Native Angels Home Care Agency Inc. v. Sebelius

749 F.Supp.2d 370

NATIVE ANGELS HOME CARE AGENCY, INC., Plaintiff,

v.Kathleen SEBELIUS, Defendant.

No. 7:09–CV–187–D.

United States District Court, E.D. North Carolina,Southern Division.

Oct. 29, 2010.

Matthew William Wolfe, Renee J. Montgomery, Parker, Poe, Adams & Bernstein, LLP, Raleigh, NC, for Plaintiff.Matthew Lee Fesak, R.A. Renfer, Jr., U.S. Attorney's Office, Raleigh, NC, for Defendant.

ORDER

JAMES C. DEVER III, District Judge.

Native Angels Home Care Agency, Inc. (“Native Angels” or “plaintiff”), a Medicare-certified hospice provider, filed suit against Kathleen Sebelius, Secretary of the U.S. Department of Health and Human Services (“Secretary” or “defendant”) and contends that 42 C.F.R. § 418.309(b)(1) is invalid and contrary to law. For purposes of calculating a hospice provider's Medicare-reimbursement “cap” for a fiscal year, 42 C.F.R. § 418.309(b)(1) dictates how to determine the number of Medicare beneficiaries that a hospice provider has serviced in that fiscal year. According to Native Angels, 42 C.F.R. § 418.309(b)(1) conflicts with the calculation that Congress expressly mandates in 42 U.S.C. § 1395f(i)(2)(C). Thus, Native Angels seeks summary judgment [D.E. 14] as to its claim that 42 C.F.R. § 418.309(b)(1) is invalid and contrary to law. Secretary Sebelius disagrees and has filed a cross-motion for summary judgment [D.E. 19]. Native Angels also seeks a preliminary injunction [D.E. 16] as to the Secretary's calculations for fiscal year 2007.

As explained below, the court grants Native Angels' motion for summary judgment, denies Secretary Sebelius' cross-motion for summary judgment, and denies Native Angel's motion for preliminary injunction as moot.

I.

Native Angels is a North Carolina corporation, and a Medicare-certified hospice provider based in Robeson County, North Carolina. See Jacobs–Ghaffar Aff. ¶¶ 2, 7; Compl. ¶¶ 1, 6–7; Answer ¶¶ 6–7; Def.'s Summ. J. Mem. 9. Native Angels provides hospice services to terminally ill Medicare beneficiaries. Jacobs–Ghaffar Aff. ¶ 5. In connection with such services, Native Angels submits Medicare claims and receives Medicare payments. See id. ¶¶ 12–13; Def.'s Summ. J. Mem. 9.

The U.S. Department of Health and Human Services (“HHS”) is the federal agency that administers Medicare and reimburses hospice providers for services rendered to Medicare beneficiaries. The fiscal year for hospice providers, i.e., the period for which the Medicare reimbursements are calculated, runs from November 1 to October 31. During the 2007 fiscal year, which ran from November 1, 2006 to October 31, 2007, Native Angels provided hospice care to 60 Medicare beneficiaries who first had been admitted during the 2006 fiscal year. See Jacobs–Ghaffar Aff. ¶ 12; Compl. ¶ 39. HHS paid Native Angels for these beneficiaries' hospice care at the time Native Angels provided it. See Jacobs–Ghaffar Aff. ¶ 12.

In April 2009, HHS, through its fiscal intermediary,¹ notified Native Angels that, based upon the beneficiary-spending-cap calculation established in 42 C.F.R. § 418.309(b)(1), Native Angels exceeded the beneficiary-spending cap for the 2007 fiscal year in the amount of $3,897,750. Def.'s Summ. J. Mem., Ex. A (“Ex. A”) at 32–35; see Jacobs–Ghaffar Aff. ¶ 13. Thus, HHS, through its fiscal intermediary, demanded that Native Angels return $3,897,750 of the payments that Native Angels received during the 2007 fiscal year. Ex. A at 32–35; Jacobs–Ghaffar Aff. ¶ 13.

Upon receiving this payment demand, Native Angels began to monitor the beneficiary-spending-cap allocation for each fiscal year in order to determine whether it would be in Native Angels' financial interest to admit new patients at the end of the “cap year” (i.e., in August and September). Jacobs–Ghaffar Aff. ¶ 16. To do so, Native Angels' staff determines the date on which Native Angels should admit each patient in light of the potential impact of each patient's diagnosis on the beneficiary-spending-cap allocation as calculated under 42 C.F.R. § 418.309(b)(1). Id. Additionally, Native Angels has hired an accountant specializing in beneficiary-spending-cap issues to advise Native Angels about staying beneath the cap. See id. ¶ 16.

