Kaiser Foundation Hospitals v. Sebelius
828 F. Supp. 2d 193
D.D.C.2011Background
- Hospitals receive Medicare GME reimbursements based in part on FTEs; 1997 Congress capped future FTE counts using the hospital's most recent pre-1997 cost report.
- Hospitals’ 1996 reports undercounted interns/residents; this undercount affects future FTE caps and thus ongoing reimbursements.
- GME FTE cap is tied to unweighted FTE counts; pre-1997 reports provide the basis for caps adopted after 1997.
- Intermediary and CMS determine caps and issue NPRs; cost reports can be reopened within a three-year window.
- The three-year reopening window has expired for the relevant years, so the intermediary denied any cap adjustments and hospitals appealed.
- CMS Administrator reversed the PRRB ruling, concluding that altering base-year figures would constitute reopening and violate the three-year limit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether adjusting GME FTE caps constitutes reopening. | Kaiser argues no reopening since no change to closed years' reimbursements are sought. | Secretary contends any cap adjustment requires reopening of the underlying reports. | No reopening; adjustments permissible for open years |
| Whether the reopening regulation is consistent with the statutory framework and case law. | HealthEast/Regions support adjusting base-year facts without reopening. | CMS interpretation should limit reopening to total reimbursement changes. | Plaintiffs prevail; Secretary's interpretation deemed inconsistent |
| What is the proper remedy if the court finds error in the Secretary’s reopening interpretation? | Remand or enforce stipulated FTE counts to avoid inefficiency. | Remand to agency for proper action. | Remand to HHS for proceedings consistent with the opinion |
Key Cases Cited
- HealthEast Bethesda Lutheran Hosp. and Rehabilitation Center v. Shalala, 164 F.3d 415 (8th Cir. 1998) (three-year reopening limit applies to total reimbursement, not predicate facts)
- Regions Hospital v. Shalala, 522 U.S. 448 (U.S. 1998) (base-year adjustments can affect open years without reopening closed years)