557 F.Supp.3d 122
D.D.C.2021Background
- Forty-eight hospitals appealed reductions to their FY2020 DSH (Disproportionate Share Hospital) payments after HHS relied on audited Worksheet S-10 (FY2015) data to calculate each hospital’s Factor 3 (pro rata share of uncompensated care).
- HHS selected hospitals for Worksheet S-10 audits using a risk-based process and announced use of the audited FY2015 S-10 data in the FY2020 final rule issued after notice-and-comment rulemaking.
- Plaintiffs argued to the PRRB that the unpublished S-10 audit protocols were substantive rules that required notice-and-comment and that relying on them unlawfully reduced payments; they sought recalculation without the audit adjustments.
- The PRRB dismissed the administrative appeals for lack of jurisdiction under the Medicare statute’s preclusion provision, 42 U.S.C. § 1395ww(r)(3), which bars review of the Secretary’s estimates and selected periods used in computing the DSH factors.
- Plaintiffs sued in district court, renewing arguments that the audit protocol violated notice-and-comment rules and was ultra vires; the court considered cross-motions for summary judgment on whether the statutory preclusion bars their claims.
- The court granted HHS summary judgment, holding plaintiffs’ challenge to the S-10 audit protocol is inextricably intertwined with the Secretary’s Factor 3 estimates and thus precluded from administrative and judicial review; the ultra vires/Kyne exception did not overcome the bar.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1395ww(r)(3) precludes review of the S-10 audit protocol | The challenge is procedural (failure to follow notice-and-comment) and therefore falls outside the preclusion provision | The audit protocol is part of the methodology that produces Factor 3 estimates; challenges to methodology/data are inextricably intertwined with the estimates and barred | Precluded: challenge barred because methodology/audit is inextricably intertwined with the unreviewable estimates |
| Whether Allina (notice-and-comment requirement) permits judicial review here | Allina requires notice-and-comment for substantive payment policies, so plaintiffs can challenge the audit protocol despite §1395ww(r)(3) | Allina addresses substantive-rule requirements but does not negate the functional preclusion analysis; Allina does not allow circumventing the statutory bar | Not persuasive: Allina is irrelevant to overcoming the preclusion because the claim seeks recalculation of precluded estimates |
| Whether out-of-circuit decisions (e.g., Yale New Haven) create an exception for procedural notice-and-comment claims | Procedural notice-and-comment claims can be distinct from substantive estimate challenges and thus reviewable | Those decisions conflict with D.C. Circuit precedent applying a functional inextricability test; permitting such claims would eviscerate the bar | Court follows D.C. Circuit precedent: out-of-circuit cases unpersuasive; procedural label cannot avoid preclusion |
| Whether the Kyne/ultra vires exception allows review despite the statutory bar | The Secretary acted ultra vires by applying an undisclosed audit protocol, so §1395ww(r)(3) should not preclude review | The Kyne exception is narrow; the preclusion here is express as applied to methodology and plaintiffs cannot show the Secretary plainly exceeded statutory authority | Denied: Kyne exception inapplicable—preclusion is express and plaintiffs do not show extreme, plain ultra vires conduct |
Key Cases Cited
- Florida Health Scis. Ctr. v. Sec’y of Health & Human Servs., 830 F.3d 515 (D.C. Cir.) (holds §1395ww(r)(3) bars review of data choices underlying DSH estimates)
- DCH Regional Med. Ctr. v. Azar, 925 F.3d 503 (D.C. Cir.) (holds methodology challenges to uncompensated-care estimates are barred as inextricably intertwined)
- Allina Health Servs. v. Price, 863 F.3d 937 (D.C. Cir.) (establishes Medicare notice-and-comment rulemaking requirement for substantive payment rules)
- Azar v. Allina Health Servs., 139 S. Ct. 1804 (2019) (Supreme Court affirming Allina principle on notice-and-comment for substantive payment policies)
- Am. Clinical Lab. Ass’n v. Azar, 931 F.3d 1195 (D.C. Cir.) (distinguishes a different Medicare preclusion provision and permits review of certain data-collection rules there)
- Knapp Med. Ctr. v. Hargan, 875 F.3d 1125 (D.C. Cir.) (presumption of reviewability but endorses functional analysis re: preclusion)
- Amgen, Inc. v. Smith, 357 F.3d 103 (D.C. Cir.) (courts must determine whether challenged action is the sort shielded from review before merits inquiry)
- Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (standard for arbitrary-and-capricious review)
- Leedom v. Kyne, 358 U.S. 184 (1958) (narrow exception allowing review of ultra vires agency action)