FIRSTHEALTH MOORE REGIONAL HOSPITAL, Plaintiff, v. XAVIER BECERRA, Secretary of Health and Human Services, Defendant.
Civil Action No. 20-1007 (BAH)
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
Chief Judge Beryl A. Howell
September 20, 2021
Plaintiff FirstHealth Moore Regional Hospital made a deliberate and strategic decision to pursue review of a calculation for reimbursement of Medicare uncollectible patient debts by asking the U.S. Department of Health and Human Services (“HHS“) contractor administering the calculation process to revisit certain issues that plaintiff believed involved errors. This choice of review process avoided the higher-overhead and potentially more time-consuming process of formal agency review authorized by statute. Ultimately, however, when the contractor reviewed plaintiff‘s objections, made adjustments to certain calculations, and declined to make adjustments to others, this choice of review pathway, effectuated by withdrawal of the initial appeal, foreclosed continuing with the formal appeals process before HHS‘s Provider Reimbursement Review Board (“PRRB“) for the items the contractor reviewed but did not adjust.
Plaintiff now seeks to force HHS to reinstate its formal appeal filed before the PRRB, arguing that the PRRB‘s rules unlawfully deprived plaintiff of statutory appeal rights, first, by forcing withdrawal of its formal appeal to pursue the more informal review process with the
This case offers a cautionary tale to any provider navigating “the labyrinthine world of Medicare,” Adirondack Med. Ctr. v. Sebelius, 740 F.3d 692, 694 (D.C. Cir. 2014), and HHS‘s complex system of reimbursements. Plaintiff withdrew its formal agency appeal based on an understanding of a rule making the healthcare provider “responsible” for doing so, combined with the further understanding that reinstatement of that formal appeal would be possible if sought. Plaintiff apparently also believed that the relevant regulations provided a right to maintain or revive its appeal as to any issue that the contractor reviewed, regardless of whether the contractor modified the outcome as to that issue. Indeed, the governing regulations and PRRB rules may allow for misinterpretation. Improving the clarity of the Medicare rules, however, is not a task for this Court.
As explained more fully below, (a) the agency‘s interpretation of its rules is reasonable and entitled to deference; (b) the rules, as so interpreted, are lawful; and (c) the agency correctly applied the rules under its interpretation. Presented with two routes by which it could obtain
I. BACKGROUND
The statutory and regulatory scheme underlying the parties’ dispute is described below, followed by the factual and procedural history in this case.
A. Statutory and Regulatory Background
“Medicare is a federally funded program that reimburses healthcare providers for delivering medical care to qualifying elderly and disabled individuals.” New LifeCare Hosps. of N.C., LLC v. Becerra, 7 F.4th 1215, 1219 (D.C. Cir. 2021) (citing
Each fiscal year, a participating hospital files a “cost report” with its MAC to provide the basis for calculating reimbursements due the hospital for services provided to beneficiaries over the course of the year.
“Providers can then appeal reimbursement decisions from the contractors to the Provider Reimbursement Review Board ([ ‘PRRB‘]), an administrative tribunal within HHS.” New LifeCare Hosps., 7 F.4th at 1220 (citing
MAC reopening and PRRB appeals may proceed simultaneously, since a MAC “may reopen ... [a] determination that is currently pending on appeal before the [PRRB] or Administrator.”
Separately, the PRRB rules allow a provider to make a request for abeyance, which if granted “suspends action on an appeal until specified events occur or conditions are met.” 2015 PRRB Rule 39(A); see also 2018 PRRB Rule 39. As relevant here, abeyance may be deemed appropriate “where the Provider can demonstrate that the case will be resolved without a hearing upon the occurrence of specified conditions or events.” 2015 PRRB Rule 39(A). Grants of abeyance are at the discretion of the PRRB. Id.
