GENTIVA HEALTH SERVICES, INC. v. XAVIER BECERRA, IN HIS OFFICIAL CAPACITY AS SECRETARY OF THE U.S DEPARTMENT OF HEALTH AND HUMAN SERVICES
No. 21-5091
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
April 15, 2022
Argued February 7, 2022
W. Jerad Rissler argued the cause for appellant. With him on the briefs was Adriaen M. Morse, Jr.
William A. Dombi was on the brief for amicus curiae National Association for Home Care & Hospice in support of appellant.
Before: ROGERS, MILLETT and PILLARD, Circuit Judges.
Opinion for the Court by Circuit Judge ROGERS.
ROGERS, Circuit Judge: Every year, millions of Americans — most of them Medicare beneficiaries — receive hospice care. Br. for Nat‘l Ass‘n for Home Care & Hospice as Amicus Curiae at 5–6 (citing Nat‘l Hospice & Palliative Care Org., NHCPO Facts and Figures 6–11, 22 (2020), https://bit.ly/3gTXpmx). For eligible Medicare beneficiaries, the Medicare program reimburses hospice providers for services at per-diem rates in periodic disbursements throughout the fiscal year. That reimbursement is subject to certain fiscal-year-end adjustments, including a cap on the total reimbursement a provider may receive for inpatient hospice care (“inpatient cap“) and a cap on the total reimbursement a provider may receive for all hospice services (“aggregate cap“).
In 2013, budget sequestration under the Budget Control Act of 2011 forced spending reductions in nearly all federal programs, including Medicare, requiring a 2% reduction in all Medicare spending. Periodic disbursements to hospice providers were accordingly reduced by 2%. Because calculation of the aggregate cap was unaffected, the methodology initially used by Medicare‘s hospice
Gentiva Health Services, Inc., a hospice provider, challenges CMS‘s methodology, contending that it violates both the Medicare statute and the Budget Control Act, and that CMS did not follow the required administrative procedures for adopting it. For the following reasons, we affirm the district court‘s grant of summary judgment because the Secretary correctly interpreted the Medicare statute and the Budget Control Act in devising the sequestration methodology, and because adoption of the methodology did not deprive hospice providers of adequate notice or procedural protections.
I.
This case arises out of the interaction of two statutory schemes: the Medicare statute (specifically, the provision governing reimbursements to hospice care providers) and the Budget Control Act.
A.
CMS, a division of the Department of Health and Human Services, administers the Medicare program, including hospice benefits for terminally ill patients under Medicare Part A. See
With respect to the aggregate cap, the Medicare statute provides that reimbursements for hospice services are capped annually: “The amount of payment made under this part for hospice care provided by (or under arrangements made by) a hospice program for an accounting year may not exceed the ‘cap amount’ for the year . . . multiplied by the number of [M]edicare beneficiaries in the hospice program in that year.”
Medicare reimbursements for hospice services follow a two-step process. The Medicare Administrative Contractors that process reimbursements to providers make regular disbursements throughout the cap year (November 1 to October 31) based on the per-diem reimbursement rates. See
The Budget Control Act of 2011, Pub. L. No. 112-25, 125 Stat. 240, aimed to reduce federal government spending via certain budgetary devices. The Act provides that, should Congress fail to enact legislation that reduces the deficit by a specified amount, sequestration is triggered, meaning that federal government spending must be reduced by a certain percentage across the board (with certain programs exempted). See
Medicare spending is subject to sequestration, but enjoys certain special rules, including that the maximum percentage reduction that may be applied to Medicare spending is 2%.
On March 1, 2013, the conditions for sequestration were triggered and OMB determined that the maximum 2% reduction to Medicare spending was required. See Office of Management & Budget, OMB Report to Congress on the Joint Comm. Sequestration for Fiscal Year 2013, at 1, 5 (2013), https://go.usa.gov/xVMJb (“OMB 2013 Sequestration Report“). CMS soon announced how this would impact Medicare providers, explaining that claims “with dates-of-service or dates-of-discharge on or after April 1, 2013, will incur a 2 percent reduction in Medicare payment.” Provider Reimbursement Review Board Decision, Case No. 15-3457GC, at 5 n.32 (May 31, 2019). But at the time, CMS did not specifically address how the reduction would interact with the hospice care reimbursement process.
On March 3, 2015, CMS issued to its contractors a Technical Direction Letter providing additional guidance on the sequestration methodology for hospice reimbursement calculations while sequestration was in effect. The contractors would first determine the amount by which a given provider‘s periodic reimbursements were reduced by sequestration and add that figure to the net payments actually disbursed to the provider during the year, arriving at the amount that would have been disbursed in the absence of sequestration (infra “Figure A“). Then the contractors were to determine the provider‘s aggregate cap and apply the aggregate cap to Figure A, resulting in the amount of overpayment the provider would owe were sequestration not in effect (infra “Figure B“). Finally, to account for the sequestration reduction that had already been applied to the periodic disbursements, the contractors were to reduce Figure B by 2%, arriving at the amount of overpayment actually owed under sequestration (infra “Figure C“). As the district court illustrated by a
| Sequestration Methodology | ||
|---|---|---|
| Hospice A | Hospice B | |
| Aggregate Cap | $1,000 | $1,000 |
| Net Disbursements | $980 | $1,176 |
| Amount Withheld for Sequestration | $20 | $24 |
| Reimbursement Without Sequestration (“Figure A“) | $1,000 | $1,200 |
| Overpayment Without Sequestration (“Figure B“) | $0 | $200 |
| 2% Reduced Overpayment (“Figure C“) | $0 | $196 |
| Final Amount Paid by Medicare | $980 | $980 |
Gentiva Health Servs., Inc. v. Cochran, 523 F. Supp. 3d 81, 88 (D.D.C. 2021).
