ALEGENT HEALTH - IMMANUEL MEDICAL CENTER v. SEBELIUS
1:12-cv-00812
D.D.C.Mar 31, 2014Background
- Alegent Health–Immanuel Medical Center (Alegent), a hospital with a zero FTE cap, became the primary training site for Creighton University's psychiatric residency after entering an affiliation agreement with St. Joseph in 1998 to aggregate FTE caps for DGME/IME Medicare reimbursement.
- CMS fiscal intermediary initially accepted Alegent's aggregation and allowed reimbursements for some years, but later disallowed DGME and IME payments for FYs ending June 30, 2002 and June 30, 2003, finding no valid written affiliation agreement for those periods.
- Alegent appealed to the PRRB; the PRRB upheld disallowance for FYs 2002 and 2003 (finding the written agreement lapsed), reversed for some earlier years, and the Administrator declined further review, making the PRRB decision final.
- Alegent sued under the APA challenging (1) the requirement of a written affiliation agreement (arguing PRA and APA defects), and (2) asserting equitable estoppel based on the intermediary’s earlier approvals.
- The district court reviewed under Chevron/APA standards and affirmed the Secretary: written affiliation agreements were required, the PRA and APA challenges failed, and equitable estoppel was barred by the Appropriations Clause and failure to show reasonable reliance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a written affiliation agreement was required to aggregate FTE caps | Alegent: regulation and statute did not require a written agreement prior to 2002 | Secretary: preamble and rules required submission of a written affiliation agreement; agency had authority to define affiliated groups | Court: written agreement requirement was valid and properly applied; Alegent lacked a current agreement for FYs 2002–2003 |
| Whether the Paperwork Reduction Act (PRA) invalidates the written agreement requirement | Alegent: HHS failed to obtain OMB PRA approval, so the requirement is invalid | Secretary: PRA creates no private cause of action; requirement falls within PRA exemptions for administrative actions/audits | Court: PRA claim fails—no private right of action and exemption applies |
| Whether the written-affiliation requirement violated the APA (notice-and-comment) | Alegent: preamble-imposed requirement was not validly promulgated via notice-and-comment | Secretary: requirement was foreshadowed in interim final rule and was a logical outgrowth of notice-and-comment process | Court: APA challenge rejected; preamble requirement was fairly disclosed and is binding as promulgated |
| Whether equitable estoppel bars disallowance of payments | Alegent: relied to its detriment on intermediary's prior approvals, so Secretary should be estopped | Secretary: Appropriations Clause bars estoppel against government payments; Alegent could not reasonably rely given reopening rules | Court: Estoppel barred by Appropriations Clause and, alternatively, reliance was unreasonable; estoppel claim fails |
Key Cases Cited
- Chevron U.S.A., Inc. v. Natural Res. Defense Council, 467 U.S. 837 (agency interpretations of ambiguous statutes reviewed for reasonableness)
- Thomas Jefferson Univ. v. Shalala, 512 U.S. 504 (deference to agency interpretation of its own regulation unless plainly erroneous)
- OPM v. Richmond, 496 U.S. 414 (Appropriations Clause precludes estoppel against government for unauthorized payments)
- Kennecott Utah Copper Corp. v. United States Dept. of Interior, 88 F.3d 1191 (preamble language can have binding legal effect when agency intends to bind)
- Sutton v. Providence St. Joseph Medical Center, 192 F.3d 826 (PRA provides a defense but no private cause of action)
- Shell Oil Co. v. EPA, 950 F.2d 741 (agency need not renotice changes that follow logically from proposed rule)
- Universal Camera Corp. v. NLRB, 340 U.S. 474 (substantial evidence standard in administrative review)
- Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402 (standards for arbitrary and capricious review)