108 F.4th 882
D.C. Cir.2024Background
- The Department of Health and Human Services (HHS) administers Medicare reimbursements to hospitals, based on detailed statutory formulas in the Medicare Act that include a wage index accounting for regional wage differences.
- In 2019, HHS adopted a policy adjusting the wage index, inflating rates for hospitals in the lowest wage quartile and reducing rates for others, resulting in a $245 million redistribution.
- A coalition of hospitals challenged this redistribution policy, arguing HHS exceeded its statutory authority under the Medicare Act’s wage-index provision and adjustment provision.
- The district court ruled in favor of the hospitals, finding HHS lacked authority for the policy, but remanded without vacating the rule, ordering recalculation of reimbursements.
- HHS appealed on the merits, and the hospitals cross-appealed on the remedy, specifically arguing for vacatur and an award of interest on underpayments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Authority for Wage-Index Redistribution | HHS exceeded authority by departing from Congress’s precise wage-index formula | Adjustments and wage-index provisions authorize HHS to adjust as deemed appropriate | HHS lacked authority for this redistribution under the statute |
| Use of Adjustments Provision | Adjustments provision is limited to minor/moderate changes, not sweeping redistributions | Adjustments provision authorizes broad discretion for necessary changes | The provision does not allow the substantial departure or override of explicit statutory formula |
| Remedy: Vacatur vs Remand | Unlawful agency actions must be vacated, not just remanded | Remand without vacatur is appropriate if the error is curable | Action must be vacated since the lack of authority is incurable |
| Award of Interest | Statute mandates courts to award interest to prevailing parties regardless of calculation timing | Interest award is premature until exact back-payments are determined | Court must order interest award upon final calculation of reimbursements |
Key Cases Cited
- Becerra v. Empire Health Foundation, 597 U.S. 424 (Supreme Court explained Medicare reimbursement formulas must be carefully applied)
- Kingdomware Technologies, Inc. v. United States, 579 U.S. 162 (statutory use of "shall" creates mandatory duties)
- Biden v. Nebraska, 143 S. Ct. 2355 (expansive agency modification authority limited by statutory specificity)
- American Hospital Association v. Becerra, 596 U.S. 724 (rejecting broad HHS adjustment authority that bypasses specific statutory text)
- MCI Telecommunications Corp. v. AT&T, 512 U.S. 218 (interpreting statutory terms like "modify" or "adjust" as permitting only moderate changes)
- Allina Health Services v. Sebelius, 746 F.3d 1102 (normally vacatur is the remedy for unlawful agency action)
- Atrium Medical Center v. HHS, 766 F.3d 560 (wage index must be uniformly determined and applied under Medicare)