Plaintiff is a Medicare-participating hospital in North Carolina that provides services to Medicare beneficiaries. Compl. ¶ 1, ECF No. 1. On June 9, 2015, Palmetto GBA, the MAC administering reimbursements for plaintiff, issued an NPR for the fiscal year ending September 30, 2011, showing Medicare‘s overpayment of $1,458,636 to plaintiff, which consequently owed that amount back to Medicare. Admin. Record (“AR“) at 70.4 Dissatisfied with the calculated reimbursement amounts, plaintiff filed with the PRRB an appeal, which was received on December 1, 2015, within the 180-day window provided by statute,
Plaintiff also elected to pursue relief through the reopening process. When the PRRB appeal had been pending for about eight months, plaintiff wrote to the MAC “request[ing] a reopening” of the cost report. Def.‘s Opp‘n, Ex. C, August 19, 2016 Request for Reopening Medicare Cost Report at 1, ECF No. 16-4. In its letter, plaintiff identified six issues related to bad debt reimbursement in dispute and indicated that it had a pending appeal before the PRRB.
The MAC performed a review and, on September 27, 2017, issued a Revised NPR that allowed reimbursement for some previously disallowed bad debts but continued to deny reimbursement for others. AR at 19 (indicating revisions to reimbursement amounts); id. at 10-12, 14-15 (explaining the MAC‘s determinations on reopening with respect to various of plaintiff‘s objections). The effect of the Revised NPR was to increase the total reimbursement plaintiff was eligible to receive for the fiscal year by $833,242. AR at 19. Plaintiff did not appeal the Revised NPR to the PRRB, Def.‘s Opp‘n at 6, nor did it otherwise signal any objections within the 180-day statutory appeals window. Apparently still dissatisfied, nearly two years later, on August 13, 2019, plaintiff wrote to the PRRB “request[ing] reinstatement” of its original appeal because, plaintiff asserted, in the Revised NPR “[t]he MAC only partially accounted for the issues outlined.” AR at 22. This was within the requisite three years of the date plaintiff had withdrawn its PRRB appeal, see 2018 PRRB Rule 47.1, and thus the timeliness of this reinstatement request is not at issue here. Plaintiff did not, however, enclose any documents with its request nor elaborate on how the Revised NPR “only partially accounted” for the bad debt disputes.
On February 19, 2020, the PRRB issued a decision denying reinstatement of plaintiff‘s appeal. AR at 1-3. The principal reason given for the denial was that the MAC did, “in fact, issue[] a [Revised] NPR consistent with the agreed withdrawal.” AR at 2-3. As such, the PRRB concluded, plaintiff‘s “right to reinstatement was extinguished when the [MAC] issued a new determination on September 27, 2017 that specifically dealt with the issues for which the Provider is seeking reinstatement.” Id. at 3 (footnote omitted) (emphasis in original).
C. Procedural Background
On April 17, 2020, plaintiff filed the instant complaint challenging the PRRB‘s February 19, 2020 decision to deny reinstatement of its appeal. See Compl. ¶ 5. In a single count, the complaint alleges that the denial of reinstatement was “contrary to the Medicare statute,” id. ¶ 42, and violated the APA because the denial was arbitrary and capricious, was contrary to statute, lacked observance of required procedures, and was unsupported by substantial evidence, id. ¶ 43. The parties subsequently filed and briefed cross-motions for summary judgment and submitted, on June 17, 2021, a joint appendix containing relevant excerpts of the administrative record, J.A., ECF No. 22.5 The pending motions are now ripe for resolution.
A. Administrative Procedure Act
The APA provides for judicial review of any “final agency action for which there is no other adequate remedy in a court,”
B. Summary Judgment
Pursuant to
III. DISCUSSION
Plaintiff argues that the PRRB‘s withdrawal rule is mandatory for providers seeking a MAC reopening review and, as such, is unlawful and, in any event, that the PRRB failed properly to apply its reinstatement rule here. These assertions do not withstand scrutiny. HHS‘s interpretation of the PRRB withdrawal rule as non-mandatory is reasonable and entitled to deference, and under this interpretation, the rule is unquestionably lawful. Furthermore, the plain text of the reinstatement rule demonstrates that plaintiff was not automatically entitled to reinstatement in this case. HHS is therefore entitled to summary judgment.
