Empire Health Found. v. Becerra

EMPIRE HEALTH FOUNDATION, et al., Plaintiffs, v. XAVIER BECERRA, Secretary, U.S. Department of Health and Human Services, Defendant.

Civil Action No. 20-2149 (JEB)

United States District Court, District of Columbia

February 8, 2022

MEMORANDUM OPINION

JAMES E. BOASBERG UNITED STATES DISTRICT JUDGE

In this Medicare-reimbursement case, Plaintiffs Empire Health Foundation and hospitals it owns seek payment for certain services the hospitals provided to Medicare patients over a decade ago. Following an administrative rollercoaster of reimbursement appeals and remands, Defendant Department of Health and Human Services dismissed the latest iteration of Plaintiffs' challenge to the agency's reimbursement formula. Unhappy with that decision, Plaintiffs brought this suit, asking the Court to find the agency's actions improper. After the completion of summary-judgment briefing Defendant now proposes an alternative: remand this case to allow the agency to reevaluate Plaintiffs' reimbursement sums in light of a forthcoming rule addressing the question at the heart of their challenges. Although Plaintiffs oppose this outcome, the Court agrees with Defendant that this is the most efficient course; it will thus grant the Motion to Remand and return this case to the agency.

I. Background

Empire Health Foundation and two hospitals it owns, Valley Hospital Medical Center and Deaconess Medical Center, seek reimbursement for services those hospitals provided to Medicare patients. Plaintiffs' journey to obtain reimbursement has been long and winding, and the Court provides a truncated version here. Interested readers may consult this Court's earlier Opinion in Empire Health Foundation v. Burwell (Empire I), 209 F.Supp.3d 261 (D.D.C. 2016), for a more detailed account of the procedural history of this case and the Medicare reimbursement scheme it involves.

The gist of it is this: The Centers for Medicare and Medicaid Services (CMS) administers reimbursements for providers who treat Medicare patients. Id. at 263-64. Private companies enlisted by CMS (known as “Medicare Administrative Contractors” or “MACs”) calculate the amount of reimbursement each provider is due through a complex equation that is “roughly pegged to the number of patients discharged.” Id. at 264 (emphasis omitted). They inform providers of their reimbursement sum in a document called a “Notice of Program Reimbursement” (NPR). Id. Some NPRs include certain adjustments to the baseline formula. Relevant here, Valley and Deaconess received “‘disproportionate share hospital' or ‘DSH' adjustment[s], ” which are “a bump-up for hospitals that ‘serve[] a significantly disproportionate number of low-income patients.'” Id. (quoting 42 U.S.C. § 1395ww(d)(5)(F)(i)(I)). DSH adjustments are calculated by adding two fractions that determine the hospital's disproportionate patient percentage for a fiscal period. See ECF No. 16-1 (Amended Complaint), ¶¶ 9-11. One of those fractions - the Medicare/SSI fraction - is at issue here. That fraction, which is calculated by CMS, is determined by dividing the time spent caring for patients entitled to benefits under both Medicare Part A and the Supplemental Security Income (SSI) program by the time spent caring for patients who are entitled to benefits under only Medicare Part A. Id. ¶¶ 10, 15; see also Azar v. Allina Health Services (Allina II), 139 S.Ct. 1804, 1809 (2019); 42 U.S.C. § 1395ww(d)(5)(F)(vi)(I).

Providers that are unhappy with their reimbursement sum may appeal their NPR to the Provider Reimbursement Review Board (PRRB), which is authorized to affirm or alter the award. See Am. Compl., ¶¶ 16-18 (citing 42 U.S.C. § 1395oo(a)). The PRRB's determination is subject to further review by the Secretary of Health and Human Services. Id., ¶ 18; see also Empire I, 209 F.Supp.3d at 264. Once the Secretary has issued her decision or declined to review a decision of the PRRB, a provider has “the right to obtain judicial review.” Empire I, 209 F.Supp.3d at 264 (quoting 42 U.S.C. § 1395oo(f)(1)); see also 42 C.F.R. § 405.1877.

Dissatisfied with the NPRs they received for the 2006 and 2007 years, respectively, Valley Hospital and Deaconess Medical Center initiated this reimbursement-appeal process with the PRRB in 2009. See Am. Compl., ¶ 19. Those appeals challenged the agency's inclusion of time spent treating Medicare Part C enrollees (Part-C days) in the Medicare/SSI fraction, which the agency had done under the theory that Part-C patients are also entitled to benefits under Part A. Id. The PRRB remanded those appeals to the MACs, and Plaintiffs challenged that decision by filing suit in this Court. Id., ¶ 20. Finding that Plaintiffs' challenges were premature because the remand process had not yet been completed, this Court dismissed the case in September 2016. Empire I, 209 F.Supp.3d at 263.

