Yale New Haven Hosp. v. Becerra

• Decision Date: 19 December 2022
• Docket Number: s. 20-2115(L),20-2151(XAP),August Term 2021
• Parties: YALE NEW HAVEN HOSPITAL, Plaintiff-Appellee-Cross-Appellant, v. Xavier BECERRA, Secretary, United States Department of Health and Human Services, Defendant-Appellant-Cross-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

56 F.4th 9

YALE NEW HAVEN HOSPITAL, Plaintiff-Appellee-Cross-Appellant,

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

Nos. 20-2115(L)

20-2151(XAP)

August Term 2021

United States Court of Appeals, Second Circuit.

Argued: September 22, 2021

Decided: December 19, 2022

Robert L. Roth, Hooper Lundy & Bookman, PC, Washington, DC (Patrick M. Noonan, Donahue, Durham & Noonan, P.C., Guilford, CT, on the brief), for Plaintiff-Appellee-Cross-Appellant Yale New Haven Hospital.

Leif Overvold, Appellate Staff Attorney (Jeffrey Bossert Clark, Acting Assistant Attorney General, Brian M. Boynton, Acting Assistant Attorney General, Alisa B. Klein, Appellate Staff Attorney, on the brief), Civil Division, U.S. Department of Justice, Washington, DC (Robert P. Charrow, General Counsel, Daniel J. Barry, Acting General Counsel, Janice L. Hoffman, Associate General Counsel, Susan Maxson Lyons, Deputy Associate General Counsel for Litigation, Jonathan C. Brumer, Staff Attorney, U.S. Department of Health and Human Services, Washington, DC, of counsel), for Defendant-Appellant-Cross-Appellee Xavier Becerra, Secretary of the U.S. Department of Health and Human Services.

Before: Wesley, Sullivan, Circuit Judges, and Koeltl, District Judge.^†

Richard J. Sullivan, Circuit Judge:

Yale New Haven Hospital ("YNHH," or the "Hospital") receives federal funds under the Medicare Act, 42 U.S.C. § 1395 et seq ., for serving uninsured patients who cannot pay for the healthcare they receive.

As part of the statutory formula for determining the appropriate funding for such care, the Medicare Act directs the Secretary of Health and Human Services ("HHS") (the "Secretary") to make certain "estimates." As relevant here, the Secretary must "estimate[ ]" the "amount of uncompensated care" that each hospital will provide in a given federal fiscal year ("FFY"), based on the "data" that "the Secretary determines" "appropriate" to "use" as the best "proxy for the costs of ... hospitals for treating the uninsured." Id. § 1395ww(r)(2)(C)(i). The Medicare Act provides that there "shall be no ... judicial review" of "[a]ny" such "estimate of the Secretary." Id. § 1395ww(r)(3)(A).

Here, YNHH challenges the Secretary's estimate of its amount of uncompensated care for FFY 2014, the first FFY following YNHH's merger with the Hospital of Saint Raphael ("St. Raphael"), a nearby hospital that had historically treated a proportionally greater share of low-income patients than YNHH. YNHH contends that the Secretary failed to abide by adequate notice-and-comment rulemaking procedures before choosing to use only YNHH's historical data – and not St. Raphael's – to estimate YNHH's amount of uncompensated care for FFY 2014. The Secretary moved to dismiss this claim for lack of subject-matter jurisdiction, arguing that it was barred by section 1395ww(r)(3) ’s prohibition on judicial review of the "estimate[s] of the Secretary." Id. The district court (Hall, J. ) denied the Secretary's motion, reasoning that section 1395ww(r)(3) applies only to substantive challenges to the Secretary's estimates, whereas YNHH's challenge was procedural . The district court subsequently granted summary judgment in favor of YNHH, finding that the Secretary had indeed failed to conduct adequate notice-and-comment rulemaking before choosing to exclude the St. Raphael data, and remanded to the Secretary without vacating his calculation of YNHH's 2014 payment.

The Secretary now appeals, disputing (1) the district court's ruling that it had jurisdiction, notwithstanding section 1395ww(r)(3), to consider YNHH's procedural challenge; and alternatively (2) the district court's merits ruling that the Secretary's exclusion of the St. Raphael data was procedurally unlawful. YNHH defends the district court's rulings on both counts, also contending that, even if its challenge were barred by section 1395ww(r)(3), we (and the district court) would nevertheless have inherent subject-matter jurisdiction under Leedom v. Kyne , 358 U.S. 184, 79 S.Ct. 180, 3 L.Ed.2d 210 (1958), to consider it on a theory of ultra vires agency action. Additionally, YNHH cross-appeals, disputing the district court's chosen remedy of remand without vacatur. We conclude that the plain and ordinary meaning of section 1395ww(r)(3) ’s text bars any challenge to an "estimate of the Secretary" – whether cast in substantive or procedural terms – and we reject YNHH's arguments that either the canon of meaningful variation or the substantive canon favoring judicial review of executive action justifies departing from the plain meaning of the text. We therefore hold that section 1395ww(r)(3) expressly deprives us – and the district court – of subject-matter jurisdiction to consider YNHH's challenge. We also hold that Kyne ’s ultra-vires exception, which is available only where the pertinent statutory preclusion of review is implied rather than express, is inapplicable here.

