Columbia Saint Mary's Hosp. Milwaukee, Inc. v. Sebelius

893 F.Supp.2d 172

COLUMBIA SAINT MARY'S HOSPITAL MILWAUKEE, INC., Plaintiff,

v.Kathleen SEBELIUS, Secretary, U.S. Department of Health & Human Services, Defendant.

Civil Action No. 09–2031 (ABJ).

United States District Court, District of Columbia.

Sept. 28, 2012.

Andrew C. Bernasconi, Washington, DC, Steven B. Roosa, New York, NY, for Plaintiff.

Javier M. Guzman, U.S. Attorney's Office, Leah Jo Bressack, U.S. Department of Justice, Washington, DC, for Defendant.

MEMORANDUM OPINION

AMY BERMAN JACKSON, District Judge.

Plaintiff, Columbia St. Mary's Hospital Milwaukee, Inc., has brought this action against defendant Kathleen Sebelius, Secretary of the U.S. Department of Health and Human Services, for improperly calculating the hospital's Medicare disproportionate share hospital (“DSH”) adjustment for fiscal year 1999. The DSH adjustment is the means by which hospitals that serve a disproportionately large number of low income patients can receive additional federal financial assistance. This lawsuit concerns the statutory provision that sets forth how the DSH adjustment is to be calculated, and it centers on the meaning of the term “entitled” to Medicare in that provision. In 2004, the Secretary issued a formal rulemaking explaining her current interpretation of the term, which she began implementing in 2000. But as of 1999, the Secretary applied a different interpretation of the statute.

This case presents two issues: whether the Secretary's current interpretation of the statute is supported by the statute's plain terms or is otherwise permissible, and whether the application of that interpretation to Columbia St. Mary's FY 1999 DSH adjustment is proper. The D.C. Circuit has already ruled that the Secretary's interpretation is not inconsistent with the statute, leaving open the question of whether it is reasonable. Northeast Hosp. v. Sebelius, 657 F.3d 1 (D.C.Cir.2011). But this Court need not rule on that issue either because it holds that even if it assumes the Secretary's interpretation is permissible, applying that interpretation to Columbia St. Mary's 1999 DSH adjustment would be an improper retroactive application of the agency's current rule. The Court, therefore, grants the hospital's the motion for summary judgment and denies the Secretary's cross-motion for summary judgment.

I. BACKGROUNDA. The DSH Adjustment

The federal Medicare program provides healthcare coverage to individuals who are at least 65 years old and eligible for Social Security benefits, among others. 42 U.S.C. § 402. Medicaid programs are state-run programs that provide healthcare coverage to certain low income individuals. 42 U.S.C. § 1396. Under both programs, the federal government reimburses healthcare providers for the services they provide to Medicare and Medicaid enrollees. See42 U.S.C. § 1395ww(d). The Department of Health and Human Services (“HHS”) administers both programs, and the Center for Medicare and Medicaid Services (“CMS”), which is part of HHS, is responsible for reimbursing providers. See42 U.S.C. §§ 1395h, 1395u.

Hospitals that serve a large number of low income patients can receive additional reimbursement from the federal government based on the Medicare DSH adjustment. 42 U.S.C. § 1395ww(d)(5)(F)(i)(I). This adjustment does not calculate the actual number of low income individuals a hospital serves, but rather is an indirect, or “proxy” measurement. Catholic Health Initiatives v. Sebelius, 841 F.Supp.2d 270, 272 (D.D.C.2012), citing H.R. Report No. 99–241, at 16 (1985), reprinted in 1986 U.S.C.C.A.N. 579, 594. This proxy is calculated by adding two fractions: the Medicare fraction, sometimes called the SSI fraction, and the Medicaid fraction. The statute defines the Medicare fraction as follows:

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). It defines the Medicaid fraction this way:

the fraction (expressed as a percentage), the numerator of which is the number of the hospital's patient days for such period which consist of patients who (for such days) were eligible for medical assistance under a State plan approved under subchapter XIX of this chapter [i.e., Medicaid], but who were not entitled to benefits under part A of this subchapter [i.e., Medicare] and the denominator of which is the total number of the hospital's patient days for such period.

