Allina Health Services v. Thomas Price
2017 U.S. App. LEXIS 13347
| D.C. Cir. | 2017Background
- Medicare Part A pays hospitals directly; Part C provides government-subsidized private plans. HHS publishes a nationwide “Medicare fraction” used by fiscal intermediaries to calculate disproportionate share hospital (DSH) adjustments.
- The Medicare fraction includes patient days "entitled to benefits under Part A." Whether Part C enrollees are included has been contested; inclusion lowers DSH payments to many hospitals.
- HHS treated Part C days as Part A days in a 2004 rule, but this Court vacated that rule (Allina I). HHS later issued a 2013 rule adopting the interpretation prospectively for FY2014 and later.
- In June 2014 HHS published Medicare fractions for FY2012 that included Part C days (affecting FY2012 reimbursements). Hospitals sought Board review; the Provider Reimbursement Review Board certified it lacked authority, allowing expedited district-court review.
- District Court held HHS’s FY2012 publication was an APA "interpretive rule," thus exempt from notice-and-comment, and granted summary judgment to HHS. D.C. Circuit reversed, holding that the Medicare Act required notice-and-comment and HHS failed to comply.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether district court may review Board's no-authority certification | Board's no-authority determination is final and confers immediate district-court jurisdiction for providers | HHS: the Board's no-authority determination is reviewable and the Board should decide first | Held: District court review is not barred; statute grants providers expedited judicial review when Board certifies lack of authority, and the Board was correct here to certify no authority |
| Whether HHS’s inclusion of Part C days in FY2012 Medicare fractions is a "rule, requirement, or statement of policy" under 42 U.S.C. § 1395hh(a)(2) | Inclusion is a requirement applied nationwide that changes calculation rules and governs payment — thus falls within § 1395hh(a)(2) | HHS: the fractions were case/year-specific and not a rule requiring notice and comment | Held: Inclusion is a requirement establishing a substantive legal standard governing payment; §1395hh(a)(2) applies |
| Whether the Medicare Act incorporates APA’s interpretive-rule exception to notice-and-comment | Hospitals: Medicare Act does not incorporate APA’s interpretive-rule exemption; Medicare Act independently requires notice-and-comment | HHS: APA exceptions (including interpretive-rule exemption) apply to Medicare rulemaking | Held: Medicare Act does not incorporate APA interpretive-rule exception; Congress omitted that exception and incorporated only certain APA exceptions elsewhere (e.g., good cause) |
| Whether §1395hh(a)(4) — logical-outgrowth protection — bars HHS from reimposing the vacated 2004 interpretation without new notice-and-comment | Hospitals: §1395hh(a)(4) requires further notice-and-comment where a final regulation includes a provision not a logical outgrowth of a proposed rule; applies because 2004 rule was vacated for not being a logical outgrowth | HHS: cannot avoid by treating action as adjudication; if interpretive/adjudicative, exception may apply | Held: §1395hh(a)(4) applies; because the 2004 rule was vacated as not a logical outgrowth, HHS could not "take effect" for FY2012 without fresh notice-and-comment |
Key Cases Cited
- Allina Health Servs. v. Sebelius, 746 F.3d 1102 (D.C. Cir.) (vacating 2004 rule for not being a logical outgrowth of proposed rule)
- Northeast Hosp. Corp. v. Sebelius, 657 F.3d 1 (D.C. Cir. 2011) (discussing HHS’s historical treatment of Part C days in Medicare fractions)
- Bethesda Hosp. Ass’n v. Bowen, 485 U.S. 399 (U.S. 1988) (PRRB lacks authority to declare statutes or regulations invalid)
- Monmouth Med. Ctr. v. Thompson, 257 F.3d 807 (D.C. Cir. 2001) (noted but did not decide whether Medicare Act incorporates APA interpretive-rule exception)
- Southeast Ala. Med. Ctr. v. Sebelius, 572 F.3d 912 (D.C. Cir. 2009) (standard of review for summary judgment in similar Medicare challenges)
- Providence Yakima Med. Ctr. v. Sebelius, 611 F.3d 1181 (9th Cir. 2010) (contrasting precedent regarding reviewability of Board no-authority determinations)