466 F.Supp.3d 124
D.D.C.2020Background
- Four long-term care hospitals challenged CMS’s denial of Medicare reimbursement for dual-eligible “bad debts,” arguing CMS’s actions violated the Bad Debt Moratorium (OBRA 1987).
- The Providers raised the moratorium argument before the Provider Reimbursement Review Board (PRRB), which issued a mixed decision (some wins, some losses) and discussed the moratorium but ruled against hospitals that chose not to participate in state Medicaid programs.
- The CMS Administrator accepted review; the Providers submitted a seven-page written submission but did not re-raise the Bad Debt Moratorium issue to the Administrator.
- The Administrator reversed the Board’s partial favorable rulings; because the moratorium argument was not presented to her, she did not address it in her decision.
- On judicial review, this Court previously granted judgment to the Secretary, holding the Providers waived the moratorium argument by failing to present it to the Administrator; the Providers moved for reconsideration under Rules 59(e) and 60(b), which the Court denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Providers waived the Bad Debt Moratorium claim by not raising it to the CMS Administrator | Providers contend presenting the argument to the PRRB sufficed to preserve it for judicial review | Secretary contends the Providers waived it by failing to press the issue to the Administrator during final agency review | Court: Waiver; claim forfeited because Providers dropped the issue before the Administrator and so did not exhaust it for judicial review |
| Whether the CMS appeals process is adversarial (relevance to judicially imposed issue-exhaustion) | Providers argue Administrator review is informal/optional and thus exhaustion should not be imposed | Secretary: PRRB and Administrator review are adversarial — counsel, evidence, cross-examination — so exhaustion is appropriate | Court: Process is adversarial; Sims’s nonexhaustion rationale (Social Security) does not control; exhaustion is required |
| Whether the Administrator’s ability to review the entire Board record preserves issues not re-argued in submissions | Providers argue Administrator could (and did) consider the full administrative record, so moratorium need not be re-argued | Secretary argues Administrator did not address the moratorium because it was not raised to her and thus had no opportunity to resolve it | Court: Not preserved; reviewing the record is not a substitute for giving the agency a chance to address the issue during its final review |
| Whether reconsideration is warranted for clear error or manifest injustice under Rules 59(e)/60(b) | Providers contend the Court erred in holding the argument waived and that relief is needed to avoid manifest injustice | Secretary says no clear error; exhaustion/waiver bars the claim and relief is inappropriate | Court: Denied; no clear error and no manifest injustice—exhaustion principles and adversarial record support waiver finding |
Key Cases Cited
- Sims v. Apfel, 530 U.S. 103 (2000) (issue-exhaustion depends on whether agency proceedings are adversarial or inquisitorial)
- L.A. Tucker Truck Lines, Inc. v. United States, 344 U.S. 33 (1952) (courts generally require issues to be raised during agency proceedings to preserve them for review)
- Leidos v. Hellenic Republic, 881 F.3d 213 (D.C. Cir. 2018) (standard for Rule 59(e) reconsideration is narrow; extraordinary relief)
- Wallaesa v. Federal Aviation Admin., 824 F.3d 1071 (D.C. Cir. 2016) (issues not raised before an agency are waived and not considered on review)
- Environmentel, LLC v. F.C.C., 661 F.3d 80 (D.C. Cir. 2011) (exhaustion under agency rules requires raising issues before the full agency, not only at intermediate levels)
- Grossmont Hosp. Corp. v. Burwell, 797 F.3d 1079 (D.C. Cir. 2015) (provider’s failure to present an argument at all stages of review results in waiver)
- Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (agency action is arbitrary and capricious if not reasonably explained)