42 U.S.C. § 1395ww(d)(5)(F)(vi)(II) (emphasis added). The equation below summarizes this calculation:

+----------------------------------------------------------------------------+
¦Medicare Fraction      ¦+ ¦Medicaid Fraction       ¦= ¦DSH Adjustment       ¦
+-----------------------+--+------------------------+--+---------------------¦
¦number of patient days ¦  ¦number of patient days  ¦  ¦                     ¦
¦for patients entitled  ¦  ¦for patients eligible   ¦  ¦                     ¦
¦to Medicare Part A and ¦  ¦for Medicaid, but not   ¦  ¦                     ¦
¦to SSI                 ¦  ¦“entitled” to Medicare  ¦  ¦                     ¦
¦                       ¦  ¦Part A                  ¦  ¦                     ¦
+-----------------------+--+------------------------+--+---------------------¦
¦number of patient days ¦  ¦                        ¦  ¦                     ¦
¦for patients who were  ¦  ¦total number of patient ¦  ¦                     ¦
¦entitled to Medicare   ¦  ¦days                    ¦  ¦                     ¦
¦Part A                 ¦  ¦                        ¦  ¦                     ¦
+----------------------------------------------------------------------------+

CMS delegates the task of calculating the DSH adjustment to “fiscal intermediaries,” which are typically private insurance companies acting as the Secretary's agent. Northeast Hosp. v. Sebelius, 657 F.3d 1, 3 (D.C.Cir.2011). To obtain additional reimbursement under the DSH adjustment, hospitals submit data to these fiscal intermediaries, which calculate the adjustment for the relevant time period and issue a notice of program reimbursement to the hospital. 42 C.F.R. § 405.1803. If a hospital disagrees with the intermediary's calculation, the hospital can appeal to an administrative body appointed by the Secretary: the Provider Reimbursement Review Board (“PRRB”). 42 U.S.C. § 1395oo(a); see also Northeast Hosp., 657 F.3d at 3–4. The Secretary can then affirm, modify, or reverse the PRRB. 42 U.S.C. §§ 1395oo(d)-(f).

B. This Case and Procedural History

Columbia St. Mary's is an acute care hospital in Milwaukee, Wisconsin that participates in the federal Medicare program. Compl. ¶ 6. For the period covered by the hospital's fiscal year ending June 1999, the hospital had a patient eligible for both Medicare and Medicaid—a dual-eligible patient—who spent 365 patient days in the hospital that Medicare did not pay for because the patient had exhausted his Medicare hospital coverage.¹ Pl.'s Statement of Material Facts (“Pl.'s SMF”) [Dkt. # 14] ¶¶ 2, 7. The fiscal intermediary that calculated Columbia St. Mary's DSH adjustment excluded the patient's 365 unpaid hospital days from the Medicaid numerator, because it interpreted the phrase “entitled” to Medicare benefits in the numerator to mean simply whether the patient was enrolled in Medicare or not, not whether the patient's hospital days were actually covered by the program. See PRRB Decision 2009–D27 (“PRRB Decision”) at 4 (attached to Pl.'s SMF, Ex. A). In other words, because the patient with 365 unpaid Medicare days was both a Medicaid enrollee and a Medicare enrollee—and therefore, “entitled” to Medicare benefits, under the intermediary's interpretation, the patient's days were excluded from the hospital's calculation.

Columbia St. Mary's appealed the fiscal intermediary's calculation to the PRRB, which decided the appeal in favor of the hospital. PRRB Decision at 5. It held that “entitled” to a benefit means “the absolute right to receive an independent and readily defined payment.” Id., citing Jewish Hosp., Inc. v. Sec'y of Health and Human Services, 19 F.3d 270, 275 (6th Cir.1994). Under that interpretation, the patient with 365 hospital days unpaid by Medicare should have been included in the fraction because he had dual-eligibility and he was “not entitled” to Medicare benefits because his days had been unpaid. In making this ruling, the PRRB relied on Jewish Hospital, which interpreted “entitled” to Medicare in the Medicare proxy of the calculation. “The issue is not new and the Board has consistently applied the holdings of the Court in Jewish Hospital,” which held that “entitled” to Medicare benefits means that benefits were actually paid. Id., citing Jewish Hospital, 19 F.3d at 275.

The Secretary, through the CMS, overturned the PRRB's decision. See Ctrs. for Medicare and Medicaid Serv's Decision of the Adm'r, Rev. of PRRB 2009–D27 at 6 (attached to Pl.'s SMF, Ex. A). CMS held that:

[T]he statutory phrase in the Medicaid proxy “but who were not entitled to benefits under Medicare Part A of this title” forecloses the inclusion of the days at issue in this case in the numerator.... [I]t is the status of the patients, as opposed to the payment for the day, which determines whether a patient day is included in the numerator of the Medicaid proxy.

Id. at 5.

Columbia St. Mary's filed this suit challenging the Secretary's decision, and the parties have filed cross motions for summary judgment. See Pl.'s Mot. for Summ. J. (“Pl.'s Mot.”) [Dkt. # 12]; Def.'s ...