Advocate Christ Med. Ctr. v. Becerra

80 F.4th 346

ADVOCATE CHRIST MEDICAL CENTER, et al., Appellants v. Xavier BECERRA, Secretary, United States Department of Health and Human Services, Appellees

No. 22-5214

United States Court of Appeals, District of Columbia Circuit

Argued April 14, 2023

Decided September 1, 2023

Appeal from the United States District Court for the District of Columbia (No. 1:17-cv-1519)

Daniel F. Miller argued the cause for appellants. With him on the briefs were Sara Jean MacCarthy and Heather D. Mogden.

Stephanie R. Marcus, Attorney, U.S. Department of Justice, argued the cause for appellees. With her on the brief were Mark B. Stern, Attorney, and Brian M. Boynton, Principal Deputy Assistant Attorney General.

Before: Henderson, Katsas, and Pan, Circuit Judges.

Katsas, Circuit Judge:

Hospitals treating Medicare beneficiaries receive greater reimbursements to the extent that the beneficiaries are also entitled to supplemental security income benefits under Title XVI of the Social Security Act. The Secretary of Health and Human Services understands this population to include only patients receiving cash payments during the month in question. Various hospitals contend that this population also includes patients receiving a subsidy under Medicare Part D and vocational training. The district court disagreed with the hospitals, as do we.

I

A

This case involves benefits under three different titles of the Social Security Act. Title XVIII of that Act establishes the Medicare program, which provides health insurance to the elderly and disabled. Part A of Medicare covers inpatient hospital services, and Part D affords a prescription-drug benefit. Title XVI of the Social Security Act provides monthly cash payments, known as supplemental security income benefits, to financially needy individuals who are elderly, disabled, or blind. Title XI, among other things, provides vocational rehabilitation services for the disabled. In the United States Code, the Social Security Act is codified as chapter 7 of Title 42, and its individual titles are codified as subchapters of chapter 7. The Department of Health and Human Services administers Medicare, while the Social Security Administration administers the SSI program and the vocational rehabilitation services under Title XI.

Hospitals receive fixed payments for services provided to Medicare beneficiaries regardless of their actual costs. The payment formula, which approximates the costs that a well-run hospital would incur to provide the treatment at issue, seeks to "encourage efficiency by rewarding cost effective hospital practices." Cape Cod Hosp. v. Sebelius, 630 F.3d 203, 205 (D.C. Cir. 2011) (cleaned up). One variable in the formula is a "disproportionate share hospital" adjustment, which provides additional compensation to hospitals serving an "unusually high percentage of low-income patients." Sebelius v. Auburn Reg'l Med. Ctr., 568 U.S. 145, 150, 133 S.Ct. 817, 184 L.Ed.2d 627 (2013). This adjustment accounts for the fact that low-income patients tend to be in worse health and therefore costlier to treat. Id.

The DSH adjustment derives from two statutory formulas known as the Medicare fraction and the Medicaid fraction. The Medicare fraction represents the percentage of a hospital's Medicare patients who are low-income, as measured by their entitlement to SSI benefits. The Medicaid fraction represents the percentage of a hospital's patients who are eligible for Medicaid, which provides health benefits to a different population of low-income individuals. The sum of these fractions, which is called the hospital's "disproportionate patient percentage," reflects all low-income patients served. See 42 U.S.C. § 1395ww(d)(5)(F)(vi).

This case turns on the Medicare fraction, which consists of the following:

the fraction (expressed as a percentage), the numerator of which is the number of such hospital's patient days for such period which were made up of patients who (for such days) were entitled to benefits under part A of this subchapter and were entitled to supplementary security income benefits (excluding any State supplementation) under subchapter XVI of this chapter, and the denominator of which is the number of such hospital's patient days for such fiscal year which were made up of patients who (for such days) were entitled to benefits under part A of this subchapter

. . . .

42 U.S.C. § 1395ww(d)(5)(F)(vi)(I). In plain English, the numerator of the Medicare fraction is the number of patient days attributable to Medicare patients who are entitled to SSI benefits, while the denominator is the number of patient days attributable to all Medicare patients.