As a result, we REVERSE the district court's denial of the Secretary's motion to dismiss YNHH's procedural challenge for lack of subject-matter jurisdiction; VACATE , for lack of subject-matter jurisdiction, the district court's grant of summary judgment for YNHH on its procedural challenge; REMAND the case to the district court with instructions to dismiss the remainder of YNHH's action for lack of subject-matter jurisdiction; and DISMISS AS MOOT YNHH's cross-appeal disputing the district court's chosen remedy of remand without vacatur.

I. Background

Under the Medicare Act, 42 U.S.C. § 1395 et seq. – enacted by Congress in 1965 as Title XVIII of the Social Security Act, and administered by the Secretary, see id. § 1395kk(a) – the federal government pays for healthcare for elderly and disabled individuals. Under Medicare's Inpatient Prospective Payment System, the Secretary reimburses participating hospitals for the operating costs of providing inpatient hospital services to Medicare beneficiaries. See id. § 1395ww(d). Hospitals that serve "a significantly disproportionate number of low-income patients," id. § 1395ww(d)(5)(F)(i)(I), are deemed "disproportionate share hospital[s]" ("DSHs") and receive an increased payment, id. § 1395ww(r), in recognition of the relatively higher costs associated with providing such care.

Prior to FFY 2014, the Secretary had calculated hospitals’ DSH payments under a statutory formula (the "Traditional DSH Formula"), id. § 1395ww(d)(5)(F)(vi)–(vii), "that consider[ed] their Medicare utilization due to beneficiaries who also receive[d] Supplemental Security Income benefits and their Medicaid utilization," Medicare Program 2014 Final Rule, 78 Fed. Reg. 50,496, 50,505 (Aug. 19, 2013). The Traditional DSH Formula, however, did not account for the cost to hospitals of providing "uncompensated care," i.e., care for patients who have no means to pay (whether through federally furnished insurance programs or otherwise). See id. at 50,622, 50,634 –35.

The Patient Protection and Affordable Care Act of 2010 (the "ACA") implemented a new formula for calculating DSH payments from FFY 2014 onward (the "Adjusted DSH Formula"), 42 U.S.C. § 1395ww(r), which places greater emphasis on the cost to hospitals of providing uncompensated care. Under the Adjusted DSH Formula, each hospital receives 25% of the amount it would have received under the Traditional DSH Formula, id. § 1395ww(r)(1), as well as an "[a]dditional payment" (the "UC DSH Payment") calculated by multiplying three statutorily defined "factors," each based on various data points "as estimated by the Secretary," id. § 1395ww(r)(2). At issue in this case is "Factor [T]hree," which measures an individual hospital's share of all uncompensated care nationwide. Id. § 1395ww(r)(2)(C). Factor Three is calculated by taking the quotient of the following ratio:

(i) the amount of uncompensated care for such hospital for a period selected by the Secretary (as estimated by the Secretary, based on appropriate data (including, in the case where the Secretary determines that alternative data is available which is a better proxy for the costs of [DSHs] for treating the uninsured, the use of such alternative data)) ...

(ii) the aggregate amount of uncompensated care for all [DSHs] that receive a payment under this subsection for such period (as so estimated, based on such data).

Id. The ACA's amendments to the Medicare Act provide that "[t]here shall be no administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or otherwise of ... [a]ny estimate of the Secretary for purposes of determining the [three] factors [that make up the UC DSH Payment formula]." Id. § 1395ww(r)(3)(A).

In September 2012, St. Raphael merged into YNHH and became a campus of YNHH. After the merger was complete, YNHH continued to operate the former St. Raphael facilities as a second inpatient acute care hospital campus with all services, including its provision of uncompensated care, being provided under YNHH's name and certification number (as used in HHS databases for tracking services provided by Medicare- and Medicaid-participating hospitals).

About nine months after that merger, HHS announced a proposed rule to implement the Adjusted DSH Formula, specifying the "data sources and methodologies [to be used] for computing" the three UC DSH Payment factors for FFY 2014. Medicare Program 2014 Proposed Rule, 78 Fed. Reg. 27,486, 27,582 (May 10, 2013). The 2014 Proposed Rule stated that Factor Three would be calculated as the ratio of the aggregate number of days of inpatient care provided to Medicaid and Medicare-SSI patients at each DSH, divided by the total number of such days for all DSHs nationally, using recent historical cost-report data from HHS's own databases. See id. at 27,588 –90. The 2014 Proposed Rule did not specify whether, for newly merged hospitals, HHS would calculate Medicare payments using combined data from both hospitals or only...