UNIVERSITY OF COLORADO HEALTH AT MEMORIAL HOSPITAL v. BURWELL, 1:14-cv-01220

Background

Fifty-one hospitals (consolidated plaintiffs) challenge HHS’s implementation of Medicare outlier payments, focusing on the Secretary’s annual fixed-loss-threshold (FLT) rulemakings for roughly FY2007–2016.
Outlier eligibility depends on providers’ projected cost‑adjusted charges, which in turn rely on projected cost-to-charge ratios (CCRs); HHS sets each year’s FLT by rulemaking aiming to target aggregate outlier payments (historically ~5.1%).
Many plaintiffs or their affiliates previously litigated similar challenges in Banner Health and Billings Clinic (D.D.C. and D.C. Cir. decisions), which upheld many annual FLT rules and narrowed viable arguments.
Procedural prerequisites: hospitals obtain expedited judicial review (EJR) via the PRRB for discrete legal questions; district-court jurisdiction is limited to matters presented to/approved by the PRRB.
The Secretary moved to partially dismiss claims as precluded, jurisdictionally defective, or untimely; plaintiffs moved to supplement the agency administrative records with omitted or extra-record materials. The Court granted each motion in part and denied each in part.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Voluntary abandonment of claims (2003 and 2007–2011 rulemakings)	Plaintiffs: their December 2018 notice expressed intent only; amended complaints clarify what they still pursue.	Secretary: plaintiffs should be held to their Notice and on‑record statements.	Court: dismissed 2003‑rule challenges (plaintiffs waived on record); declined to dismiss FY2007–2011 claims.
Claim preclusion as to previously‑lit fiscal years	Plaintiffs: each cost‑report/year gives rise to a new claim; prior litigation shouldn’t bar new reimbursement suits.	Secretary: challenge to each year’s FLT is a discrete claim; prior final judgments bar relitigation of that year’s rule.	Court: follows NRDC framework — plaintiffs who previously litigated and lost as to a specific fiscal year are precluded from relitigating that same year’s FLT.
Broader preclusion (binding non‑party hospitals or affiliates under common control)	Plaintiffs: non‑parties or separately controlled hospitals cannot be bound by others’ suits.	Secretary: all hospitals that participated in Banner/Billings should be bound; affiliates under common control also precluded.	Court: rejects overbroad application; only entities that actually litigated the specific year are precluded; common‑control preclusion requires fact‑specific proof.
Jurisdiction for claims that CCR projection methods themselves are separate "rules" requiring notice & comment	Plaintiffs: PRRB EJR requests were broad enough to encompass challenges to CCR projection methods as a separate rule or policy.	Secretary: PRRB did not authorize review of CCR methodology as a separate rule; thus district court lacks jurisdiction.	Court: agrees with Secretary — jurisdictional EJR limits bars standalone CCR‑as‑rule claims, though plaintiffs may argue that notice for an FLT must disclose methodologies integral to that FLT.
Timeliness / mislabeling of supplemental vs amended pleadings (Rule 15(a) vs 15(d))	Plaintiffs: mislabeling was harmless; claims were accepted and Secretary answered; equitable cure is appropriate.	Secretary: plaintiffs added claims without leave and missed the §1395oo(f)(1) 60‑day filing window.	Court: exercises discretion to treat mislabeled amendments as supplemental (nunc pro tunc); permits the claims.
Alleged missing FY2007 actuarial analysis ("Attachment A")	Plaintiffs: the standalone Attachment A label and content imply a missing main document/actuarial analysis that was before HHS and omitted from record.	Secretary: label alone does not prove a material omitted document; prior related courts declined similar requests.	Court: orders HHS to produce the full document associated with Attachment A so plaintiffs can seek inclusion in the administrative record.
FY2014–2016: requested HHS calculations (prior‑year outlier estimates and CCR adjustment‑factor computations)	Plaintiffs: HHS ran simulations/calculations and those specific calculations that were before the agency must be in the record.	Secretary: Federal Register explanations suffice; administrative record need not include every calculation.	Court: where calculations existed and were before HHS, they must be included; supplements ordered for those specific computations and adjustment‑factor calculations.
Extra‑record OIG, HCFAC reports and litigation pleadings showing reconciliation recoveries	Plaintiffs: these materials are adverse, relevant, and should be added to show HHS ignored recoveries in threshold setting.	Secretary: documents were not before HHS; requests are overbroad and speculative.	Court: denies extra‑record supplementation — plaintiffs failed to show documents were directly before HHS or that agency deliberately/ negligently excluded them; merits arguments remain available.
Inclusion of later FY2020 proposed/final rule as background	Plaintiffs: the 2020 proposal demonstrates feasibility of addressing reconciliation and supports their claims.	Secretary: later rulemaking was not before agency at the time of challenged rules.	Court: declines to supplement record with later rule; may take judicial notice when appropriate.

Key Cases Cited

Billings Clinic v. Azar, 901 F.3d 301 (D.C. Cir.) (discussing outlier FLT methodology and CCR projections)
Banner Health v. Price, 867 F.3d 1323 (D.C. Cir.) (review of fixed‑loss threshold rulemakings)
NRDC v. EPA, 513 F.3d 257 (D.C. Cir. 2008) (same‑nucleus‑of‑facts test for claim preclusion in successive challenges to an underlying framework)
Taylor v. Sturgell, 553 U.S. 880 (2008) (claim preclusion fundamentals)
Comm’r v. Sunnen, 333 U.S. 591 (1948) (tax‑year precedent on successive enforcement and new causes of action)
Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402 (1971) (administrative‑record review principle)
Owner‑Operator Indep. Drivers Ass’n v. Fed. Motor Carrier Safety Admin., 494 F.3d 188 (D.C. Cir. 2007) (when model outputs central, APA notice on methodology may be required)
City of Dania Beach v. FAA, 628 F.3d 581 (D.C. Cir. 2010) (standards for extra‑record supplementation)
Prasco, LLC v. Medicis Pharm. Corp., 537 F.3d 1329 (Fed. Cir. 2008) (district court discretion to allow supplemental pleadings under Rule 15(d))
Dist. Hosp. Partners L.P. v. Burwell, 786 F.3d 46 (D.C. Cir. 2015) (EJR and non‑correction of midyear outlier adjustments)