344 F. Supp. 3d 321
D.C. Cir.2018Background
- Plaintiffs: California acute-care hospitals sought Medicare reimbursement for unpaid deductibles/coinsurance (bad debts) for dual-eligible patients (Medicare + Medi‑Cal) for fiscal years 1995–2004.
- Plaintiffs sometimes stopped billing Medi‑Cal, submitted alternative documentation (including EDS reports) instead of State remittance advices; intermediaries disallowed claims for lack of remittance advices.
- Administrator affirmed the disallowance, applying the Secretary's "must‑bill" policy (providers must bill state Medicaid and produce State remittance advices) and denied hold‑harmless relief under JSM‑370.
- Plaintiffs challenged the Administrator's decision in district court, arguing the Secretary’s remittance‑advice requirement is a post‑1987 change violating the Bad Debt Moratorium and that their alternative documentation should suffice.
- Court reviewed the administrative record under the APA, found no substantial evidence that a remittance‑advice requirement existed prior to Aug. 1, 1987, concluded imposing it violated the Moratorium, and remanded the matter to the Secretary.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Secretary's "must‑bill" remittance‑advice requirement predated Aug. 1, 1987 (Moratorium) | Must‑bill remittance‑advice requirement did not exist pre‑1987; imposing it now violates the Bad Debt Moratorium | Must‑bill policy (billing + State determination/remittance advice) is longstanding and predates 1987; courts should defer to agency interpretation | Court held: No substantial evidence remittance‑advice requirement existed pre‑1987; applying it now violates Moratorium; Administrator's finding unsupported and vacated. |
| Whether PRM §§ 310, 312, 322 independently or together require billing the State and obtaining a remittance advice | PRM language does not compel a remittance‑advice requirement; §312 permits alternative methods and does not require billing the State | PRM sections read together establish the must‑bill policy (including remittance advices) | Held: PRM §§ 310/312/322 do not on their face impose a remittance‑advice requirement; reading them together does not create one. |
| Whether pre‑1987 Board decisions and other evidence show a pre‑Moratorium remittance‑advice practice | Pre‑1987 Board decisions cited do not mention remittance advices and do not support a remittance‑advice requirement | Administrative decisions and later agency writings show consistent application of must‑bill policy; post‑1987 evidence reflects pre‑1987 practice | Held: Pre‑1987 Board decisions do not establish a remittance‑advice requirement; post‑Moratorium decisions/statements cannot prove pre‑1987 policy. |
| Whether plaintiffs' alternative documentation (EDS reports) must be rejected as non‑equivalent to remittance advices | Plaintiffs contend alternatives should be acceptable under PRM §1102.3L and other guidance; EDS reports identify State responsibility | Secretary concluded EDS reports are not contemporaneous State documents and are not State remittance advices | Court did not decide merits of EDS reports because remittance‑advice requirement itself was invalid for pre‑Moratorium claims; remanded for further proceedings. |
Key Cases Cited
- Foothill Hosp. - Morris L. Johnston Mem'l v. Leavitt, 558 F. Supp. 2d 1 (D.D.C. 2008) (discussing congressional Bad Debt Moratorium history and agency practice)
- Mountain States Health All. v. Burwell, 128 F. Supp. 3d 195 (D.D.C. 2015) (analyzing Moratorium constraints on agency reinterpretation of pre‑1987 policy)
- Cmty. Hosp. of the Monterey Peninsula v. Thompson, 323 F.3d 782 (9th Cir. 2003) (addressing billing/state‑determination aspects of must‑bill policy)
- Grossmont Hosp. Corp. v. Sebelius, 797 F.3d 1 (D.C. Cir.) (agency deference to must‑bill/state‑determination interpretation)
- Palisades Gen. Hosp., Inc. v. Leavitt, 426 F.3d 400 (D.C. Cir. 2005) (remand required when agency made legal error)
- Dist. Hosp. Partners, L.P. v. Sebelius, 932 F. Supp. 2d 194 (D.D.C. 2013) (substantial‑evidence review applied to pre‑Moratorium policy questions)
(NOTE: Court remanded to Secretary for further proceedings consistent with opinion.)