33 F. Supp. 3d 47
D.D.C.2014Background
- Forty-one hospitals sue HHS over the Boston-Quincy CBSA wage index for FY2006 and FY2007, claiming St. Luke’s and Charlton data outside the CBSA were included.
- Wage index adjusts DRG payments to reflect geographic-area wage differences under 42 U.S.C. § 1395ww(d)(3)(E)(i); statute does not unambiguously specify data use.
- From 2006, HHS treated hospital groups as single entities and allocated their wage costs to the CBSA where the facility with the principal provider number is located.
- Tobey Hospital, St. Luke’s Hospital, and Charlton Hospital formed Southcoast Hospital Group; Tobey remained in Boston-Quincy CBSA while St. Luke’s/Charlton were in Providence-New Bedford-Falls River CBSA; data included in Boston-Quincy wage index for 2006-07.
- In 2008, HHS changed policy to allocate hospital-group costs by campus location (per campus) with prospective allocation; the change was not retroactive to 2006-07.
- Court applies Chevron and APA standards; holds the agency’s 2006-07 inclusion of St. Luke’s and Charlton costs reasonable; denies plaintiffs’ summary-judgment motion and grants defendant’s cross-motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the statute unambiguous about data for the wage index? | Jaques argues the statute clearly fixes the data to the area. | Segregating the precise data is not required by the statute. | Statute silent/ambiguous; agency deference applies. |
| Was including St. Luke’s and Charlton in Boston-Quincy 2006-07 wage index reasonable? | Inclusion outside the CBSA undermines uniform area wage levels. | Data treatment was consistent and reasonable given group-wage data constraints. | Reasonable interpretation; not arbitrary or capricious. |
| Should the 2008 policy change be retroactive to 2006-07? | Policy should apply to prior years. | Policy changes prospectively; retroactivity not warranted. | Agency decision reasonable; no retroactive application to 2006-07. |
Key Cases Cited
- Bellevue Hosp. Ctr. v. Leavitt, 443 F.3d 163 (2d Cir. 2006) (geographic-area term is ambiguous; agency discretion to define areas)
- St. Michael’s Med. Ctr. v. Sebelius, 648 F. Supp. 2d 18 (D.N.J. 2009) (reclassification data and wage-index treatment for urban areas at issue)
- Methodist Hosp. of Sacramento v. Shalala, 38 F.3d 1225 (9th Cir. 1994) (statutory framework for adjusting wage-based DRG payments; index reflects best approximation)
- Anna Jaques Hosp. v. Sebelius, 583 F.3d 1 (D.C. Cir. 2009) (statutory silence on data handling; agency discretion upheld)
- Robert Wood Johnson Univ. Hosp. v. Thompson, 297 F.3d 273 (3d Cir. 2002) (wage-index data testing and geographic-area considerations in Medicare)