Civil Action No. 18-cv-2 (TJK)
September 17, 2019
MEMORANDUM OPINION
Plaintiffs, two hospitals that receive reimbursement from the federal government for serving Medicare patients, sought to challenge their adjustments for a given fiscal year before the Provider Reimbursement Review Board, the administrative body that hears such appeals. But instead of filing their own appeal, they requested that it reinstate a closed common-issue group appeal filed by another hospital and add them to it. The Board declined to reinstate the appeal because the issue raised by Plaintiffs was not the same as that in the group appeal. In this lawsuit, Plaintiffs allege that the Board‘s decision was arbitrary and capricious under the Administrative Procedure Act. The parties have filed cross-motions for summary judgment. Finding no reason to set aside the Board‘s determination under the APA, the Court will deny Plaintiffs’ motion and grant Defendant‘s.1
I. Background
A. Statutory and Regulatory Scheme
Plaintiffs Franciscan St. Margaret Health and Franciscan St. Anthony Memorial Health Centers are hospitals entitled to reimbursement from the federal government for serving patients enrolled in Medicare and Medicaid under Title XVIII of the Social Security Act (“Medicare Act“),
1. Reimbursement Under the Medicare Act
In another case reviewing an administrative decision about a hospital‘s reimbursement for serving low-income patients, the D.C. Circuit explained:
Hospitals receive reimbursement based on prospectively determined national and regional rates, not on the actual amount they spend, and they also receive payment adjustments for some hospital-specific factors. See [
42 U.S.C.] § 1395ww(d)(2) &(d)(5)(F)(i)(I) . The adjustment at issue in this case is the “disproportionate share hospital” (DSH) adjustment, under which the government pays more to hospitals that “serve[] a significantly disproportionate number of low-income patients.” Id.§ 1395ww(d)(5)(F)(i)(I) . This provision is based on Congress‘s judgment that low income patients are often in poorer health, and therefore costlier for hospitals to treat.
Catholic Health Initiatives Iowa Corp. v. Sebelius, 718 F.3d 914, 916 (D.C. Cir. 2013) (alteration in original).
The D.C. Circuit has summarized the formulas for determining each of these two fractions that, together, comprise a hospital‘s DSH adjustment:
| Medicare fraction | Medicaid fraction | |
|---|---|---|
| Numerator | Patient days for patients “entitled to benefits under part A” and “entitled to SSI benefits” | Patient days for patients “eligible for [Medicaid]” but not “entitled to benefits under part A” |
| Denominator | Patient days for patients “entitled to benefits under part A” | Total number of patient days |
Northeast Hosp. Corp. v. Sebelius, 657 F.3d 1, 3 (D.C. Cir. 2011).
2. The Provider Reimbursement Review Board
The federal government outsources the calculation of DSH adjustments, along with other types of reimbursement, to private contractors. See
Two constraints on appeals are relevant here: the scope of the Board‘s review of an RNPR, and the circumstances under which healthcare providers may appeal as a group rather than individually. As for the former, under the applicable regulations, when a provider appeals an RNPR as opposed to an NPR, it may appeal “[o]nly those matters that [have been] specifically revised.”
The Board has also issued procedural rules governing its appeals.
B. The St. Francis Common-Issue Group Appeal
In March 2015, Franciscan St. Francis Health Indianapolis (“St. Francis“)—a hospital owned by the same entity as Plaintiffs—filed an appeal with the Board. AR 76. The appeal purported to be a common-issue group appeal, although at the time it involved only a single hospital. Id. The issue on appeal was the treatment of St. Francis‘s patient days—also known as “dual-eligible” days—for those patients eligible for both Medicaid and Medicare but who have exhausted their Medicare benefits. At least in theory, those days could be included in the numerator for either of the fractions that comprise the DSH adjustment. See AR 93. But since 2004, the Department of Health and Human Services has interpreted the Medicare Act to include dual-eligible days in the Medicare fraction numerator, and contractors have calculated the DSH adjustment accordingly. Id.; see Catholic Health, 718 F.3d at 918. St. Francis‘s appeal sat dormant for a few years. In August 2017, St. Francis requested that the Board transfer its appeal to another common-issue group appeal, and the Board promptly did so. AR 64–65. The Board then closed St. Francis‘s common-issue group appeal, which by then lacked any members. Id.
