Saint Francis Medical Center v. Alex M. Azar II
894 F.3d 290
D.C. Cir.2018Background
- Medicare inpatient prospective payment rates incorporate "standardized amounts" calculated in 1983 from 1981 cost-report data; those historical factual inputs ("predicate facts") continue to affect reimbursements.
- Hospitals may challenge fiscal-intermediary (contractor) determinations either by (a) requesting a reopening of a prior determination (42 C.F.R. §405.1885) or (b) filing an appeal to the Provider Reimbursement Review Board (PRRB) within 180 days (42 U.S.C. §1395oo; 42 C.F.R. §405.1835).
- Reopenings are discretionary, decided by the same entity that made the original determination, and subject to a three-year limitations period (as amended in 2013 to treat each "specific finding on a matter at issue" separately and to define that term to include predicate facts).
- After this court's Kaiser decision allowed predicate-fact challenges in PRRB appeals, HHS amended the reopening regulation in 2013 to treat predicate facts as subject to the three-year reopening rule.
- 277 hospitals sought to challenge alleged errors in the 1981 data via PRRB appeals filed as early as 2005; the PRRB dismissed those challenges based on the 2013 amendments applied to pending appeals; the district court affirmed.
- The D.C. Circuit reversed as to whether §405.1885 governs PRRB appeals, holding the reopening regulation applies only to reopenings by the entity that made the decision and does not bar predicate-fact challenges in PRRB appeals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 42 C.F.R. §405.1885 (reopening rule) applies to appeals to the PRRB | Hospitals: §405.1885 governs only reopenings by the decisionmaker, not appeals to the PRRB; PRRB appeals are governed by separate statute/regulations | Secretary: 2013 amendments cover both reopenings and PRRB appeals, barring late predicate-fact challenges | Held: §405.1885 does not apply to PRRB appeals; reopenings and appeals are distinct and governed by different rules |
| Whether 2013 amendments lawfully bar predicate-fact challenges generally | Hospitals: such a bar is arbitrary and capricious because it perpetuates known errors in inputs used for ongoing reimbursements | Secretary: amendments promote finality and uniform limits on revisiting older factual determinations | Court: did not decide; remanded after ruling reopening regulation inapplicable to PRRB appeals (concurring judge found the rule arbitrary and capricious) |
| Whether applying the 2013 amendments to appeals pending on effective date is impermissibly retroactive | Hospitals: retroactive application is unlawful | Secretary: amendments validly apply to pending proceedings | Court: did not reach retroactivity question because reopening rule not applicable to PRRB appeals |
| Whether §1395oo(g) (limits on review) bars predicate-fact challenges in PRRB appeals | Hospitals: §1395oo(g) enumerates only two non-reviewable findings and does not bar predicate facts | Secretary: invoked broader interpretive arguments tied to reopening regulation | Held: §1395oo(g) does not support barring predicate-fact challenges; court need not fully decide statutory scope after resolving regulatory question |
Key Cases Cited
- Methodist Hosp. of Sacramento v. Shalala, 38 F.3d 1225 (D.C. Cir.) (background on Medicare prospective payment history)
- Sebelius v. Auburn Reg'l Med. Ctr., 568 U.S. 145 (2013) (administrative structure for Medicare reimbursements)
- Kaiser Foundation Hospitals v. Sebelius, 708 F.3d 226 (D.C. Cir. 2013) (held reopenings could allow predicate-fact changes affecting open years)
- Wyeth v. Levine, 555 U.S. 555 (2009) (preamble does not have force of law when regulation text is clear)
- Nat. Res. Def. Council v. EPA, 559 F.3d 561 (D.C. Cir. 2009) (agency preamble cannot override clear regulation)
- Auer v. Robbins, 519 U.S. 452 (1997) (deference to agency interpretations of its regulations; limits where interpretation is plainly erroneous)
- Bowles v. Seminole Rock & Sand Co., 325 U.S. 410 (1945) (deference to agency interpretation of its regulations)
- AT&T Corp. v. FCC, 841 F.3d 1047 (D.C. Cir. 2016) (declining Auer deference when agency lacks reasoned explanation)
- Regions Hospital v. Shalala, 522 U.S. 448 (1998) (criticizing acceptance of perpetuating misclassified costs into future reimbursements)