When Plaintiffs received revised NPRs in March 2017, they again appealed to the PRRB, this time also seeking expedited judicial review. See Am. Compl., ¶ 23. In their appeal, the providers again challenged the treatment of Part-C days in the Medicare/SSI fraction. See ECF No. 36 (Def. Reply) at 4. The PRRB held that it lacked jurisdiction to review the revised NPRs because the revisions had not included an adjustment to the Medicare/SSI fraction, and regulations prohibit consideration of any matter that has not been specifically revised. See Am. Compl., ¶ 24; ECF No. 16-6 (PRRB Decision in 17-0555GC) at 8-9; 42 C.F.R. § 405.1889(b)(2). Plaintiffs filed another suit in this Court to vacate that decision and to order the PRRB to reinstate its appeal from the initial NPRs. See Empire Health Foundation v. Azar (Empire II), No. 19-1692. Not long thereafter, the parties filed a Joint Motion to Remand the case to the Secretary, and this Court granted the Motion and signed their Proposed Order in October 2019. See ECF No. 35-1 (Empire II Motion for Remand) at 7-8 (Empire II Remand Order); see also No. 19-1692, Minute Order of Oct. 22, 2019; Am. Compl., ¶¶ 25-28. The PRRB has since reopened the case and issued a request for information to which the providers and the MAC have responded. See ECF Nos. 35-2 (MAC Response); 35-3 (Providers' Response). No. final decision has yet been rendered.

Plaintiffs' challenge to the inclusion of Part-C days in the Medicare/SSI fraction was not original. That same challenge appeared in a congeries of suits, and the Supreme Court confronted the issue in 2019. See Allina II, 139 S.Ct. at 1809-10. In Allina II, the Court held that CMS could not implement a policy of including Part-C days in the Medicare/SSI fraction without going through the notice-and-comment rulemaking process. Id. at 1817. It offered no view on the merits of whether Part-C days should be included in the fraction. The agency responded to this decision in two ways: first, CMS issued a proposed rule stating that Part-C days would be included in the Medicare/SSI fraction for fiscal years before 2013, and, second, CMS issued a ruling (CMS Ruling 1739-R) divesting the PRRB of jurisdiction over NPR appeals from before 2013 that raise the Part-C-days question until the issuance of the forthcoming final rule. See ECF No. 29 (Motion to Remand), ¶¶ 9-10; Medicare Program; Treatment of Medicare Part C Days in the Calculation of a Hospital's Medicare Disproportionate Patient Percentage, 85 Fed.Reg. 47, 723-01 (Aug. 6, 2020) (proposed rule); ECF No. 16-12 (CMS Ruling 1739-R). The Secretary also sought to consolidate ongoing lawsuits that raised the same issue, and 93 of them - including Deaconess's 2007 appeal of its initial NPR - were consolidated before Judge Amy Berman Jackson. See In re: Allina II, Misc. No. 19-190 (D.D.C.). Judge Jackson then remanded many of these lawsuits - namely, all those that specifically challenged the inclusion of the Part-C days as improper because of the agency's failure to undertake notice-and-comment rulemaking. Id, ECF No. 74 (Remand Order). Deaconess's 2007 initial-NPR appeal was among those remanded. Id, ECF No. 74-1 (Appendix of Remanded Cases) at 3, item 79.

In the midst of this, Plaintiffs asked CMS to realign their Medicare/SSI fractions to the hospitals' cost year (i.e., calendar-year reporting periods), rather than the federal fiscal years to which they had previously been aligned. See Am. Compl., ¶ 30. CMS granted this request, and Plaintiffs received adjusted NPRs on December 7, 2018. Id Like those before them, these realigned NPRs included Part-C days in the Medicare/SSI fraction. Id, ¶¶ 31-32. Plaintiffs thus appealed to the PRRB once more. Id, ¶¶ 32-33. Once more, the Board dismissed the appeal, finding that “it [did] not have jurisdiction over the DSH Part C Days issue from the revised NPRs” because “the specific issue[] was not adjusted as part of the revised NPRs.” ECF No. 34-1 at ECF pp. 4-7 (PRRB Decision in Case No. 19-1983GC) at ECF p. 5. Although the realigned NPRs differed from those the providers had previously received, “CMS [did] not utilize a new or different data match process when it issue[d] a realigned SSI percentage - all of the underlying data remain[ed] the same, it is simply that a different time period [was] used.” Id at ECF pp. 4-5 (emphasis in original). The same regulations that prohibited review of the revised Medicare/SSI fractions in PRRB appeal No. 17-0555GC thus barred review in this case, No. 19-1983GC. See 42 C.F.R. § 405.1889(b)(2).

Unhappy with the PRRB's dismissal of their appeal, Plaintiffs filed this action in August of 2020, see ECF No. 1 (Complaint), and their Amended Complaint that December. Plaintiffs allege four counts: 1) the PRRB's Decision in Case No. 19-1983GC violated this Court's remand Order in Empire II; 2) the PRRB has unreasonably delayed resolving Plaintiffs' appeals, in...