As an initial matter, HHS argues that plaintiff waived the argument that PRRB‘s “mandatory withdrawal rule,” as characterized by plaintiff, is unlawful. According to HHS, plaintiff “could have argued before the [PRRB]” its grievance with the rule and, by failing to do so, is barred from raising the issue here. Def.‘s Opp‘n at 10. Citing “black-letter administrative law principles,” HHS argues that because plaintiff withdrew its PRRB appeal without suggesting either that it was required to do so or that such requirement was unlawful, plaintiff “deprived [the PRRB] of the opportunity to consider an ‘objection made at the time appropriate under its practice.‘” Id. at 10-11 (quoting United States v. L.A. Tucker Truck Lines, Inc., 344 U.S. 33, 37 (1952)).
The problem with this waiver argument is that plaintiff does not contend that a “mandatory withdrawal rule” is unlawful standing alone. Rather, plaintiff takes issue with “[t]he PRRB‘s Mandatory Withdrawal Rule and subsequent refusal to reinstate the Hospital‘s appeal after the MAC‘s reopening did not fully resolve issues.” Pl.‘s Mem. Supp. Mot. Summ. J. (“Pl.‘s Mem.“) at 12, 15, 17, ECF No. 14. This distinction is essential; if the PRRB had reinstated plaintiff‘s appeal, the earlier withdrawal, regardless whether deemed mandatory or not, would have worked no alleged deprivation of plaintiff‘s statutory appeal rights and would not have been raised as a basis for review in this Court.
Although framed as an argument that the mandatory withdrawal rule is in itself unlawful, the better description of the concern is that the unlawfulness stems from the combination of the purported mandatory withdrawal of issues from appeal with the denial of reinstatement of the withdrawn claim after the intermediary finishes its review without changing the calculations at issue. That result only became apparent when the PRRB issued its decision to deny reinstatement.
Applied here, formal substantive review on the particulars of a Medicare reimbursement is unquestionably adversarial. The request for reinstatement, however, is less clearly so. To be sure, a “request for reinstatement is a motion” and must “set[] out the reasons for reinstatement,” 2018 PRRB Rule 47.1, and “an opposing party may send a response,” id. R. 44.3; see also id. R. 10.2 (allowing a response if the MAC opposes any type of “request“). At that point, however, a challenge to the rules themselves would have been premature given plaintiff‘s apparent belief that it was entitled to reinstatement under those rules. The MAC‘s letter of opposition to reinstatement said nothing about the circumstances of withdrawal or the interaction between the two rules, see AR at 4-5, and in any event, the PRRB rules do not contemplate a reply to such an opposition.
HHS thus fails to identify precisely when in the administrative process leading up to the PRRB decision plaintiff was required to raise its argument that the PRRB withdrawal and
B. PRRB‘s Interpretation of Its Own Withdrawal Rule Is Entitled to Deference
Under the disputed PRRB rule, “[i]t is the provider‘s responsibility to withdraw ... an issue(s) for which the [MAC] has agreed to reopen the final determination for that issue(s).” 2015 PRRB Rule 48. The parties vigorously debate whether the use of the word “responsibility” in this disputed rule means that a provider must withdraw its appeal as to an issue that is being reopened by agreement with the contractor. On the one hand, plaintiff describes this provision as a “Mandatory Withdrawal Rule” whereby “[t]he hospital has no choice regarding that withdrawal.” Pl.‘s Mem. at 7, 9; see also id. at 12-13; Pl.‘s Reply Mem. Supp. Mot. Summ. J. & Opp‘n Def.‘s Cross-Mot. Summ. J. (“Pl.‘s Opp‘n“) at 1-6, ECF No. 18. HHS, on the other hand, argues that the Rules elsewhere “use[] mandatory language like ‘must’ to establish a requirement” and “the word ‘responsibility’ is best read as not implying a command.” Def.‘s Opp‘n at 16-17. Both readings appear reasonable and, in this legal context, that ambiguity only helps the agency.
