St. Francis Hosp., Inc. v. Becerra

28 F.4th 119

ST. FRANCIS HOSPITAL, INC.; AHS Hillcrest Medical Center, LLC; St. John Medical Center, Plaintiffs - Appellants,

v.Xavier BECERRA, Defendant - Appellee.

No. 20-5097

United States Court of Appeals, Tenth Circuit.

FILED March 7, 2022

Daniel J. Hettich, King & Spalding LLP (Juliet M. McBride, with him on the briefs), Washington, D.C., for Plaintiffs-Appellants.

Kyle T. Edwards, Attorney, U.S. Department of Justice, Civil Division (Abby C. Wright, Attorney, U.S. Department of Justice, Civil Division; Brian M. Boynton, Acting Assistant Attorney General; Clinton J. Johnson, Acting United States Attorney; Daniel J. Barry, of Counsel, Acting General Counsel, U.S. Department of Health and Human Services; Janice L. Hoffman, of Counsel, Associate General Counsel, U.S. Department of Health and Human Services; Susan Maxson Lyons, of Counsel, Deputy Associate General Counsel for Litigation, U.S. Department of Health and Human Services; Jonathan C. Brumer, of Counsel, Attorney, Department of Health and Human Services, with her on the briefs), Washington, D.C., for Defendant-Appellee.

Before HOLMES, BALDOCK, and BACHARACH, Circuit Judges.

BACHARACH, Circuit Judge.

In this appeal, three teaching hospitals¹ challenge the denial of Medicare reimbursements. These hospitals had shared the cost to train residents off-site (at places like community clinics). At that time, a teaching hospital could obtain reimbursement only by incurring "substantially all" of a resident's training costs. Omnibus Reconciliation Act of 1986, Pub. L. No. 99-509, § 9314, 100 Stat. 1874, 2005. Because the teaching hospitals had shared the training costs for each resident, the government denied reimbursement.

The denials led the teaching hospitals to file administrative appeals. While they were pending, Congress enacted the Affordable Care Act (ACA), which created a new standard for reimbursement. Under the new standard, teaching hospitals could obtain reimbursement on a proportional basis when they shared the training costs. Patient Protection and Affordable Care Act, Pub. L. No. 111-148, § 5504(a)–(b), 124 Stat. 119, 659 (2010).

But the parties disagree on whether the ACA's new standard applied to proceedings reopened when Congress changed the law. The agency answered no , and the district court granted summary judgment to the agency. We affirm.

1. The court applies a deferential standard when reviewing administrative decisions.

We conduct de novo review of the district court's ruling, applying the same standard that governed there. See Gross v. Hale-Halsell Co. , 554 F.3d 870, 875 (10th Cir. 2009) (review of summary-judgment ruling); Via Christi Reg'l Med. Ctr., Inc. v. Leavitt , 509 F.3d 1259, 1271 (10th Cir. 2007) (review under the Administrative Procedure Act), abrogated on other grounds by Azar v. Allina Health Servs. , ––– U.S. ––––, 139 S. Ct. 1804, 204 L.Ed.2d 139 (2019). The district court could set aside the administrative decision only if it was

• "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law,"

• beyond the court's "statutory jurisdiction, authority, or limitations," or

• "short of statutory right."

5 U.S.C. § 706(2)(A), (C) (2018), incorporated in 42 U.S.C. § 1395oo(f)(1) (2018).

2. Prior to the ACA, federal law did not allow cost-sharing for shared residents engaged in off-site training.

The teaching hospitals incurred the disputed costs from 2001 to 2006.² At that time, federal law covered reimbursement of costs for shared residents in nonhospital sites only "if the hospital [had] incur[red] all, or substantially all, of the costs for the training program in that setting." Omnibus Reconciliation Act of 1986, Pub. L. No. 99-509, § 9314, 100 Stat. 1874, 2005 (covering direct graduate medical education costs) (emphasis added); Balanced Budget Act of 1997, Pub. L. 105-33, § 4621(b)(2), 111 Stat. 251, 477 (covering indirect costs of medical education) (emphasis added). Because the noun hospital is singular, reimbursement was available only if a single hospital bore substantially all of the costs for the training program.

A. The teaching hospitals misapply the Dictionary Act to interpret the Medicare statutes.

The teaching hospitals argue that the Medicare statutes didn't prevent sharing of costs for residents training in community clinics. For this argument, the teaching hospitals rely on the Dictionary Act, an umbrella statute providing basic principles to interpret statutes. 1 U.S.C. § 1 (2000 & 2006). The Act states that "unless the context indicates otherwise," "words importing the singular include and apply to several persons, parties, or things." Id. Interpreted in the plural, the statutes would allow reimbursement if hospitals "incur all, or substantially all, of the costs for the training program."

