Adirondack Medical Center v. Kathleen Sebelius
408 U.S. App. D.C. 161
| D.C. Cir. | 2014Background
- In 2007 HHS revised Medicare’s Inpatient Prospective Payment System (IPPS), changing DRG classifications and weights, which risked producing aggregate overpayments.
- Congress had previously authorized the Secretary to adjust the average standardized amounts to eliminate effects of coding/classification changes (42 U.S.C. § 1395ww(d)(3)(A)(vi)) and also granted broader adjustment authority elsewhere in the IPPS statute (42 U.S.C. § 1395ww(d)(5)(I)(i)).
- Secretary reduced standardized amounts for FY2008–FY2009; Congress partly rolled back that reduction. The Secretary then used her broader adjustment authority to make downward prospective adjustments to hospital-specific rates as well, splitting the adjustment burden across hospitals.
- Several hospitals (rural and otherwise underserved), which receive hospital-specific rates, sued, arguing the Secretary lacked statutory authority to adjust hospital-specific rates to offset coding-related overpayments and that her action was arbitrary and capricious.
- The Provider Reimbursement Review Board declined jurisdiction; the district court found the statute ambiguous and deferred to the Secretary under Chevron, granting her motion to dismiss. The D.C. Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 1395ww(d)(3)(A)(vi) limits the Secretary to adjusting only the standardized (federal) amount to offset coding-related overpayments | The provision’s text and expressio unius show Congress intended adjustments solely to the standardized amount, excluding adjustments to hospital-specific rates | The statutory scheme contains overlapping grants; § 1395ww(d)(5)(I)(i) gives broad authority to make other exceptions and adjustments, permitting adjustments to hospital-specific rates | Court: Statute ambiguous at Chevron step one; cannot read § 1395ww(d)(3)(A)(vi) as an unambiguous limit on broader authority |
| Whether the specific/general and surplusage canons mandate that the specific adjustment provisions control over the general grant in § 1395ww(d)(5)(I)(i) | The specific provisions (including TMA) should control and preclude the Secretary from using the general grant to adjust hospital-specific rates | Overlap is permissible; harmonizing provisions is proper and some redundancy does not show congressional intent to preclude the general grant | Court: Canons do not resolve ambiguity; harmonization and deference appropriate |
| Whether the Secretary’s interpretation is reasonable under Chevron step two | Plaintiffs: Secretary’s use of the broad grant to reduce hospital-specific rates is unreasonable and undermines Congress’s protective intent for underserved hospitals | Secretary: Adjustment reasonably addresses artificial increases from coding changes; splitting burden avoids disproportionate disruption | Court: Secretary’s interpretation and adjustments are reasonable; deference warranted |
| Whether subsequent statutory action (American Taxpayer Relief Act) undermines the Secretary’s authority for prospective adjustments | Plaintiffs: Later statute barring recoupment implies Congress would not permit broad prospective adjustments | Secretary: Subsequent statute addressed recoupment, not prospective adjustments; policy concerns are legislative, not judicial | Court: Policy argument unpersuasive; later statute does not show ambiguity resolved against Secretary |
Key Cases Cited
- Methodist Hosp. of Sacramento v. Shalala, 38 F.3d 1225 (D.C. Cir.) (describing federal-rate DRG payment formula)
- Chevron U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837 (1984) (framework for judicial deference to agency statutory interpretations)
- Pub. Citizen, Inc. v. Rubber Mfrs. Ass’n, 533 F.3d 810 (D.C. Cir.) (courts should not add words to statutes)
- RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 132 S. Ct. 2065 (2012) (discussion of surplusage and canon application)
- Am. Bankers Ass’n v. Nat’l Credit Union Admin., 271 F.3d 262 (D.C. Cir.) (statutory provisions read in context)
- Lamie v. U.S. Tr., 540 U.S. 526 (2004) (surplusage canon not inviolable)
- HCSC-Laundry v. United States, 450 U.S. 1 (1981) (specific statute controls generally where irreconcilable)
- Morton v. Mancari, 417 U.S. 535 (1974) (duty to harmonize statutory provisions when possible)
- DeNaples v. Office of Comptroller of Currency, 706 F.3d 481 (D.C. Cir.) (overlap among enforcement provisions reasonable)