University of Texas M.D. Anderson Cancer Center v. Sebelius
650 F.3d 685
D.C. Cir.2011Background
- Medicare inpatient target amounts for cancer hospitals set in 1982 under 42 U.S.C. §1395ww(b)(3); target amounts sometimes increased for events beyond the hospital's control per 42 C.F.R. §413.40(g)(1)(ii).
- M.D. Anderson requested 2000 and 2001 inpatient target increases to cover costs of new cancer drugs; DHHS/Board denied, finding no net financial impact evidence.
- Hospital argued it was not on notice of the later net financial impact requirement and thus had no fair opportunity at the hearing.
- Medicare outpatient reimbursements use a transitional “pre-BBA amount” formula designed to preserve the 1996 share of costs; 1999 transition also guaranteed pre-BBA level for cancer hospitals.
- Hospital contends HHS misapplied the pre-BBA formula, seeking higher 2000/2001 payments; district court granted summary judgment for HHS on outpatient costs.
- Court remands inpatient issue to allow Hospital to show net financial impact of new drugs; Court affirms district court on outpatient costs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Inpatient: whether the net financial impact requirement was properly applied. | Anderson lacked notice of net-impact rule. | HHS reasonably required net impact evidence. | Remand for HHS to hear net-impact evidence; not on notice invalidates the requirement. |
| Outpatient: whether the pre-BBA amount interpretation unambiguously supported by statute. | Statutory text supports net-windfall interpretation. | HHS interpretation reasonable; statute not unambiguous. | Court finds ambiguity; upholds HHS interpretation but does not decide for inpatient; remand for inpatient only. |
Key Cases Cited
- Chevron U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837 (1984) (agency interpretation allowed if not unambiguous)
- Methodist Hospital of Sacramento v. Shalala, 38 F.3d 1225 (D.C. Cir. 1994) (explanation of Prospective Payment System for outpatient costs)
- General Electric Co. v. EPA, 53 F.3d 1324 (D.C. Cir. 1995) (regulated party not on notice of ultimate agency interpretation)