1. The Disputed Rule Is Ambiguous and HHS‘s Interpretation Is Reasonable
HHS rightly concedes that the phrase “it is the responsibility of” in the disputed rule is ambiguous. Def.‘s Opp‘n at 18. As plaintiff suggests, the disputed rule can reasonably be read to require that when a provider secures the contractor‘s agreement to reopen an issue, the provider then bears a duty to withdraw that issue from its PRRB appeal. The rule does not, however, use language, such as “shall” or “must,” that makes withdrawal clearly mandatory. To be sure, the absence of such “magic words” does not foreclose the possibility that the rule nonetheless states a requirement. Cf. In re Grand Jury Investigation, 315 F. Supp. 3d 602, 633-
HHS contends that the rule need not be read as stating a mandatory step, citing, for example, instances elsewhere in the Rules where the term “responsibility” is used but, HHS argues, does not “imply[] a command,” such as: (a) “It is the responsibility of the Provider to maintain record of delivery“; (b) “It is the Provider‘s responsibility to maintain evidence of timely filing” and (c) “It is the responsibility of the party calling a remote witness to ensure that the witness has available both parties’ organized and labeled exhibits.” Def.‘s Opp‘n at 17. These examples simply beg the question, however, since each of HHS‘s illustrative provisions appears susceptible to the same inquiry as to whether a requirement is established as opposed to a mere exhortation. HHS also leans on the Rules’ reference to “[a] provider‘s request to withdraw an issue(s)” as militating against the provider being mandated to do so. See id. at 16-17. This is similarly unhelpful, as the mere fact that a provider makes a “request” does not, in itself, make clear that the provider was not compelled by a rule to make said request.
Finally, HHS argues, more persuasively, that “the non-mandatory character” of the rule is both evidenced and clarified by “the fact that the [PRRB] Rules gave Plaintiff a choice between requesting withdrawal of its appeal under Rule 46 and requesting that the appeal be held in abeyance or suspended under Rule 39,” id. at 18, while MAC reopening and review took place. Certainly, plaintiff‘s exercise of the option of requesting abeyance would have better served its interests by putting it in the position of being able to revive its PRRB appeal after the MAC reopening and review. For the purpose of interpreting the withdrawal rule, however, this
An easier path exists to conclude that the word “responsibility” admits of some ambiguity. This word can mean “[t]he quality, state, or condition of being duty-bound, answerable, or accountable,” BLACK‘S LAW DICTIONARY (11th ed. 2019), which indeed suggests that a provider bears a “duty” to withdraw an issue on appeal upon a MAC agreement to reopen. The word can also mean “[t]hat for which one is answerable or accountable,” id., suggesting perhaps that if withdrawal is to be done, the provider is the person “answerable or accountable” for making it happen.
