Lawrence & Memorial Hospital v. Sebelius
986 F. Supp. 2d 124
D. Conn.2013Background
- Plaintiff Lawrence & Memorial Hospital filed a complaint seeking declaratory and injunctive relief against HHS, CMS, and the MGCRB challenging the MGCRB regulatory scheme governing wage-index reclassifications as violative of the Medicare Act and APA.
- Plaintiff moved for a preliminary injunction to stay MGCRB action on its MGCRB reclassification application pending merits briefing.
- Plaintiff had acquired Section 401 rural redesignation and RRC status in 2013, effective July 3, 2013, with rural status beginning October 1, 2013 and potential 340B program savings starting 2014.
- Plaintiff sought reclassification from the Norwich-New London CBSA to Nassau-Suffolk CBSA, with MGCRB decision due by March 3, 2014; Defendants-regulation 42 C.F.R. § 412.230(a)(5)(iii) bars such MGCRB reclassification for hospitals redesignated under Section 401.
- Defendants argued lack of subject-matter jurisdiction and lack of irreparable harm or likelihood of success; the court found jurisdiction but denied the injunction.
- The Court analyzes (i) subject-matter jurisdiction, (ii) irreparable harm, and (iii) likelihood of success on the merits under Chevron steps governing agency interpretations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the MGCRB decision is reviewable and Court has jurisdiction | Plaintiff challenges the MGCRB rule, not the denial of its specific application. | Medicare Act precludes review of MGCRB determinations; only challenge to guidelines is possible. | Court has jurisdiction; challenges to the MGCRB's governing rules are reviewable. |
| Whether irreparable harm supports a preliminary injunction | Denial of reclassification would cause irreparable, non-compensable monetary harm (~$3M/year). | Harm is avoidable by canceling rural status; self-inflicted harm defeats irreparable harm. | Plaintiff demonstrated irreparable harm; however, other factors led to denial given likelihood of success. |
| Chevron Step One: does Section 401 clearly require treating redesignated hospitals as rural for MGCRB reclassification? | Section 401 mandates treating redesignated hospitals as rural for all purposes, including MGCRB. | Section 401 is silent on MGCRB; 412.230 is a permissible interpretation within Secretary's discretion. | Section 401 is silent on MGCRB; regulation not shown to violate the statute at Chevron step one. |
| Chevron Step Two: is 42 C.F.R. § 412.230 a permissible construction of Section 401? | Secretary's interpretation to exclude redesignated hospitals is arbitrary and capricious. | Secretary's rationale to avoid hospitals being treated as rural for some purposes is reasonable and not arbitrary. | Agency interpretation is not arbitrary or capricious; more so, it serves consistency and budgetary integrity. |
Key Cases Cited
- ParkView Med. Assocs. v. Shalala, 158 F.3d 146 (D.C. Cir. 1998) (judicial review of guidelines allowed where challenge targets the process, not the denial)
- Universal Health Servs. v. Sullivan, 770 F. Supp. 704 (D.D.C. 1991) (preclusion of review of individual determinations does not bar review of governing guidelines)
- Bowen v. Michigan Acad. of Family Physicians, 476 U.S. 667 (U.S. 1986) (agency interpretation of statute may be reviewed if not precluded by statute)
- Skagit Cnty. Pub. Hosp. Dist. No. 2 v. Shalala, 80 F.3d 379 (9th Cir. 1996) (challenge to procedures may be moot if directly seeking to reverse MGCRB decision)
- Palisades Gen. Hosp., Inc. v. Leavitt, 426 F.3d 400 (D.C. Cir. 2005) (challenge intertwined with MGCRB denial may be barred; focus on general rules)
- Bellevue Hosp. Ctr. v. Leavitt, 448 F.3d 163 (2d Cir. 2006) (agency discretion under statute respected when interpretive construction fits statutory language)