But the teaching hospitals misapply the Dictionary Act. This Act reflects "the common understanding that the English language does not always carefully differentiate between singular and plural word forms, and especially in the abstract, such as in legislation prescribing a general rule for future application." 2A Norman J. Singer & Shambie Singer, Statutes and Statutory Construction § 47:34, at 505 (7th ed. rev. 2014); see Antonin Scalia & Bryan A. Garner, Reading Law 130 (2012);³ see also Cong. Globe , 41st Cong., 3d Sess. 1474 (1871) (statement of Rep. Poland) (stating that the purpose of the Dictionary Act was "to avoid prolixity and tautology in drawing statutes and to prevent doubt and embarrassment in their construction").

Given this common-sense understanding, legislators often use singular nouns when creating rules applicable to every entity covered by the statute. See, e.g. , Bryan A. Garner, Guidelines for Drafting and Editing Legislation § 2.4, at 56 (2015) ("Draft in the singular number unless the sense is undeniably plural, as when the sentence refers to a habitual practice."); Ofc. of the Legislative Counsel, U.S. House of Representatives, House Legislative Counsel's Manual on Drafting Style 60–61 (1995) (advising use of the singular for clarity of expression). So Congress's use of a singular noun often sheds insight into the meaning.⁴ For example, when Congress said that "the hospital" could obtain reimbursement if it had incurred substantially all of the training costs, the implication is clear: A hospital couldn't obtain reimbursement when sharing the costs with another entity.

The Dictionary Act doesn't allow us to change the meaning by converting the singular noun hospital to a plural form (hospitals ). To do so would distort Congress's meaning by authorizing reimbursement for hospitals banding together to share these costs.

Given the risk of distorting congressional intent, the Supreme Court stated in United States v. Hayes that courts are to construe singular items as plural only "[o]n the rare occasions" when "doing so [is] necessary to carry out the evident intent of the statute." 555 U.S. 415, 422 n.5, 129 S.Ct. 1079, 172 L.Ed.2d 816 (2009) (internal quotation marks & citation omitted); see also First Nat'l Bank in St. Louis v. Missouri ex rel. Barrett , 263 U.S. 640, 657, 44 S.Ct. 213, 68 L.Ed. 486 (1924) (stating that the Dictionary Act's provision, treating singular terms as plural, "is not ... to be applied except where it is necessary to carry out the evident intent of the statute").⁵ Applying Hayes , we see no obvious signs of congressional intent to allow reimbursement of shared costs.⁶ If Congress had intended to allow reimbursement for hospital sharing costs, we'd expect the statutes to address the allocation of the reimbursement, the necessity of a written agreement, and the record-keeping requirements. But the Medicare statutes contained no such provisions from 2001 to 2006.⁷

The teaching hospitals also argue that Hayes , as a 2009 opinion, doesn't bear on Congress's intent when it enacted the statutes (1986 and 1997). But Hayes was interpreting the Dictionary Act, which underlies the teaching hospitals’ argument. And when the Supreme Court interprets a statute, it is deciding what the statute has always meant. See United States v. Rivera-Nevarez , 418 F.3d 1104, 1107 (10th Cir. 2005) ("Decisions of statutory interpretation are fully retroactive because they do not change the law, but rather explain what the law has always meant.").⁸ So the statutory text in 1986 and 1997 allowed reimbursement only when a single hospital had incurred substantially all of a resident's training costs—not when two or more hospitals had shared these costs.

B. If the Medicare statutes from 2001 to 2006 were ambiguous, the agency's interpretation would have resolved the ambiguity by prohibiting reimbursement for shared costs.

Despite the statutory reference to "the hospital" bearing the costs, let's assume the existence of an ambiguity in the statutory text. With that ambiguity, the court could consider whether the agency's statutory interpretation had been permissible. Olmos v. Holder , 780 F.3d 1313, 1317 (10th Cir. 2015). We call this " Chevron deference" based on Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc. , 467 U.S. 837, 842–43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984).

The agency interpreted the Medicare statutes in 1998 and 2003. Both times, the agency interpreted the Medicare statutes to allow reimbursement only when a single hospital bore substantially all of the training costs.

In 1998, the agency solicited comments and interpreted the statutes through a new rule. That rule allowed reimbursement to a hospital only if it had incurred substantially all of the training costs for the full complement of residents. 63 Fed. Reg. 40,954 ; 40,986 (July 31, 1998) ("[A] hospital may include the time a resident spends in nonprovider settings in its indirect medical education ... and direct [graduate medical education] full-time equivalent count if it incurs ‘all or substantially all’ of the costs of training residents in the nonhospital site."). The rule clarified the...