Select Specialty Hospital - Denver, Inc. v. Sebelius, Civil Action No. 2010-1356

Background:

Plaintiffs are long-term care hospitals (LTCHs) that sought Medicare reimbursement (2005–2010) for unpaid coinsurance and deductibles of dual-eligible patients ("bad debts").
In 2007 CMS began enforcing a "must-bill" policy and remittance-advice (RA) requirement, which required providers first to bill state Medicaid and obtain an RA before seeking Medicare bad-debt reimbursement. Many LTCHs were not enrolled in state Medicaid or were barred from enrolling, so they could not obtain RAs.
This Court (Select Specialty I) held in 2019 that CMS unlawfully imposed the must-bill/RA requirements on non–Medicaid-participating LTCHs without notice-and-comment rulemaking and remanded for reconsideration of reimbursement absent those requirements.
On remand CMS paid most plaintiffs but withheld about $1.99 million (plus interest) for eight LTCHs in five states, reducing reimbursements based on CMS’s interpretation of state Medicaid plans that purportedly made the states responsible for certain cost-sharing.
The current dispute: whether CMS may reduce or withhold Medicare bad-debt reimbursements by accounting for state Medicaid liability (per state plans) for (a) claims that arose before the providers enrolled in Medicaid and (b) claims that arose after enrollment.

Issues:

Issue	Plaintiff's Argument	Defendant's Argument	Held
May CMS reduce Medicare bad-debt reimbursement based on state Medicaid liability for claims incurred while the provider was NOT enrolled in Medicaid?	No — reductions reimpose the must-bill/RA precondition that Select Specialty I invalidated for non-participants.	Yes — CMS may calculate and deduct amounts states would have been obligated to pay under their State Plans.	CMS may NOT reduce reimbursements based on perceived state liability for periods when plaintiffs were non–Medicaid participants; those pre-enrollment claims must be reimbursed without such reductions.
May CMS reduce reimbursement for claims incurred AFTER the provider enrolled in state Medicaid?	Plaintiffs argued broadly that reductions were impermissible, but primarily sought recovery for pre-enrollment periods.	CMS: reductions are lawful where State Plans make the state liable; remand did not eliminate states' cost-sharing role.	CMS may reduce reimbursements for post-enrollment claims to the extent the State Plan clearly makes the state responsible; plaintiffs must pursue states for amounts that are not federal obligations.
Was a motion to enforce appropriate after CMS issued partial payments?	Plaintiffs moved to enforce because CMS had not fully effectuated the court’s remand relief and withheld disputed sums.	CMS initially argued prematurity but then completed the administrative process and issued payments.	Motion to enforce was appropriate; court interprets its remand and enforces that CMS comply with Select Specialty I as described above.

Key Cases Cited:

Select Specialty Hosp.-Denver, Inc. v. Azar, 391 F. Supp. 3d 53 (D.D.C. 2019) (held CMS unlawfully applied must-bill/RA to non–Medicaid-participating LTCHs without notice-and-comment)
New LifeCare Hosps. of N.C., LLC v. Becerra, 7 F.4th 1215 (D.C. Cir. 2021) (explains must-bill/RA procedure and when Medicare bad-debt reimbursement is available)
Allina Health Servs. v. Sebelius, 863 F.3d 937 (D.C. Cir. 2017) (defines when agency action constitutes a substantive legal standard requiring notice-and-comment)
Grossmont Hosp. Corp. v. Burwell, 797 F.3d 1079 (D.C. Cir. 2015) (discusses interplay of Medicare and Medicaid payment responsibilities for dual-eligibles)
Heartland Reg'l Med. Ctr. v. Leavitt, 415 F.3d 24 (D.C. Cir. 2005) (motion to enforce relief is limited to the relief granted in the original judgment)
AT&T Wireless Servs., Inc. v. FCC, 365 F.3d 1095 (D.C. Cir. 2004) (the court is the authoritative interpreter of its own remand)