 42 U.S.C. § 1395ww(d)(10)(C)(iii)(II) precludes such review. We will therefore dismiss the appeal.

Background

The dispute arises in the aftermath of the Third Circuit's decision in Geisinger Cmty. Med. Ctr. v. Sec'y U.S. Dep't of Health & Human Servs., 794 F.3d 383 (3d Cir. 2015), which struck down the Secretary of Health and Human Services "Reclassification Rule". The Reclassification Rule addressed what the Secretary believed to be a conflict between two statutory provisions governing hospitals' geographic classifications—Section 401 and 42 U.S.C. § 1395ww(d)(10). Hospitals are generally classified as either urban or rural. Section 401 allows an urban hospital to apply to the Secretary to classify as rural, and be designated a Rural Referral Center ("RRC") to receive favorable inpatient and outpatient reimbursements as well as critical access hospital eligibility. Under § 1395ww(d)(10), hospitals can apply to the Board for classification into wage indexes, which affects the amount of wage reimbursement they receive. To apply to a certain geographic wage index, the hospital must be in "close proximity" to that wage index. Different rules govern close proximity: an urban hospital must be within a 15-mile radius of the wage index for which it is applying, while a rural hospital or a hospital designated as a RRC has a 35-mile radius. As a result, an urban hospital could be classified as rural/RRC under Section 401, and then use that classification under § (d)(10) to receivethe more favorable 35-mile radius proximity rule. The Secretary promulgated the Reclassification Rule to prevent these conflicting classifications by requiring urban hospitals seeking classification under § (d)(10) to first cancel their Section 401 rural/RRC classification. In Geisinger, we held the Reclassification Rule invalid because Congress intended to allow multiple classifications for differing purposes when it enacted Section 401. Geisinger, 794 F.3d at 393.

Williamsport was subject to the Reclassification Rule in 2012, when it cancelled its Section 401 rural/RRC status. In July 2015, one month before Williamsport submitted its § (d)(10) reclassification request for FY2017, we decided Geisinger. In its FY2017 application, Williamsport applied for geographic reclassification to a different urban wage index 20 miles away. Applying the proximity rules, if Williamsport had its rural/RRC status, which it had cancelled in 2012 due to the Reclassification Rule, the Board would have approved its classification. However, Williamsport, believing that the Geisinger decision meant its prior forced cancellation of its rural status was unlawful and in effect a nullity, expected the Board to use the rural proximity rules and approve its application. The Board, instead applied the urban proximity test, and denied the request for reclassification because Williamsport applied to a wage index outside the 15-mile radius.

After Geisinger, the Second Circuit also found the Reclassification Rule unlawful in Lawrence + Mem'l Hosp. v. Burwell, 812 F.3d 257 (2d Cir. 2016). This prompted the Secretary to issue an Interim Final Rule ("IFR") in April 2016 repealing the Reclassification Rule nationwide. The IFR also permitted hospitals with FY2017applications currently on appeal, and all FY2018 applications, to receive "the opportunity to seek rural reclassification for IPPS payment and other purposes and keep their existing [Board] reclassification." Modification of Limitations on Redesignation by the Medicare Geographic Classification Review Board, 81 Fed. Reg. 23428 (Apr. 21, 2016). Because the Board denied Williamsport's FY2017 application, and Williamsport did not appeal the result, its classification became final, and thus it did not receive the benefit of the IFR. This suit followed.

Proceedings Below

Williamsport sued in the United States District Court for the Middle District of Pennsylvania, alleging violations of the APA, Medicare Act, and the Equal Protection Clause. It alleged that the Board and the Secretary violated the APA because, after Geisinger, the Administrator (whom the Secretary authorizes to hear appeals from the Board) failed to exercise his discretion to review the Board's denial of Williamsport's reclassification request. In addition, Williamsport alleges the IFR is arbitrary and capricious, and denies it equal protection because it treats FY2018 applications and FY2017 applications on appeal different from FY2017 applications that did not appeal and thus became final. Williamsport also alleges that the Secretary and the Board continued to apply the Reclassification Rule after Geisinger, in violation of the Medicare Act.

The District Court requested supplemental briefing on twelve issues, including, inter alia, (1) whether Williamsport had alleged that the agency failed to take a "discrete action" as required by § 701 of the APA and (2) whether Williamsport has standing tosue because it was not a Section 401 rural hospital at the time of its reclassification request.

In the Order that followed, the District Court held that Williamsport failed to identify any "discrete agency action" Defendants were "required to take" under the APA. App. 28 (quoting Norton v. S. Utah Wilderness All., 542 U.S. 55, 64 (2004)). The District Court also found Williamsport lacked standing.² The District Court granted Defendant's motion on the Pleadings and dismissed the case with prejudice without leave to amend. Williamsport appealed the District Court's ruling, which we now review.

Analysis

1. Williamsport has standing to sue.

Because lack of standing would deprive us of jurisdiction to review Williamsport's claims, and the District Court addressed it, we begin there. The plaintiff has the burden to establish standing. Finkelman v. N.F.L., 810 F.3d 187, 194 (3d Cir. 2016). To meet the Article III requirements of standing, "[t]he plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016). "Although standing and merits questions may involve overlapping facts, standing is generally an inquiry about the plaintiff: is this the right person to bring this claim." Davis v. Wells Fargo, 824 F.3d 333, 348 (3d Cir.2016) (citing Flast v. Cohen, 392 U.S. 83, 99 (1968) ("The fundamental aspect of standing is that it focuses on the party seeking to get his complaint before a federal court and not on the issues he wishes to have adjudicated.")).

Here, we disagree with the District Court and conclude that Williamsport has standing to sue. Williamsport has stated an injury: being denied reclassification to a different wage index 20 miles away, purportedly because the Board applied the Reclassification Rule to its application, resulted in financial loss. Cottrell v. Alcon Lab., 874 F.3d 154, 163 (3d Cir. 2017) ("Typically, a plaintiff's allegations of financial harm will easily satisfy each of these components[.]"). That injury can be fairly traceable to the Department's conduct: The Department is charged with the administration of geographic classifications and the related rule-making, the Board denied the application, and the Administrator did not review the denial. And, a judicial decision could, in theory, remedy the Department's conduct. While the District Court concluded that "Williamsport Hospital cannot establish that its injury was caused by Defendant's continued application of the Reclassification rule after Geisinger, since its FFY 2017 reclassification was never subject to the Reclassification Rule[,]" App. 31 (emphasis in original), whether the conduct pleaded actually violates the APA, Equal Protection Clause, or the Medicare Act are merits determinations that we do not evaluate at the standing stage.

2. We are barred from reviewing Williamsport's claims.

We nonetheless hold that we are barred from reviewing Williamsport's claim. There is a strong presumption of judicial review of...