Adirondack Medical Center v. Sebelius
935 F. Supp. 2d 121
D.D.C.2013Background
- Plaintiff Hospitals challenge CMS Secretary Sebelius's adjustments to DRG-based Medicare payments for SCHs and MDHs under IPPS.
- Plaintiffs allege the Secretary acted ultra vires and arbitrarily in applying cumulative budget neutrality adjustments for FY2009–FY2010.
- The dispute centers on rebasing instructions (2008) to SCHs using FY2006 and MDHs using FY2002 as base years, and related rulemaking procedures.
- CMS issued rebasing instructions in 2006 (MDHs) and 2008 (SCHs); initial 2008 SCH instruction was rescinded and replaced with a full cumulative budget neutrality adjustment from FY1993.
- Plaintiffs sought judicial review of final agency actions under the APA, with the court granted partial summary judgment to the Secretary on the rulemaking issue and reserved others for briefing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Secretary’s use of cumulative budget neutrality adjustments complies with statutory budget neutrality. | Hospitals contend the cumulative adjustments violate 42 U.S.C. §1395ww(d)(4)(C)(iii). | Secretary maintains cumulative adjustments are consistent with longstanding practice and statutory requirement. | Partly denied; the court denied summary judgment on this issue and ordered further briefing. |
| Whether the Secretary was required to engage in notice-and-comment rulemaking before 2008 SCH rebasing instructions. | Hospitals argue the 2008 SCH rebasing instruction changed an interpretive rule into substantive action needing notice and comment. | Secretary contends rebasing instructions were interpretive and did not require rulemaking; the second instruction corrected an error. | Granted in part to Secretary; no rulemaking required for issuing the second 2008 SCH rebasing instruction. |
| Whether the 2008 SCH rebasing instruction was an authoritative interpretation that required formal rulemaking to change. | SCHs would have relied on the 2006 MDH interpretation; change in SCH instruction should have undergone rulemaking. | The first SCH instruction was a mistake; the second aligned with longstanding policy; rulemaking not required for correction. | Denied; court held no rulemaking required for the second instruction. |
Key Cases Cited
- Lyng v. Payne, 476 U.S. 926 (1986) (agency power limited to delegated authority)
- Transohio Sav. Bank v. Dir., Office of Thrift Supervision, 967 F.2d 598 (D.C. Cir. 1992) (ultra vires and authority limits)
- University of D.C. Faculty Ass’n/NEA v. D.C. Fin. Responsibility & Mgmt. Auth., 163 F.3d 616 (D.C. Cir. 1998) (agency must stay within enabling statute)
- Marsh v. Or. Natural Res. Council, 490 U.S. 360 (1989) (arbitrary and capricious review standard)
- Pub. Citizen, Inc. v. FAA, 988 F.2d 186 (D.C. Cir. 1993) (requirement that agency explain results)
- National Medical Enters, Inc. v. Shalala, 43 F.3d 691 (D.C. Cir. 1995) (interpretive vs. substantive rule delineation)
- Monmouth Medical Ctr. v. Thompson, 257 F.3d 807 (D.C. Cir. 2001) (interpretive rule exemption from notice and comment)
- Paralyzed Veterans of Am. v. D.C. Arena L.P., 117 F.3d 579 (D.C. Cir. 1997) (significant revision requires rulemaking)
- Alaska Professional Hunters Assoc., Inc. v. FAA, 177 F.3d 1030 (D.C. Cir. 1999) (change to longstanding interpretation may require rulemaking)