Select Specialty Hospital-Denver, Inc. v. Azar
391 F. Supp. 3d 53
| D.C. Cir. | 2019Background
- Seventy-five long-term acute care hospitals (LTCHs) sought Medicare reimbursement for dual-eligible patients’ deductible/coinsurance bad debts for FYs ~2005–2010; none were generally enrolled as Medicaid providers during the relevant periods.
- CMS/Intermediaries began denying bad-debt reimbursements in 2007–2008, invoking a "must-bill" policy requiring providers to bill state Medicaid and obtain a state Remittance Advice (RA) showing Medicaid is not responsible.
- Plaintiffs contend Intermediaries had not previously enforced the RA requirement against non‑participating providers; some states would not enroll LTCHs, or would not grant retroactive billing for pre‑enrollment dates of service.
- Plaintiffs appealed denials to the PRRB; the PRRB reversed in several instances (finding RA requirement inapplicable where LTCHs could not enroll); the CMS Administrator reversed the PRRB decisions.
- The district court reviews whether CMS was required to use notice‑and‑comment rulemaking under 42 U.S.C. § 1395hh(a)(2) before applying the must‑bill/RA requirement to non–Medicaid‑participating LTCHs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CMS had to use notice‑and‑comment rulemaking under 42 U.S.C. § 1395hh(a)(2) before applying the must‑bill/RA requirement to non‑Medicaid‑participating providers | The must‑bill/RA requirement is a substantive legal standard that changed eligibility for payment, so § 1395hh(a)(2) required notice‑and‑comment | No substantive legal standard was established or changed; the requirement is procedural and thus not subject to § 1395hh(a)(2) | Court: Allina controls; CMS needed notice‑and‑comment because the RA requirement changed a substantive legal standard governing payment |
| Whether the RA requirement is a "substantive legal standard" under § 1395hh(a)(2) | RA requirement effectively forces providers to contract with states (participate in Medicaid) to be reimbursed, altering rights/duties for payment | The RA is merely a documentation/procedural requirement; providers need not fully participate in Medicaid to comply | Court: RA requirement is substantive because it changed the eligibility/contractual obligations (state Medicaid participation) necessary to obtain payment |
| Whether plaintiffs could reasonably comply (i.e., enroll or obtain RAs) | Many plaintiffs could not enroll in state Medicaid programs (states barred LTCH enrollment) or could not obtain retroactive RAs for earlier dates of service, so compliance was impossible | CMS: providers could obtain RAs or enroll (at least for limited purposes); some plaintiffs did submit bills; any inability was evidentiary or isolated | Court: Record shows plaintiffs in multiple states could not enroll or obtain RAs for the relevant periods; inability to comply is factually supported and material to the substantive‑change analysis |
| Whether the requirement was an impermissible retroactive application of § 1395hh(a)(2) because the must‑bill policy predates the 1987 statute | Plaintiffs challenge the 2007 expansion/application to non‑participating providers, not an old 1968 policy; so § 1395hh(a)(2) governs the change | CMS argues the policy (or its core) existed long before § 1395hh(a)(2), so the rulemaking requirement is inapplicable or retroactive application is disfavored | Court: Plaintiffs challenge a changed interpretation/enforcement beginning in 2007 (including the RA requirement); retroactivity argument unpersuasive; § 1395hh(a)(2) applies to the change |
Key Cases Cited
- Allina Health Servs. v. Azar, 139 S. Ct. 1804 (2019) (Supreme Court holding Medicare Act requires notice‑and‑comment for agency statements that establish or change substantive legal standards governing payment)
- Allina Health Servs. v. Sebelius, 863 F.3d 937 (D.C. Cir. 2017) (D.C. Circuit definition/analysis of "substantive legal standard" under § 1395hh(a)(2))
- Clarian Health West, LLC v. Hargan, 878 F.3d 346 (D.C. Cir. 2017) (distinguishing procedural/enforcement policy from substantive payment standard)
- Cove Assocs. Joint Venture v. Sebelius, 848 F. Supp. 2d 13 (D.D.C. 2012) (administrative decisions discussing must‑bill policy and PRRB precedent)