Zia Hospice Inc. v. Sebelius

• Decision Date: 19 May 2011
• Docket Number: CV 09–1108 CG/ACT.,Nos. CV 09–0055 CG/LFG,s. CV 09–0055 CG/LFG
• Citation: 793 F.Supp.2d 1289
• Parties: ZIA HOSPICE, INC., Plaintiff,v.Kathleen SEBELIUS, Secretary of the United States Department of Health and Human Services, Defendant.
• Court: U.S. District Court — District of New Mexico

793 F.Supp.2d 1289

ZIA HOSPICE, INC., Plaintiff,
v.
Kathleen SEBELIUS, Secretary of the United States Department of Health and Human Services, Defendant.

Nos. CV 09–0055 CG/LFG

CV 09–1108 CG/ACT.

United States District Court, D. New Mexico.

May 19, 2011.

[793 F.Supp.2d 1290]

Caroline Blankenship, Blankenship Health Law, LLC, Albuquerque, NM, Linda G. Scoggins, Sarah J. Glick, Scoggins & Cross PLLC, Oklahoma City, OK, for Plaintiff.Manuel Lucero, U.S. Attorney's Office, Albuquerque, NM, for Defendant.MEMORANDUM OPINION AND ORDER CARMEN E. GARZA, United States Magistrate Judge.

THIS MATTER comes before the Court on the parties' cross motions for summary judgment: Plaintiff's Motion for Summary Judgment on Declaratory and Injunctive Claims for Relief (Civ. 09–055, Doc. 100; Civ. 09–1108 Doc. 35), Defendant's Response to Plaintiff's Motion for Summary Judgment (Civ. 09–055, Doc. 101), Plaintiff's Reply to Defendant's Response to Plaintiff's Motion for Summary Judgment (Civ. 09–055, Doc. 103), Defendant's Motion for Summary Judgment and Brief in Support of Summary Judgment (Civ. 09–055, Doc. 110; Civ. 09–1108, Doc. 31), Plaintiff's Response to Defendant's Motion for Summary Judgment and Brief in Support (Civ. 09–1108, Doc. 32), and Defendant's Reply Memorandum in Support of her Motion for Summary Judgment (Civ. 09–1108, Doc. 33). Plaintiff filed two lawsuits—Civ. 09–055 (“Zia

[793 F.Supp.2d 1291]

I”); Civ. 09–1108 (“Zia II”)—against the Department of Health and Human Services in 2009 and both suits contain nearly identical factual allegations. Pursuant to an unopposed motion by the defendant, this Court consolidated both cases. ( See Civ. 09–055, Doc. 84).¹ The cross-motions for summary judgment have been filed in both cases and the motions are ready for resolution. The parties' dispute centers on the validity of the Department of Health and Human Services' (“HHS”) regulation 42 C.F.R. § 418.309(b)(1). Plaintiff contends that the regulation is invalid and asks that HHS be enjoined from enforcing all repayment demands based upon that regulation. Defendant contends that Plaintiff lacks standing to challenge the regulation, that this Court lacks subject matter jurisdiction over these claims, that the regulation is valid and that all repayment demands pursuant to that regulation be enforced. Defendants further argue that Plaintiff failed to exhaust its administrative remedies for Fiscal Year 2008. (Civ. 09–1108, Doc. 26; Doc. 27)

This Court, having considered the positions of the parties, the relevant law, and otherwise being fully advised in the premises, FINDS that Plaintiff's Motion is well-taken and will be GRANTED IN PART AND DENIED IN PART. The Court finds that Defendant's Motion is not well-taken and will be DENIED for the reasons set forth below.

I. BACKGROUNDA. Medicare and the Hospice Care Cap

In 1982, Congress enacted Section 122 of the Tax Equity and Fiscal Responsibility Act (Pub. L. 97–248), which extended Medicare benefits for hospice care. Hospice care is available for patients who are classified as “terminally ill” and who have a life expectancy of six months or less. See 42 U.S.C. §§ 1395f(a)(7)(A), 1395x(dd)(3)(A). Zia Hospice provides hospice care for persons covered by Medicare. ( See Amended Complaint, Doc. 98 at 1).

While there is no limit on the amount of time a beneficiary may elect to receive hospice care, the amount of money that Medicare will reimburse hospice care providers is limited by an annual statutory cap. 42 U.S.C. § 1395f(i)(2)(A). The “intent of the cap was to ensure that payments for hospice care would not exceed what would have been expended by Medicare if the patient had been treated in a conventional setting.” H.R.Rep. No. 98–333 at 1 (1983), U.S. Code Cong. & Admin. News 1983, pp. 1043, 1043. Reimbursements per patient are currently capped at $6,500, with that cap being adjusted annually using the Consumer Price Index to account for inflation. See 42 C.F.R. § 418.309(b)(1)(a). Any payments made to hospices during a fiscal year in excess of the statutory cap must be repaid to Medicare. Demands for repayment under the cap typically originate from ‘fiscal intermediaries,’ which are agents of the Secretary. See 42 U.S.C. §§ 1395h, 1395kk–1.