C. Plaintiffs’ Attempt to Reinstate and Join the St. Francis Appeal
Plaintiffs received RNPRs in March and April 2017. AR 49–50, 59–60. In both instances, the contractor revised its calculation by reducing the number of Medicaid-eligible days in the numerator of Plaintiffs’ Medicaid fractions. See AR 50 (removing 115 days from Franciscan St. Margaret Health‘s Medicaid fraction); AR 60 (removing 12 days from Franciscan St. Anthony Memorial Health Centers’ Medicaid fraction). In the latter case, an inspector general‘s investigation led the contractor to do so. See AR 60. But rather than filing an appeal of their own, in September of that year Plaintiffs and St. Francis requested that the Board reinstate the St. Francis common-issue group appeal, transfer St. Francis‘s appeal back into it, and add Plaintiffs to it as well. AR 43. Counsel for St. Francis and Plaintiffs asserted that they had been unaware when the St. Francis appeal had been closed “that there were pending DSH reopenings for two related providers“—that is, Plaintiffs. Id. They also notified the Board of Plaintiffs’ RNPRs that they sought to appeal.
The contractor that had issued Plaintiffs’ RNPRs objected to Plaintiffs reinstating and joining the St. Francis common-issue group appeal, arguing that while it had reduced the number of Plaintiffs’ Medicaid-eligible days in the RNPRs, it had not altered the dual-eligible days in their Medicare fraction—the subject of St. Francis‘s appeal. AR 41. Because the two situations did not present common questions, it urged the Board to decline to
II. Legal Standard
This Court has jurisdiction to review final actions by the Board pursuant to
III. Analysis
The Court easily concludes that it was not arbitrary and capricious for the Board to have found that Plaintiffs’ RNPRs and the St. Francis common-issue group appeal did not present a common question of fact or law and, on that basis, to have declined to reinstate the common-issue group appeal and add Plaintiffs to it.
As explained above, the Board may decline to hear any appeal that does not comply with the Medicare Act, its applicable regulations, or its procedural rules. See
The issue in the St. Francis common-issue group appeal was the contractor‘s handling of its dual-eligible days. AR 93. In contrast, Plaintiffs were entitled to appeal only those matters “specifically revised” in their RNPRs,
Plaintiffs’ briefing focuses on a second, and even less worthy, argument: that the Board should have permitted them to join the St. Francis appeal because the provider‘s entire DSH adjustment was at issue in both circumstances. See Pls.’ Mot. at 9; Pls.’ Reply at 5. In their view, that their RNPRs adjusted only their Medicaid (but not their Medicare) fraction does not matter, because the RNPRs altered their overall DSH adjustment. But for the reasons already explained, such an expansive view of Plaintiffs’ right to join a common-issue group appeal is at odds with the Medicare Act, pertinent regulations, and the Board‘s rules. Indeed, such a view would all but do away with the statute‘s requirement that such appeals present “common question[s] of fact or interpretation of law.”
IV. Conclusion
For all the above reasons, the Board‘s denial of Plaintiffs’ request to reinstate the St. Francis appeal and permit them to join it was not arbitrary and capricious. Accordingly, the Court will deny Plaintiffs’ Motion for Summary Judgment, ECF No. 14, and grant Defendant‘s Cross-Motion for Summary Judgment, ECF No. 18. A separate order will issue.
/s/ Timothy J. Kelly
TIMOTHY J. KELLY
United States District Judge
Date: September 17, 2019