Here, the relevant event triggering the “responsibility” in question is the “agree[ment]” between a provider and the MAC “to reopen the final determination for that issue(s).” 2015 PRRB Rule 48. Such an agreement could plausibly yield withdrawal of the issue in the PRRB appeal in one of various ways: by the provider itself withdrawing the issue, by the MAC initiating the withdrawal, or by some automatic operation of law on account of the agreement. By stating that it “is the Provider‘s responsibility to withdraw” the issue, id., the Rule can be read as stating that if the issue is to be withdrawn, the provider must be the one to do so, as opposed to the MAC, the PRRB, or some automatic process. Put another way, the Rule indicates who must effectuate the withdrawal if such withdrawal is desired, not whether withdrawal is a step
The normal canons of interpretation provide little interpretive guidance here. In the context of the full Rule, other types of issues or cases are also “the Provider‘s responsibility to withdraw“: (a) “an issue(s) or case that the Provider no longer intends to pursue,” (b) “an issue(s) or case in which an administrative resolution has been executed,” and (c) “a case in which all issues have been handled, whether by resolution, transfer, dismissal, or withdrawal.” 2005 PRRB Rule 48. Under the canon of noscitur a sociis, whereby a word or phrase “is generally known by the company it keeps,” Agnew v. Gov‘t of D.C., 920 F.3d 49, 56 (D.C. Cir. 2019), the character of these other types of issues for which a provider bears “responsibility” to withdraw may inform the character of the withdrawal “responsibility” for a MAC-reopened issue. Signs point in both directions, however. Withdrawal of an issue “that the Provider no longer intends to pursue” describes a clearly voluntary activity, while, by contrast, withdrawal of a case “in which an administrative resolution has been executed” or “in which all issues have been handled” could reasonably be read as a required withdrawal as a matter of docket management.
Given that statutory interpretation “tools” fall short of definitively resolving any ambiguity in the construction of the withdrawal rule, the decisive question is whether HHS‘s interpretation—that withdrawal is voluntary—is reasonable. For an agency‘s interpretation of a regulation to receive deference, “it must come within the zone of ambiguity the court has identified after employing all its interpretive tools.” Kisor, 139 S. Ct. at 2415-16. The above analysis identifying the existence of ambiguity has already answered this question: “responsibility” need not mean that the provider must withdraw an issue upon reopening.
In response to HHS‘s assertion that the PRRB rules do not in fact require a provider to withdraw an issue or appeal when a MAC agrees to reopen a cost report, plaintiff offers two items of extra-record evidence, detailed supra note 5, that certain HHS staff members furnished information indicating that withdrawal is mandatory upon a MAC‘s agreement to reopen an issue. Pl.‘s Opp‘n at 3-6. Specifically, plaintiff cites: (a) a PRRB staff email stating that a provider “must withdraw an issue/case if the MAC agreed to reopen the final determination,” in response to an April 2021 query to PRRB made by plaintiff‘s consultant, id. at 4; and (b) a slide from a presentation by three “senior staff members at the Centers for Medicare and Medicaid Services” at an industry conference noting that “Board Rule 46 requires withdrawal of issue if ... MAC has agreed to reopen issue,” id. at 4-6.9
Assuming that these statements were in fact made by HHS staff reinforces the conclusion that the withdrawal rule is ambiguous, a point already conceded by HHS. Surely, the fact that various staff at, or associated with, PRRB represented in 2021 that the rule mandated withdrawal upon MAC reopening helps confirm that such an interpretation was a reasonable one for plaintiff to reach. The probative value of these statements, however, stops there. Not only do the statements postdate the February 2020 PRRB decision under review in this case and therefore were not before the agency at the time, see Def.‘s Reply at 5, but also for the same timing reason, plaintiff does not—and cannot—argue that these statements were relied on by plaintiff in
3. HHS Has Special Expertise Interpreting Medicare Rules
For Kisor/Auer deference to be warranted, the interpretation of the regulation at issue must “in some way implicate [the agency‘s] substantive expertise.” Kisor, 139 S. Ct. at 2417. Medicare, a statutory and regulatory scheme that the D.C. Circuit has described as a “labyrinthine world,” Adirondack Med. Ctr., 740 F.3d at 694, is prototypical subject matter for which specialized expertise is especially valuable. See Via Christi Hosps. Wichita, Inc. v. Burwell, 820 F.3d 451, 456 (D.C. Cir. 2016) (“We owe heightened deference to the Secretary‘s interpretation of a complex and highly technical regulatory program such as Medicare.” (quotation marks and citation omitted)).