In September 2009, Native Angels appealed HHS' beneficiary-spending-cap calculation for the 2007 fiscal year to the Provider Reimbursement Review Board (“PRRB”), arguing that HHS' calculation is incorrect and that 42 C.F.R. § 418.309(b)(1) is invalid. Jacobs–Ghaffar Aff. ¶ 17; see Ex. A at 12–29. Native Angels also requested “expedited judicial review,” which allows the PRRB to certify that it lacks the authority to decide a “question of law or regulations relevant to the matters in controversy.” 42 U.S.C. § 1395 oo(f)(1); see Ex. A at 30–31. On October 1, 2009, the PRRB determined that there were no findings of fact for it to resolve, it was bound by 42 C.F.R. § 418.309(b)(1), and it was “without the authority to decide the legal question of whether the regulation, 42 C.F.R. § 418.309(b)(1), is invalid.” Ex. A at 1–2. Accordingly, the PRRB granted expedited judicial review of the validity of 42 C.F.R. § 418.309(b)(1). Ex. A at 2; see 42 U.S.C. § 1395 oo(f)(1).²

On November 18, 2009, Native Angels filed a complaint in this court against the Secretary, seeking declaratory and injunctive relief [D.E. 1]. Native Angels asserts that 42 C.F.R. § 418.309(b)(1) is contrary to Congress' statutory mandate under 42 U.S.C. § 1395f(i)(2)(C), arbitrary and capricious, and constitutes an unlawful taking in violation of the Fifth Amendment.

On April 23, 2010, Native Angels moved for summary judgment on the validity of 42 C.F.R. § 418.309(b)(1) [D.E. 14]. On May 24, 2010, the Secretary responded in opposition and also filed a motion for summary judgment on the validity of 42 C.F.R. § 418.309(b)(1) [D.E. 19, 20]. Native Angels filed a response in opposition to the Secretary's motion [D.E. 22]. Additionally, Native Angels has moved for a preliminary injunction as to the calculation for fiscal year 2007 [D.E. 16]. The Secretary has responded in opposition [D.E. 18] and Native Angels has replied [D.E. 21].

II.

Initially, the Secretary argues that Native Angels lacks standing to challenge regulation 42 C.F.R. § 418.309(b)(1) because Native Angels “has not shown what concrete and actual ‘harm’ it has suffered” that is “attributable” to regulation 42 C.F.R. § 418.309(b)(1). See Def.'s Summ. J. Mem. 11–17.

To establish Article III standing, a plaintiff must show; (1) that the plaintiff has “ ‘suffered an injury in fact—an invasion of a legally-protected interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical;’ ” (2) “ ‘a causal connection between the injury and the conduct complained of—the injury has to be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court;’ ” and (3) that it is “ ‘likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision’ ” from the court. Chambers Med. Techs. of S.C., Inc. v. Bryant, 52 F.3d 1252, 1265 (4th Cir.1995) (alterations omitted) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 559–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)). “The standing doctrine, of course, depends not upon the merits, but on whether the plaintiff is the proper party to bring the suit.” McBurney v. Cuccinelli, 616 F.3d 393, 402 (4th Cir.2010) (quotation omitted). The party seeking to establish standing bears the burden of demonstrating standing. Chambers Med. Techs. of S.C., Inc., 52 F.3d at 1265.

Native Angels' business suffers sufficient adverse effects from the enforcement of 42 C.F.R. § 418.309(b)(1)'s beneficial-spending-cap calculation, including a higher repayment for fiscal year 2007 (meaning lower Medicare-reimbursement payments for the 60 Medicare beneficiaries that Native Angels cared for in fiscal year 2007 who first had been admitted during fiscal year 2006) and increased costs to monitor Native Angels' compliance. See, e.g., Chambers Med. Techs. of S.C., Inc., 52 F.3d at 1265–66. Such costs are sufficiently traceable to the enforcement of regulation 42 C.F.R. § 418.309(b)(1) to satisfy Article III standing. See, e.g., Chambers Med. Techs. of S.C., Inc., 52 F.3d at 1265. Native Angels has shown (1) injury in fact (reduced payment for 60 Medicare beneficiaries it has served and greater monitoring costs); (2) causation (HHS' employing regulation 42 C.F.R. § 418.309(b)(1)'s calculation resulted in such costs and reduced payments); and (3) redressability (invalidation of regulation 42 C.F.R. § 418.309(b)(1) would remedy Native Angels' injury). See, e.g., Defenders of Wildlife, 504 U.S. at 561–62, 112 S.Ct. 2130; Russell–Murray Hospice, Inc. v. Sebelius, No. 09–2033(RMU), 2010 WL 2814411, at *7–10 (D.D.C.2010) (concluding that hospice provider had standing to challenge 42 C.F.R. § 418.309(b)(1)); L.A. Haven Hospice, Inc. v. Leavitt, No. CV 08–4469–GW(RZx), 2009 WL 5868513, at *3–4 (C.D.Cal. July 13, 2009) (same). Accordingly, Native Angels has standing to challenge regulation 42 C.F.R. § 418.309(b)(1).

III.

The parties have filed cross-motions for summary judgment [D.E. 14, 19]. Summary judgment is appropriate when, after reviewing the record taken as a whole, no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The party seeking summary judgment bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has met its burden, the nonmoving party may not rest on the allegations or denials in its pleading, Anderson, 477 U.S. at 248, 106 S.Ct. 2505, but “must come forward with specific facts showing that there is a genuine...