Ne. Hosp. Corp.. v. Sebelius

657 F.3d 1

398 U.S.App.D.C. 43

NORTHEAST HOSPITAL CORPORATION, Appellee

v.Kathleen SEBELIUS, Secretary, United States Department of Health and Human Services, Appellant.

No. 10–5163.

United States Court of Appeals, District of Columbia Circuit.

Argued Feb. 11, 2011.Decided Sept. 13, 2011.

Appeal from the United States District Court for the District of Columbia (No. 1:09–cv–00180).Stephanie R. Marcus, Attorney, U.S. Department of Justice, argued the cause for appellant. On the briefs were Ronald C. Machen Jr., U.S. Attorney, Anthony J. Steinmeyer, Assistant Director, and Jeffrica Jenkins Lee, Attorney.Christopher L. Keough argued the cause for appellee. With him on the brief were J. Harold Richards and John M. Faust.John R. Jacob was on the brief for amicus curiae HCA, Inc., in support of appellee.Before: GARLAND, GRIFFITH, and KAVANAUGH, Circuit Judges.Opinion for the Court filed by Circuit Judge GRIFFITH.Opinion concurring in the judgment filed by Circuit Judge KAVANAUGH.GRIFFITH, Circuit Judge:

In a 2008 administrative appeal, the Secretary of Health and Human Services ruled that a Medicare beneficiary enrolled in Medicare Part C still qualifies as a person “entitled to benefits” under Medicare Part A. As a result, Beverly Hospital in Beverly, Massachusetts, received a smaller reimbursement from the Secretary for services it provided to low-income Medicare beneficiaries during fiscal years 1999–2002. The district court granted summary judgment for Beverly on the ground that the Secretary's interpretation violates the plain language of the Medicare statute. We conclude that the statute does not unambiguously foreclose the Secretary's interpretation. We nonetheless affirm the district court on the alternative ground that the Secretary must be held to the interpretation that guided her approach to reimbursement calculations during fiscal years 1999–2002, an interpretation that differs from the view she now advances. Under her previous approach, the hospital would have prevailed on its claim for a larger reimbursement.

I

A

The federal Medicare program reimburses medical providers for services they supply to eligible patients. See generally 42 U.S.C. § 1395 et seq. The Medicare statute is divided into five “Parts,” four of which are relevant here. Part A covers medical services furnished by hospitals and other institutional care providers. See id. §§ 1395c to 1395i–5. The Secretary makes payments under Part A directly to “providers of services,” such as hospitals, rather than to managed care organizations, such as health maintenance organizations (HMOs). See id. §§ 1395f(a)-(b), 1395x(u). Part B is an optional supplemental insurance program that pays for medical items and services not covered by Part A, including outpatient physician services, clinical laboratory tests, and durable medical equipment. See id. §§ 1395j to 1395w–4. Anyone covered by Part A may purchase Part B insurance by paying a monthly premium. See id. §§ 1395j, 1395 o.

Part C governs the “Medicare + Choice” (M+C) program, which gives Medicare beneficiaries an alternative to the traditional Part A fee-for-service system. See id. §§ 1395w–21 to 1395w–29. Under M+C, an individual may enroll with an HMO, preferred provider organization, or other private “managed care” plan. If a person enrolls in an M+C plan, the Secretary makes payments to the plan “instead of the amounts which (in the absence of the [M+C] contract) would otherwise be payable [to the provider] under [P]arts A and B,” id. § 1395w–21(i)(1), and the plan in turn negotiates payment with the provider. Because M+C enrollees must purchase Part B coverage, see id. § 1395w–21(a)(3)(A), they tend to be wealthier than individuals who receive care under Part A. Part D, which is not relevant to this case, provides a prescription drug benefit program. See id. §§ 1395w–101 to 1395w–152.

Part E sets out various “Miscellaneous Provisions,” one of which is the Prospective Payment System (PPS) for reimbursing Part A inpatient hospital services. See id. § 1395ww(d). Under the PPS, Medicare reimburses a hospital for services based on prospectively determined national and regional rates rather than on the actual amount the hospital spends. See id. § 1395ww(d)(1)-(4). The PPS also provides for payment adjustments based on various hospital-specific factors. One such adjustment is the “disproportionate share hospital” (DSH) adjustment, under which the Secretary pays more for services provided by hospitals that “serve[ ] a significantly disproportionate number of low-income patients.” Id. § 1395ww(d)(5)(F)(i)(I).

