DISTRICT HOSP. PARTNERS, LP v. Sebelius
794 F. Supp. 2d 162
D.D.C.2011Background
- Plaintiffs operate 186 Medicare-participating hospitals and challenge HHS's outlier payment methodology as arbitrary and capricious under the APA.
- Hospitals received outlier payments in 2004–2006 and argue larger sums were due if thresholds were estimated more accurately.
- Board review was sought for the Secretary's methodology; the Board certified issues related to elements used to project outlier thresholds.
- Plaintiffs allege the Secretary failed to account for declining cost-to-charge ratios, preferred cost methodology, mid-year adjustments, and reconciliation effects.
- The Secretary moved to dismiss for lack of subject-matter jurisdiction and for failure to state a claim, asserting exhaustion and other defects.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Exhaustion and board review scope | Mid-year adjustments and related issues fall within Board review. | Mid-year adjustments not within the certified issues; not exhausted. | Conclusion: mid-year adjustments claims are unexhausted and dismissed. |
| Authority of the Board to decide issues | Board had authority to decide law/regulations relevant to outlier thresholds. | Board limited to issues relevant to projected threshold methodology. | Board properly limited review to outlier-threshold elements; other claims unexhausted. |
| Judicial review under APA after exhaustion | APA review should consider Secretary's methodology as implemented. | APA review deferential; relies on full record and agency reasoning. | Court will review, but only to the extent exhaustion permits; mid-year claim dismissed. |
| Inclusion of Federal Register and administrative record in 12(b)(6) analysis | Federal Register and full record show methodology flaws; need record review. | Register alone insufficient; full administrative record needed for APA review. | Court may consider Federal Register but requires full administrative record for merits; dismisses some claims for lack of exhaustion. |
| Mathematical errors claim | Secretary made mathematical errors in final thresholds. | Not alleged in Complaint; outside scope; not yet amended. | Denied: claim not properly pleaded; dismissed for lack of jurisdiction. |
Key Cases Cited
- Am. Bankers Ass'n v. Nat'l Credit Union Admin., 271 F.3d 262 (D.C. Cir. 2001) (role of agency record in facial versus applied challenges)
- Swedish American Hosp. v. Sebelius, 691 F.Supp.2d 80 (D.D.C. 2010) (need for administrative record in APA challenges to agency adjudication)
- Cnty. of Los Angeles v. Shalala, 192 F.3d 1005 (D.C. Cir. 1999) (outlier threshold methodology and DRG-based payment context)
- American Bioscience, Inc. v. Thompson, 243 F.3d 579 (D.C. Cir. 2001) (administrative record and facial challenge distinctions in agency actions)