Anna Jacques Hospital v. Sylvia Mathews Burwell
418 U.S. App. D.C. 291
| D.C. Cir. | 2015Background
- Medicare’s Prospective Payment System requires the Secretary to compute an annual wage index reflecting relative hospital wages by geographic area to adjust labor-related portions of inpatient payments.
- Historically the Secretary used MSAs, but in FY2005 she adopted OMB Core-Based Statistical Areas, which in three cases split merged multi-campus hospitals across new geographic areas.
- Multi-campus hospitals file a single, consolidated cost report under the main campus’s Medicare provider number when they meet regulatory integration criteria; Southcoast (three merged hospitals) filed one report under Tobey Hospital (Boston-Quincy).
- For FY2006–2007 the Secretary continued to use consolidated cost-report wage data tied to the main provider’s geographic area rather than attempting immediate campus-level wage allocation, citing data, auditing, and administrative burdens.
- A group of 41 providers challenged inclusion of Southcoast’s consolidated wages in the Boston-Quincy wage index for FY2006–2007; the district court granted summary judgment to the Secretary and the D.C. Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether statute requires excluding wages of multi-campus facilities located outside a wage area when computing that area’s wage index | The Secretary’s use of Southcoast’s consolidated wages made the Boston-Quincy wage index reflect wages outside that area, violating 42 U.S.C. § 1395ww(d)(3)(E)(i) | Statute is silent/ambiguous on campus-level treatment; Secretary reasonably may use unified hospital reporting tied to main provider | Court: Statute does not compel deconsolidation; Secretary’s approach reasonable under Chevron |
| Whether the Secretary’s interim decision (FY2006–2007) to decline campus-level allocation was arbitrary and capricious | Secretary offered no rational basis for including out-of-area wages and should have used campus-specific data or reclassified campuses | Secretary reasonably cited lack of available campus data, impracticability of timely audits, limited marginal benefit, and administrative reliance interests | Court: Not arbitrary or capricious; Secretary’s factual and policy justifications reasonable |
| Whether later adoption of campus-allocation in FY2008 shows the FY2006–2007 approach was unreasonable | The post hoc change proves the earlier policy waswrong/unreasonable | Agencies may proceed incrementally and revise policy after further study; change does not render prior interim choice unreasonable | Court: Change is permissible; agency explained reasons for revision and incrementalism |
| Whether wage-index calculation must mirror reimbursement determinations (i.e., must exclude wages if reimbursements use a different area) | Wage-index must be uniformly measured so wages used for index should align with payment-area reimbursements | Statute and rules allow different administrative treatments; reimbursement and index computations serve different purposes and use different procedures | Court: No statutory requirement linking index inclusion to reimbursement classification; differing treatment is permissible |
Key Cases Cited
- Thomas Jefferson Univ. v. Shalala, 512 U.S. 504 (1994) (Medicare is a complex, technical regulatory program)
- Methodist Hosp. of Sacramento v. Shalala, 38 F.3d 1225 (D.C. Cir. 1994) (Secretary may make reasonable approximations in wage-index calculations)
- Anna Jaques Hosp. v. Sebelius, 583 F.3d 1 (D.C. Cir. 2009) (discussion of wage-index data collection and cost-reporting rules)
- Southeast Ala. Med. Ctr. v. Sebelius, 572 F.3d 912 (D.C. Cir. 2009) (wage-index update and administrative discretion)
- Chevron U.S.A. Inc. v. Natural Resources Def. Council, Inc., 467 U.S. 837 (1984) (two-step framework for deference to agency statutory interpretation)
- Barnhart v. Thomas, 540 U.S. 20 (2003) (agencies need only provide reasonable explanations for policy choices)
- FCC v. Fox Television Stations, Inc., 556 U.S. 502 (2009) (requirements for reasoned agency change in policy)
- National Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005) (agency interpretations may change; initial interpretations are not immutable)
- Bellevue Hosp. Ctr. v. Leavitt, 443 F.3d 163 (2d Cir. 2006) (statutory ambiguity over defining "geographic area" delegates discretion to Secretary)