BANNER HEALTH v. Sebelius
797 F. Supp. 2d 97
D.D.C.2011Background
- Plaintiffs are 29 hospital operators challenging Medicare outlier payments under the Prospective Payment System.
- The Secretary determines a fixed loss threshold and DRG-based payments; outliers supplement payments above this threshold.
- Statutory framework targets five-to-six percent total outlier payments of DRG payments per year.
- Plaintiffs allege vulnerabilities in the Outlier Regulations (1988-2003) and in the Fixed Loss Threshold Regulations (1998-2006).
- Plaintiffs seek review under the Medicare Act and Mandamus, with PRRB expedited review; court grants-in-part and denies-in-part relief.
- The court requires administrative record development and adopts a plan for phased proceedings; Mandamus claims are dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to challenge agency actions | Plaintiffs challenge four categories affecting payments | Standing contested for some claims | Standing exists for challenged Medicare Act claims |
| Difficulty of reviewing implementation/enforcement claims | Allegations target overall implementation/enforcement | APA review limited to discrete actions | Claims unconnected to discrete action dismissed; merits await record |
| Mandamus claim viability | Secretary has non-discretionary duty to share proceeds | No clear duty under statute; actions discretionary | Mandamus claim dismissed for lack of clear duty |
| Proceedings and record development | Immediate merits briefing feasible | Record insufficient to decide merits | Administrative record required; plan for phased proceedings ordered |
Key Cases Cited
- Cnty. of Los Angeles v. Shalala, 192 F.3d 1005 (D.C. Cir. 1999) (outlier framework and DRG methodology background)
- Cape Cod Hosp. v. Sebelius, 630 F.3d 203 (D.C. Cir. 2011) (standardized amount; wage index; DRG weighting explained)
- Dist. Hosp. Partners, L.P. v. Sebelius, 794 F. Supp. 2d 162 (D.D.C. 2011) (summary judgment on outlier issues without full record)
- Sierra Club v. Envtl. Prot. Agency, 292 F.3d 895 (D.C. Cir. 2002) (standing analysis at pleading stage; injury-in-fact, causation, redressability)
- In re Cheney, 406 F.3d 723 (D.C. Cir. 2005) (mandamus jurisdiction requires a clear and compelling duty)