389 F. Supp. 3d 32
D.C. Cir.2019Background
- Florida obtained a §1115 Medicaid demonstration waiver (2006) creating a federally‑matched $1 billion Low Income Pool (LIP) to reimburse hospitals for uncompensated inpatient care to uninsured and underinsured patients.
- CMS approved Special Terms and Conditions and a Reimbursement and Funding Methodology requiring hospitals to document patient‑level LIP claims and submit Milestone Reports; LIP payments were lump‑sum distributions rather than individualized benefit checks.
- Plaintiffs (Florida hospitals) included inpatient days for LIP‑reimbursed uninsured/underinsured patients on Medicare cost reports; fiscal intermediary excluded those days.
- The PRRB (Board) affirmed the exclusion, reasoning the waiver did not identify individual beneficiaries or specific benefit packages and LIP payments were undifferentiated hospital reimbursements.
- The CMS Administrator denied review; hospitals sued under the APA. The district court reviewed whether 42 C.F.R. §412.106(b)(4) required inclusion of these patient days in the Medicaid fraction of the Medicare DSH calculation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether patient days for uninsured/underinsured inpatients reimbursed by Florida's LIP count as "eligible for Medicaid" under 42 C.F.R. §412.106(b)(4) | LIP patients received inpatient services “under” an approved §1115 waiver and thus are "deemed eligible" for Medicaid for DSH counting; documentation exists for individual patient eligibility | The waiver lacks individualized enrollment/benefit‑package language; LIP makes gross hospital payments not payments to specific patients, so days are charity care and not Medicaid‑eligible | Court: Regulation unambiguous—patient days count if patients were eligible for inpatient services under an approved §1115 waiver; LIP patient days must be included; gov’t interpretation rejected |
| Whether the Board permissibly required individualized enrollment or specific benefit‑package language in the waiver | Plaintiffs: regulation looks to whether patients were capable of receiving inpatient services under the waiver, not to waiver text or enrollment formalities | Gov't/Board: inclusion requires explicit eligibility criteria or enrollment mechanisms in waiver documents | Court: Regulation contains no enrollment requirement; evidence shows hospitals made individuated eligibility determinations and records were auditable; Board's enrollment requirement is unsupported |
| Whether lump‑sum hospital payments (versus payments on behalf of named patients) preclude counting patient days | Plaintiffs: regulation does not distinguish payments to hospitals from payments to patients; it focuses on whether inpatient services were provided under an approved waiver | Gov't: gross payments to hospitals for an undifferentiated population cannot substitute for patient‑level benefits | Court: Regulation does not condition inclusion on payment form; documentation and Milestone Reports show LIP funded inpatient services and patient‑level records exist |
| Whether precedent on charity care controls here | Gov't: charity‑care cases bar counting uncompensated care days | Plaintiffs: those cases addressed state‑plan or charity care outside §1115 waivers; §1115 waiver authority changes analysis | Court: Charity‑care precedents are distinguishable; where uncompensated care is authorized and funded by a §1115 waiver, those patient days may be included (consistent with other circuits/courts) |
Key Cases Cited
- HealthAlliance Hospitals, Inc. v. Azar, 346 F. Supp. 3d 43 (D.D.C.) (interpreting §412.106(b)(4) to require counting days where waiver made inpatient services available)
- Forrest Gen. Hosp. v. Azar, 926 F.3d 221 (5th Cir.) (holding §1115‑authorized uncompensated inpatient care days must be included in DSH numerator)
- Adena Regional Med. Ctr. v. Leavitt, 527 F.3d 176 (D.C. Cir.) (distinguishing charity care not provided under a state Medicaid plan)
- Azar v. Allina Health Servs., 139 S. Ct. 1804 (U.S.) (discussing deference and Medicare reimbursement interpretation)