C. PRRB‘s Reinstatement Rule Is Unambiguous and Was Correctly Applied
While the parties focus primarily on the proper interpretation of the withdrawal rule, the PRRB‘s decision not to reinstate plaintiff‘s appeal requires some examination of the reinstatement rule as well. The operative 2018 version of Rule 47.2.2 reads: “Upon written motion, [PRRB] will also grant reinstatement of an issue(s)/case if a provider requested to withdraw an issue(s) from its case because the [MAC] agreed to reopen/revise the cost report for that issue(s) but failed to reopen the cost report and issue a new final determination (e.g., Revised NPR) for that issue(s) as agreed.”
Plaintiff argues that “[r]einstatement is nondiscretionary when the MAC fails to fully resolve the disputed issues that were originally appealed by the hospital” and since the MAC allegedly did not do so here, “[t]he PRRB‘s refusal to reinstate the appeal thus violated the
Plaintiff indisputably “requested to withdraw” its appeal, see AR at 35, and did so on account of the MAC‘s declaration that same day about “hereby reopening [plaintiff‘s] cost report” to examine issues including all those cited in the withdrawal letter, AR at 36. The MAC thereafter issued an “Amended Notice of Amount of Medicare Program Reimbursement” (the “Revised NPR“), AR at 19, which the PRRB found to be based on a review of all of the specific issues for which plaintiff had sought reopening, AR at 2-3. Plaintiff asserted that the Revised NPR “only partially accounted for the issues,” AR at 6, but dissatisfaction with the result of a review is not the same as having no review at all.
Plaintiff is thus simply incorrect to assert that the MAC‘s “cost report reopening and review process did not resolve fully the previously appealed issues that were the subject of the cost report reopening,” Pl.‘s Opp‘n at 1. On the contrary, the MAC resolved the issues “fully” and, indeed, in plaintiff‘s favor—to the tune of $833,242—just not to plaintiff‘s liking on each and every one of the six issues raised. Nowhere in the record or the briefing does plaintiff claim that the MAC, in preparing its Revised NPR, failed to examine any of the six issues prompting the reopening, nor that the Revised NPR failed to cover all those issues.
Furthermore, even if the MAC failed to examine any reopened issue—despite its workpapers suggesting otherwise, AR at 2—plaintiff did not include in its reinstatement request,
The lack of evidence of any shortcomings in the MAC review and ensuing Revised NPR is fatal to plaintiff‘s claim that it was entitled to reinstatement under PRRB rules.11
* * *
The above analysis, examining the matter through the lens of the parties’ arguments, is sufficient to resolve the matter. The root cause of plaintiff‘s predicament, however, may well be far simpler: the language of the governing regulations (not merely the PRRB rules) seems to foreclose a provider‘s ability to avail itself of both the PRRB review route and the MAC reopening route, irrespective of the procedural choices it makes before the PRRB. So long as the
Insofar as that critical regulatory bar to further appeal controls the outcome, the distinctions raised by the parties—between withdrawal and abeyance, or between mandatory and voluntary withdrawal—matter little. HHS has set up a system where a provider can pursue an appeal before the PRRB as of right, or, with the MAC‘s agreement, review of disputed items through the reopening process. So long as a provider receives the promised review through one route or the other, as plaintiff did here, it is not deprived of its right to contest the NPR.
Plaintiff does not argue that
In this case, plaintiff chose to divert its review to the more informal MAC reopening process and bore the docket-management consequence that when the MAC‘s reopening completed with the issuance of a Revised NPR, by regulation “any appeal” of “a matter that was reopened but not revised” was thereby foreclosed,
For the foregoing reasons, the PRRB rules challenged by plaintiff are lawful and were correctly applied in this case. Accordingly, plaintiff‘s motion for summary judgment is DENIED and HHS‘s cross-motion for summary judgment is GRANTED.
An order consistent with this Memorandum Opinion will be entered contemporaneously.
Date: September 20, 2021
BERYL A. HOWELL
Chief Judge