416 F.Supp.3d 11
D.D.C.2019Background
- Four long-term care hospitals (LTCHs) sought Medicare reimbursement for deductible/coinsurance “bad debts” that beneficiaries did not pay; CMS denied about $3 million in claims for failure to comply with its "must-bill" policy.
- CMS’s must-bill policy requires (1) billing the State Medicaid program and (2) obtaining a State Remittance Advice (RA) showing no state liability for the charges.
- The Providers were not enrolled in Medicaid for the fiscal years at issue; contractors denied their claims in April 2008 for lack of RAs.
- The PRRB (Board) split: it upheld denials for Louisiana and Texas providers (who could have enrolled) but reversed for North Carolina and Pennsylvania providers (which the Board found could not enroll).
- The CMS Administrator reviewed, reversed the Board as to NC/PA, applied the must-bill policy to all Providers, and denied reimbursement; Providers sued for review under the APA.
- The district court, applying the deferential arbitrary-and-capricious standard, granted summary judgment to the Secretary, rejecting the Providers’ challenges.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether denial violates Medicare’s prohibition on cost-shifting | Providers: denial forces shifting Medicare costs to non‑Medicare patients, violating statute | Secretary: statute allows denial when providers fail to furnish requested info; reasonable collection rules avoid improper reimbursement | Denial does not violate cost-shifting prohibition; Secretary may enforce collection-info requirements |
| Whether CMS effectively forces Medicaid participation | Providers: must-bill policy makes Medicaid participation mandatory for bad‑debt claims | Secretary: states must be able to process claims; requirement concerns documentation, not mandatory program enrollment | Policy does not unlawfully compel Medicaid participation |
| Whether application violates the Bad Debt Moratorium | Providers: must-bill (esp. RA requirement) is a post‑1987 change barred by moratorium | Secretary: policy longstanding; but court found Providers waived the issue by not raising it to the Administrator | Court declined to reach the merits — Providers waived the moratorium claim |
| Whether CMS abruptly changed practice / acted arbitrarily & capriciously | Providers: contractors formerly reimbursed without RAs; 2008 change was unexplained and retroactive | Secretary: no adequate record of any change; Administrator’s explanation was rational | Providers failed to show a change; decision not arbitrary or capricious on that basis |
| Whether Providers could comply or are similarly situated to exempt providers | Providers: states prevented them from obtaining RAs; CMS treated other provider types differently | Secretary: some provider categories (e.g., California CMHCs, IMDs) are statutory or factual exceptions; Providers differ | Court held CMS’s explanation adequate; Providers failed to show inability to comply or arbitrary disparate treatment |
Key Cases Cited
- Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (agency must offer reasoned explanation for policy changes)
- Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402 (courts give some deference to agency factfinding; limited, searching review)
- Grossmont Hosp. Corp. v. Burwell, 797 F.3d 1079 (D.C. Cir. 2015) (failure to preserve bad‑debt moratorium challenge to Administrator waives review)
- Mercy Gen. Hosp. v. Azar, 344 F. Supp. 3d 321 (D.D.C. 2018) (examining historical record to assess whether must‑bill RA requirement predated moratorium)
- Select Specialty Hosp.-Denver, Inc. v. Azar, 391 F. Supp. 3d 53 (D.D.C. 2019) (plaintiffs produced contemporaneous evidence showing a change in application of must‑bill policy)
- Maine Med. Ctr. v. Burwell, 775 F.3d 470 (1st Cir. 2015) (analyzing scope of must‑bill policy components)
- Dist. Hosp. Partners, L.P. v. Sebelius, 932 F. Supp. 2d 194 (D.D.C. 2013) (concluding challenged policy violated the moratorium where pre‑1987 evidence lacking)