To determine a hospice provider's annual reimbursement cap, HHS multiplies each patient's cap amount by the number of beneficiaries who elected to receive hospice care during that fiscal year. However, in acknowledging that a hospice patient may receive care in more than one fiscal year, Congress requires HHS to account for that patient for each year she received treatment. 42 U.S.C. § 1395(f)(i)(2).²

[793 F.Supp.2d 1292]

Therefore, a patient's cap amount for any given fiscal year is proportionally reduced to reflect any care that was provided in previous or subsequent years or with a different hospice care provider. See, e.g. Affinity Healthcare Services, Inc. v. Sebelius, 746 F.Supp.2d 106, 108–09 (D.D.C.2010). Congress codified this reimbursement system under 42 U.S.C. § 1395(f)(i)(2):

[T]he “number of medicare beneficiaries” in a hospice program in an accounting year is equal to the number of individuals who have made an election ... with respect to the hospice program and have been provided hospice care ... in the accounting year, such number reduced to reflect the proportion of hospice care that each such individual was provided in a previous or subsequent accounting year or under a plan of care established by another hospice program.(Emphasis added).

Rather than perform the proportional allocation of care across years of treatment that the Congressional statute requires, HHS decided to count “each beneficiary only in the reporting year in which the preponderance of the hospice care would be expected to be furnished ...” 48 Fed.Reg. 38146, 38158 (Aug. 22, 1983). To implement this payment scheme, HHS promulgated 42 C.F.R. § 418.309(b)(1), which provides:

For purposes of this calculation, the number of Medicare beneficiaries includes ... beneficiaries who have not previously been included in the calculation of any hospice cap and who have filed an election to receive hospice care ... during the period beginning on September 28 (35 days before the beginning of the cap period) and ending on September 27 (35 days before the end of the cap period).

The failure to proportionally allocate the cap across the years of care has, in recent years, overstated repayment demands. See generally Marc Adler, The Government's Cap on Dying: Why Is the Medicare Hospice Benefit Cap Being Exceeded and How Should This Problem Be Addressed?, 4 NAELA J. 201 (2008). Plaintiff claims that the regulation improperly increases repayment demands because the regulation gives providers credit for the hospice cap only in the year where the preponderance of hospice care was provided. ( See Pl. Amend. Comp., Doc. 97 at 9). Accordingly, Plaintiff has challenged the hospice cap calculations imposed under § 418.309(b)(1). A review of the procedures which Plaintiff must follow in order to challenge such calculations is in order.

B. Administrative Exhaustion of Reimbursement Claims

The Secretary of HHS is authorized by Congress to write regulations which both define reimbursable costs and determine the manner in which they will be distributed. See 42 U.S.C. § 1395x(dd)(1). Providers file an annual report with their fiscal intermediary in order to be reimbursed and the intermediary determines the ‘Notice of Program Reimbursement’ (“NPR”) that the provider is entitled to. 42 C.F.R. §§ 413.20, 413.24. Fiscal intermediaries may also require that providers reimburse the intermediary in the event that an overpayment is alleged to have occurred. See 42 C.F.R. § 405.371. Should a provider be dissatisfied with the intermediary's NPR determination, the provider may appeal the determination to the Provider Reimbursement Review Board (“PRRB”), so long as the contested amount exceeds $10,000. A provider may appeal an adverse decision by the PRRB by filing a civil action in the appropriate United States District Court within sixty days of the decision. 42 U.S.C. § 1395 oo(a),(f). However, the Administrator of the Centers for Medicare and Medicaid Services may

[793 F.Supp.2d 1293]

also review a PRRB decision within 60 days of the decision. 42 C.F.R. § 405.1840(c)(3).

In 1980, Congress added a provision to the Medicare statute providing for Expedited Judicial Review (“EJR”) of PRRB decisions. 42 U.S.C. § 1395 oo(f)(1). The statute was designed to provide for expedited review when the PRRB was without the authority to resolve questions of law or where the dispute concerned the validity of HHS regulations. Id. The statute explicitly states that a PRRB decision to grant EJR “shall be considered a final decision and not subject to review by the Secretary.” Id.

C. HHS and Zia Hospice

In the consolidated cases before the Court, Plaintiff has appealed three repayment demands. (Doc. 97). In each case, Zia specifically challenges the validity of 42 C.F.R. § 418.309(b)(1), arguing that the regulation is inconsistent with its parent Congressional statute, 42 U.S.C. § 1395f(I)(2)(C).

Initially, in Zia II, Plaintiff challenged the repayment demands in the amounts of $1,625,142.00 and $854,536.00 for FY 2006 and 2007, respectively. ( See Def.'s Mot. Dismiss, CV 09–1108, Doc. 26 at 1–2). Both the 2006 and 2007 claims were properly brought before the PRRB and in both instances the PRRB determined that it did not have the authority to decide the legal issues presented. The PRRB granted Plaintiff's request for EJR in both instances and Plaintiff has properly exhausted its administrative remedies for both claims. ( Id.). In January of 2010, Defendant made an additional repayment demand in the amount of $1,184,871.00 for FY 2008. ( Id. at 2). Plaintiff disputed the repayment demand and sought administrative review before the PRRB. ( Id. at 3). The PRRB stated that it lacked the authority to decide the...