Whether a hospital qualifies for a Medicare DSH adjustment, and the amount of the adjustment the hospital receives, depends on the hospital's “disproportionate patient percentage.” Id. § 1395ww(d)(5)(F)(v)-(vii). This percentage is a “proxy measure” for the number of low-income patients a hospital serves, H.R.Rep. No. 99–241, pt. 1, at 17 (1985), and represents the sum of two fractions, commonly called the “Medicare fraction” and the “Medicaid fraction.” The Medicare fraction is:

[T]he 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 [Medicare] Part A ... and were entitled to supplementary security income [SSI] benefits ... 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 [Medicare] Part A....

Id. § 1395ww(d)(5)(F)(vi)(I). The Medicaid fraction is:

[T]he 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 [Medicaid] plan ... but who were not entitled to benefits under [Medicare] Part A ... and the denominator of which is the total number of the hospital's patient days for such period.

Id. § 1395ww(d)(5)(F)(vi)(II). Here is a visual representation of the two fractions:

+------------------------------------------------+
¦            ¦Medicare Fraction¦Medicaid Fraction¦
+------------------------------------------------+

                      Patient days for patients    Patient days for patients
Numerator             “entitled to benefits under  “eligible for [Medicaid]”
                      Part A” and “entitled to SSI but not “entitled to
                      benefits”                    benefits under Part A”
                      Patient days for patients    ” Total number of patient
Denominator           “entitled to benefits under  days”
                      Part A”

A “fiscal intermediary,” typically a private insurance company acting as the Secretary's agent, calculates DSH adjustments. See 42 C.F.R. §§ 421.1, 421.3, 421.100–.128. If a hospital is dissatisfied with the intermediary's determination, it may appeal to the Provider Reimbursement Review Board (PRRB), an administrative body appointed by the Secretary. See 42 U.S.C. § 1395 oo (a), (h). The PRRB may affirm, modify, or reverse the fiscal intermediary's award; the Secretary in turn may affirm, modify, or reverse the PRRB's decision. See id. § 1395 oo (d)-(f).

B

Northeast Hospital Corporation owns and operates Beverly Hospital, a Medicare provider in Beverly, Massachusetts. For fiscal years 1999–2002, the fiscal intermediary excluded Beverly's M+C patient days from the numerator of the Medicaid fraction.

Northeast appealed to the PRRB, arguing that M+C patients eligible for Medicaid should be counted in the numerator of the Medicaid fraction because they are not “entitled to benefits” under Part A. Northeast claimed it was owed an additional $737,419 in Medicare payments as a result of the intermediary's improper calculation. The PRRB ruled against Northeast, holding that under the statute and implementing regulations, M+C patient days should not be counted in the Medicaid fraction because M+C beneficiaries remain “entitled to benefits under Part A” even after electing Part C. Beverly Hosp. v. BlueCross BlueShield Ass'n, PRRB Dec. No. 2008–D37, 2008 WL 7256679, at *4 (Sept. 23, 2008), reprinted in Medicare & Medicaid Guide (CCH) ¶ 82,112. The Secretary affirmed the PRRB's ruling. Beverly Hosp. v. BlueCross BlueShield Ass'n, Review of PRRB Dec. No. 2008–D37, 2008 WL 6468518 (Nov. 21, 2008), reprinted in Medicare & Medicaid Guide (CCH) ¶ 82,207.

Northeast filed suit in the district court challenging the Secretary's decision. In an opinion issued on March 30, 2010, the district court granted summary judgment for Northeast.¹ Ne. Hosp. Corp. v. Sebelius, 699 F.Supp.2d 81 (D.D.C.2010). In the district court's view, under the plain language of the statute, M+C patients eligible for Medicaid must be counted in the Medicaid fraction because M+C beneficiaries are no longer “entitled to benefits under Part A” once they elect Part C. Id. at 93. Counting M+C patients in the Medicaid fraction increases the size of the fraction and, in Northeast's case, the amount of the reimbursement to which it is entitled for its care of low-income patients. We have jurisdiction over the Secretary's appeal under 28 U.S.C. § 1291.

II

We review a grant of summary judgment de novo, viewing the evidence in the light most favorable to the nonmoving party and drawing all reasonable inferences in the nonmoving party's favor. Geleta v. Gray, 645 F.3d 408, 410 (D.C.Cir.2011). We review the Secretary's interpretation of the DSH provision, 42 U.S.C. § 1395ww(d)(5)(F)(vi), under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). The Chevron inquiry has two steps. First, “we ask if the statute unambiguously forecloses the agency's interpretation.” Nat'l Cable & Telecomm. Ass'n v. FCC, 567 F.3d 659, 663 (D.C.Cir.2009). If it does, we “disregard...