For our purposes, the key statutory terms are "entitled to benefits under part A" and "entitled to supplementary security income benefits . . . under subchapter XVI." The Department of Health and Human Services considers a patient "entitled to benefits under part A" if he satisfies the threshold requirements for Part A benefits—i.e., if he is over 65 or suffers a long-term disability—regardless of whether Medicare pays for the specific service rendered. See Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2005 Rates, 69 Fed. Reg. 48,916, 49,098-99, 49,246 (Aug. 11, 2004). The Supreme Court recently endorsed this interpretation in Becerra v. Empire Health Foundation, — U.S. —, 142 S. Ct. 2354, 213 L.Ed.2d 685 (2022).

The SSI program provides cash payments to financially needy individuals who are aged, blind, or disabled. 42 U.S.C. § 1382(a). Individuals must apply for this benefit. Id. § 1382(c)(7). Eligibility is determined monthly, depending on a beneficiary's "income" and "resources" during the month. Id. § 1382(c)(1). Once an individual qualifies for the cash payment during a particular month, he remains enrolled in the SSI program until failing to qualify for the payment for twelve consecutive months. See 20 C.F.R. § 416.1335. At that point, the individual must reapply to receive future payments.

Enrollees in the SSI program may receive two further benefits beyond the cash payments. First, they become eligible for a subsidy under Medicare Part D. See 42 U.S.C. § 1395w-114(a)(3)(B)(v)(I). Each enrollee receives this subsidy for at least six months regardless of whether he continues to qualify for the monthly payments. 42 C.F.R. § 423.773(c)(2). Second, blind or disabled enrollees may access the Ticket to Work and Self-Sufficiency Program, which provides vocational rehabilitation services through state agencies or private employment networks. 42 U.S.C. § 1320b-19. In some circumstances, SSI enrollees may use these services even after they fail to qualify for the monthly payments. See 20 C.F.R. §§ 411.100-660.

For purposes of the Medicare fraction, HHS interprets the phrase "entitled to supplementary security income benefits . . . under subchapter XVI" to denote only those patients who are entitled to the cash payment during the month in question. In administering the SSI program, SSA assigns codes to track monthly (1) whether enrollees qualified for the payment and (2) the reason why or why not. For example, the code "N01" indicates that an enrollee failed to receive a payment for a particular month ("N") because of excess income during that month ("01"). After studying the various codes used by SSA, HHS concluded that codes C01, M01, and M02 capture the relevant universe of individuals entitled to the monthly payment. See Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System Changes and FY 2011 Rates, 75 Fed. Reg. 50,042, 50,281 (Aug. 16, 2010).¹ To help HHS calculate the Medicare fraction of individual hospitals, SSA gives HHS data in the form of "monthly indicators," which denote whether SSI enrollees were coded as C01, M01, or M02 in any given month. See id. at 50,276. HHS calculates the Medicare fraction by comparing this data regarding who qualified for monthly cash payments against its own data regarding the inpatient admissions of individuals entitled to Part A benefits. Id. at 50,278.

To provide for a check on HHS's work, Congress enacted section 951 of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA). It requires HHS to give each hospital "the data necessary" for the hospital "to compute the number of patient days used in computing the disproportionate patient percentage . . . for that hospital." Pub. L. No. 108-173 § 951, 117 Stat. 2066, 2427 (2003) (codified at 42 U.S.C. § 1395ww note). To comply with the MMA, the agency gives hospitals data of the "matched patient-specific Medicare Part A inpatient days/SSI eligibility data on a month-to-month basis." Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2006 Rates, 70 Fed. Reg. 47,278, 47,440 (Aug. 12, 2005). This amounts to a list of inpatient days along with a binary yes-or-no marker indicating whether the patient for those days was counted as being entitled to SSI benefits. HHS neither receives from SSA, nor gives to the hospitals, the individual codes reflecting SSA's determination of why specific enrollees were or were not entitled to SSI benefits month-to-month.

B

The plaintiffs in this case are more than 200 different hospitals seeking additional Medicare reimbursement for fiscal years 2006 to 2009. The hospitals dispute HHS's calculation of their respective Medicare fractions for those years. They contend that the phrase "entitled to supplementary security income benefits" includes all patients enrolled in the SSI program at the time of hospitalization, even if they did not then qualify for the monthly cash payment. The Provider Reimbursement Review Board, a tribunal within HHS, denied relief to the hospitals. So did the Centers for Medicare and Medicaid Services, which administers Medicare for the Secretary. Consistent with the Secretary's longstanding view, CMS reasoned...