University of Colorado Health at Memorial Hospital v. Burwell
151 F. Supp. 3d 1
| D.D.C. | 2015Background
- Plaintiffs are 35 acute-care hospitals challenging HHS/CMS regulations implementing the Medicare IPPS Outlier Payment System (2003 Payment Regulations and FY 2007, 2008, 2011, 2012 Threshold Regulations) and seek supplementation of the administrative record.
- The Outlier program pays hospitals additional amounts when a patient’s cost (adjusted by hospital cost-to-charge ratios, CCRs) exceeds a DRG payment plus a fixed loss threshold (FLT); CMS aims to make outlier payments ≈5.1% of total IPPS payments each year.
- CMS simulates upcoming-year payments using MedPAR claims from two years prior (inflated forward) and Provider Specific File / Impact File CCRs (with trims, backfilling, and CCR adjustment factors) to select an FLT that yields the target outlier share.
- Plaintiffs contend CMS’s rulemaking records omit key materials (2003 draft Interim Final Rule, 2003 Impact File, formulas/algorithms used to simulate payments and estimate prior-year outlier payments, actuarial inputs/cost-report data for CCR adjustment factors, and other underlying data), impairing judicial review.
- The court recognized the agency must produce the materials it actually considered (directly or indirectly) but will not require raw data the agency did not rely on; it evaluated each requested category for concrete evidence that CMS had considered the material.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Inclusion of 2003 draft Interim Final Rule in record | Draft shows CMS considered a large, contrary analysis (recommended cutting 2003 FLT) and thus was before decisionmakers | Draft is pre-decisional/deliberative and not part of record | Court ordered inclusion: draft was a formal statement considered and highly probative |
| Inclusion of 2003 Impact File | Impact File contains provider-specific CCRs used to simulate 2003 threshold; CMS likely relied on it | CMS uncertain whether Impact File was used/claims inability to locate definitively | Ordered inclusion: contemporaneous materials show CMS reestimated 2003 threshold using PSF data contained in Impact File |
| Production of formulas/algorithms for simulating payments and estimating prior-year outlier payments | Rule notices and CMS descriptions refer to "simulations" and a payment-calculation mechanism; absence prevents meaningful review | CMS says plaintiffs assume such formulas exist and has suggested materials in rule text suffice | Ordered inclusion: court found non-speculative evidence CMS used formulas and required production |
| Actuarial memos / data underlying CCR adjustment factors (market-basket inputs and cost-report source data) | Plaintiffs seek Office of Actuary inputs and raw cost-report data driving annual cost-per-discharge increases | CMS says RIA and rule notices describe methodology and public market-basket figures; some underlying data not relied on by agency | Ordered production only for cost-report data actually used to compute the published percentage increases; other actuarial underlying materials not required because figures are disclosed in rulemaking |
| MedPAR early-update files used to compute inflation factors | Plaintiffs want the exact MedPAR files CMS used for charge-inflation calculations | CMS withheld early-update MedPAR because they contain protected PII but says publicly produced MedPAR can closely approximate the factor | Denied: court accepted CMS’s representation that produced MedPAR files contain the actual data (early-update differs only by form/PII) |
| Underlying source data for Impact Files (PSF raw inputs) and discrepancies between public PSF and Impact File CCRs | Plaintiffs argue Impact Files are derived and discrepancies show missing source data the agency considered | CMS explained Impact Files are the data it used (compiled snapshots), discrepancies arise from timing/backfilling/transmission and agency did not rely on other raw PSF data | Denied: court accepted that CMS relied only on the Impact Files it produced and plaintiffs’ discrepancy claims were speculative |
| Documents supporting CMS’s decision not to reconcile outlier payments when setting FLTs | Plaintiffs cite OIG reports and ask for documents substantiating CMS’s ‘‘few reconciliations’’ claim | CMS says its rationale is in rule notices; plaintiffs provided only speculation that other internal rationales exist | Denied: no concrete evidence that such documents were before agency; merits challenge remains for later review |
Key Cases Cited
- Dist. Hosp. Partners v. Burwell, 786 F.3d 46 (D.C. Cir. 2015) (discusses supplementation standards and outlier-rule challenges)
- Banner Health v. Sebelius, 945 F. Supp. 2d 1 (D.D.C. 2013) (held draft materials and certain data relevant to outlier rule supplementation)
- Cape Cod Hosp. v. Sebelius, 630 F.3d 203 (D.C. Cir. 2011) (describes IPPS and DRG framework)
- Cnty. of L.A. v. Shalala, 192 F.3d 1005 (D.C. Cir. 1999) (background on shift from reasonable-cost to prospective payment regime)
- Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402 (1971) (administrative review must be based on full administrative record)
- Walter O. Boswell Mem’l Hosp. v. Heckler, 749 F.2d 788 (D.C. Cir. 1984) (courts should neither review less nor more than agency record; avoid post-hoc rationalizations)
- Am. Wildlands v. Kempthorne, 530 F.3d 991 (D.C. Cir. 2008) (sets "unusual circumstances" test for extra-record supplementation)
- City of Dania Beach v. F.A.A., 628 F.3d 581 (D.C. Cir. 2010) (applies Am. Wildlands framework to supplemental evidence)
- Marcum v. Salazar, 751 F. Supp. 2d 74 (D.D.C. 2010) (agency must include materials it considered directly or indirectly in the administrative record)