District Hospital Partners v. Sylvia Mathews Burwell
415 U.S. App. D.C. 203
| D.C. Cir. | 2015Background
- Medicare outlier payments exist to compensate costly cases under a prospective payment system.
- Secretary sets annual outlier thresholds (drg rate + fixed loss) and must reconcile payments after cost reports.
- HHS faced controversy over 2004–2006 thresholds; DHP hospitals sue under APA for arbitrary, capricious action.
- District Court denied some relief; court granted summary judgment for Secretary on most thresholds but remanded on 2004 for explanation.
- Outlier correction rule aimed to curb turbo-charging by using more recent cost-to-charge ratios and reconciliation.
- Court remands for better explanation of 2004 data and potential recalculation effects on 2005–2006 thresholds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the record should be supplemented | DHP seeks broader supplementation | Record supplementation was improper | Remand, not reversal, for limited supplementation |
| Whether best-available data was required | Secretary failed to use best data | No universal best-data obligation; data adequacy reviewed | APA challenge rejected except as to 2004 remand for explanation |
| Whether 2004 threshold was arbitrary and capricious | 2004 threshold inadequately explained and inconsistent | Methodology reasonable given data constraints | Remand for further explanation of 123 turbo-chargers vs. 50 identified data; 2004 threshold remanded |
| Whether 2005 threshold was arbitrary and capricious | Use of updated data and methodology biased | Data recent yet reasonable; burden to show defect | Affirmed (not arbitrary) for 2005 threshold |
| Whether 2006 threshold was arbitrary and capricious | Data used was inappropriate | Data from the outlier-rule period valid | Affirmed; 2006 threshold reasonable |
Key Cases Cited
- Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (U.S. 1983) (agency action must have rational basis; reasoned decisionmaking guidance)
- Kennecott Utah Copper Corp. v. DOI, 88 F.3d 1191 (D.C. Cir. 1996) (draft rules not binding; published rule need not repeal unissued draft)
- Bell Atlantic Tel. Cos. v. FCC, 79 F.3d 1195 (D.C. Cir. 1996) (explains agency explanation required when changing positions)
- County of Los Angeles v. Shalala, 192 F.3d 1005 (D.C. Cir. 1999) (requires considering more recent data; remand if inconsistent data not explained)
- Cape Cod Hosp. v. Sebelius, 630 F.3d 203 (D.C. Cir. 2011) (highly technical agency judgments defer but require reasoned explanation)