Owensboro Health, Inc. v. United States Department of Health & Human Services
832 F.3d 615
| 6th Cir. | 2016Background
- Medicare DSH adjustment increases Medicare payments to hospitals that serve a disproportionate share of low-income patients; one input is the "Medicaid fraction" counting patient days for those "eligible for medical assistance under a State plan approved under subchapter XIX."
- Kentucky operates a state program (KHCP) providing coverage to low-income individuals ineligible for Medicaid; KHCP payments are distributed by the state as part of its Medicaid-related programs.
- Hospitals included KHCP patient days in their Medicare DSH proxy calculations for various cost-reporting years; fiscal intermediaries and the PRRB rejected those inclusions, and the Administrator affirmed.
- Two federal district courts (Eastern and Western Districts of Kentucky) granted summary judgment to the Secretary, holding the Medicare DSH numerator excludes KHCP days as a matter of law under Chevron Step One.
- The Sixth Circuit consolidated the appeals and affirmed: it concluded the statutory phrase "eligible for medical assistance under a State plan approved under subchapter XIX" is unambiguously synonymous with "eligible for Medicaid," and KHCP patients are not Medicaid-eligible.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Medicare DSH "Medicaid proxy" numerator includes KHCP patient days | KHCP days should count because Kentucky awards additional Medicaid-related funds tied to KHCP treatment days and the proxy measures days hospitals treat low-income patients under an approved state plan | The statutory phrase refers specifically to Medicaid eligibility (medical assistance under subchapter XIX); KHCP patients are statutory non‑Medicaid beneficiaries and thus excluded | The court held the phrase is unambiguous: KHCP days are excluded (affirming summary judgment for Secretary) |
| Whether earlier agency/PRRB practice or the Pickle method compels inclusion of KHCP days | Hospitals argued prior PRRB decisions and that the Pickle method’s exclusion of Medicaid DSH revenue implies the proxy must include the corresponding patient days | Secretary argued Pickle and proxy are distinct; legislative structure and definitions show proxy counts only Medicaid-eligible days and prior PRRB decisions were not final agency positions | Court rejected these arguments: Pickle and proxy differ and legislative text/history support exclusion; PRRB decisions relied upon were reversed and not final agency positions |
| Whether Secretary’s exclusion violates Equal Protection or is arbitrary and capricious | If agency had discretion, excluding KHCP days is irrational and denies equal treatment to functionally similar populations (e.g., §1115 waiver beneficiaries) | Because the statute is unambiguous, Secretary had no discretion; equal protection/APA claims fail as they presuppose ambiguity and agency discretion | Court declined to reach merits of constitutional/APA claims, holding statute is unambiguous so agency lacked discretion and plaintiffs’ challenges fail |
Key Cases Cited
- Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (establishing two-step test for reviewing agency statutory interpretation)
- Univ. of Wash. Med. Ctr. v. Sebelius, 634 F.3d 1029 (9th Cir. 2011) (interpreting Medicaid proxy as limited to Medicaid-eligible patients)
- Cooper Univ. Hosp. v. Sebelius, 636 F.3d 44 (3d Cir. 2010) (affirming that "eligible for medical assistance" refers to Medicaid eligibility)
- Adena Reg'l Med. Ctr. v. Leavitt, 527 F.3d 176 (D.C. Cir. 2008) (treating Medicaid-proxy language as referring to Medicaid-eligible patients)
- Jewish Hosp., Inc. v. Secretary of Health & Human Servs., 19 F.3d 270 (6th Cir. 1994) (discussing ‘‘eligible for medical assistance’’ and agency interpretations)
- Metropolitan Hosp. v. U.S. Dep't of Health & Human Servs., 712 F.3d 248 (6th Cir. 2013) (addressing related DSH statutory interpretations and agency deference)