Borgess Medical Center v. Sylvia Mathews Burwell
2016 U.S. App. LEXIS 21875
| D.C. Cir. | 2016Background
- Borgess Medical Center and Bronson Methodist Hospital (the Hospitals) participated in a consortium (KCMS) that ran offsite residency training; Hospitals agreed to provide annual lump-sum financing to KCMS while KCMS also received other revenues.
- Hospitals claimed Medicare reimbursement for resident time spent in KCMS nonhospital settings for fiscal years 2000–2004; Medicare reimbursement depends on hospitals incurring “all or substantially all” training costs and having a written agreement with nonhospital sites.
- Contractors initially approved some claims but reopened cost reports and ultimately denied reimbursement, citing 42 C.F.R. § 413.86(f)(4) (2000).
- PRRB reversed the contractors, but the CMS Administrator reversed the PRRB, finding Hospitals failed to (1) show they incurred all or substantially all costs and (2) satisfy the regulation’s written-agreement requirement.
- District court granted summary judgment for the Secretary; the D.C. Circuit affirmed based on failure to meet the written-agreement requirement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether hospitals satisfied the regulation's written-agreement requirement (42 C.F.R. § 413.86(f)(4)(ii)) | The Hospitals say their 1973 agreement, annual Affiliation Agreements, and KCMS financials, taken together, constitute the required written agreement showing they would finance residents’ salaries/fringes and compensate supervisory teaching | The Secretary says the documents lack the specific, program-level allocation and dollar/compensation details the regulation requires; reopening notice referenced the encompassing regulatory provision | Court held Hospitals failed to meet the written-agreement requirement; documents lacked required specificity and were insufficient |
| Whether Hospitals received adequate notice when contractor reopened cost reports to rely on the written-agreement requirement | Hospitals argued the reopening notices did not cite the written-agreement subpart specifically, so they lacked notice | Secretary argued the reopening cited the broader provision (§ 413.86(f)(4)) covering both written-agreement and cost-incurrence subparts, providing adequate notice | Court held notice was adequate because the contractor cited the encompassing regulation that included the written-agreement subpart |
| Whether conduct or financial records can substitute for a formal written agreement | Hospitals argued conduct/financial support and KCMS records show they paid required costs and fulfilled regulatory intent | Secretary argued the regulation mandates a written agreement; conduct or nonspecific records cannot satisfy the express regulatory text | Court held the regulation requires a written agreement; conduct/financial statements lacking specificity do not satisfy the rule |
| Whether failure on written-agreement issue requires resolving the "all or substantially all" costs question | Hospitals argued cost-sharing might meet the costs requirement, making written-agreement failure less dispositive | Secretary asserted both requirements are independent; written-agreement failure is sufficient to deny reimbursement | Court held failure to satisfy the written-agreement requirement alone warranted affirmance; it did not decide the "all or substantially all" issue |
Key Cases Cited
- Dist. Hosp. Partners, L.P. v. Burwell, 786 F.3d 46 (D.C. Cir. 2015) (standard of review for district court summary judgment and administrative action review)
- Thomas Jefferson Univ. v. Shalala, 512 U.S. 504 (1994) (deference to agency interpretation of its own regulation in complex programs)
- Covenant Med. Ctr., Inc. v. Sebelius, [citation="424 F. App'x 434"] (6th Cir. 2011) (lump-sum hospital payments to nonhospital found insufficient to satisfy written-agreement requirement)
- Medcenter One Health Sys. v. Sebelius, 635 F.3d 348 (8th Cir. 2011) (letters obligating hospitals to cover nonhospital deficits did not meet written-agreement specificity requirement)