Gentiva appealed those determinations to the Provider Reimbursement Review Board. Before the Board, Gentiva argued that the Medicare statute,
| Net Payments Methodology | ||
|---|---|---|
| Hospice A | Hospice B | |
| Aggregate Cap | $1,000 | $1,000 |
| Net Disbursements | $980 | $1,176 |
| Overpayment Amount | $0 | $176 |
| Final Amount Paid by Medicare | $980 | $1,000 |
Gentiva, 523 F. Supp. 3d at 89. As this example demonstrates, Gentiva‘s net payments methodology produces different results than the sequestration methodology for a hospice that exceeds its aggregate cap, resulting in a lower amount of overpayment due. Under the sequestration methodology, the most any hospice can retain is 98% of its aggregate cap, because the methodology looks to the amount of allowable reimbursement in the absence of sequestration and then reduces that amount — which is, at most, equal to the aggregate cap — by 2%. But under the net payments methodology, a hospice can retain up to 100% of its aggregate cap.
According to Gentiva, the sequestration methodology violated the statute and the regulation by adding back the sequestration reduction withheld from the preliminary disbursements into the equation, such that — for overpayment purposes — funds the providers did not actually receive were being counted against them. As a result, the providers asserted,
The Board upheld the 2013 cap determinations, concluding that nothing in the statute or the regulation required CMS to use the net payments methodology and that the sequestration methodology was permissible. Board Decision at 9. The Board explained that the periodic disbursements are merely preliminary; they are “a proxy for costs subject to an annual cap.” Id. at 4. Because the aggregate cap, among other possible adjustments, can only be determined and applied at the end of each fiscal year, the Board concluded, “the aggregate cap then becomes the Medicare allowable payment for the . . . cap year and, therefore, sequestration must be applied to the resulting Medicare allowable payment.” Id. at 9. Contrary to the providers’ position, the Board ruled that the sequestration methodology did not “‘double dip’ from any hospices” because it “reverses and adds back any sequestration amounts already deducted during the year . . . to ensure that the aggregate cap is applied separately from sequestration . . . .” Id. at 13.
The Board noted that the simplest way to apply the sequestration reduction would have been to issue the preliminary disbursements as usual, without any reduction, and then apply the 2% reduction “to a full cap year . . . [after] the cap year has ended.” Id. at 11. That calculation would be straightforward: apply the aggregate cap, then apply the 2% sequestration reduction to the resulting amount. Id. But the problem with this method, the Board recognized, was that it required CMS “to knowingly overpay providers” by making full preliminary disbursements and waiting to reduce them at cap-year end, leading to “assessing and collecting overpayments on all Medicare-participating hospices[,] which would not be administratively practical.” Id. at 12. CMS‘s solution — the sequestration methodology — permissibly
The Board not only found the sequestration methodology permissible, but also explained why the net payments methodology would not effectuate the sequestration mandate of the Budget Control Act. While “the sequestration order requires that all Medicare payments, without exception, be reduced,” id. at 17, under the net payments methodology “no portion of the aggregate cap payments would be sequestered,” which the Board found “would violate the President‘s sequestration order, ” id. The same example illustrates how the net payments methodology would operate in the absence of sequestration and under sequestration:
| Without Sequestration | ||
|---|---|---|
| Hospice A | Hospice B | |
| Aggregate Cap | $1,000 | $1,000 |
| Net Disbursements | $1,000 | $1,200 |
| Overpayment Amount | $0 | $200 |
| Final Amount Paid by Medicare | $1,000 | $1,000 |
| With 2% Sequestration | ||
|---|---|---|
| Hospice A | Hospice B | |
| Aggregate Cap | $1,000 | $1,000 |
| Net Disbursements | $980 | $1,176 |
| Overpayment Amount | $0 | $176 |
| Final Amount Paid by Medicare | $980 | $1,000 |
Gentiva, 523 F. Supp. 3d at 89.
Using Gentiva‘s net payments methodology under sequestration, hospices that do not exceed their aggregate cap — e.g., Hospice A — experience a 2% reduction in their total annual reimbursement. But hospices that do exceed their aggregate cap — e.g., Hospice B — experience no reduction in total annual reimbursement compared with a non-sequestration year. Even with the 2% reduction in periodic disbursements, Hospice B‘s total preliminary payments still exceed its aggregate cap, so its total annual reimbursement is $1,000 — the same as it would have been in the absence of sequestration. As a result, the net payments methodology fails to reduce Medicare spending as to Hospice B, whereas the sequestration methodology reduces Medicare spending for both Hospice A and Hospice B.
The CMS administrator declined to review the Board‘s decision, which therefore became the Secretary‘s final
II.
On appeal, Gentiva contends that CMS was required to use the net payments methodology instead of the sequestration methodology for three reasons: First, the plain meaning of the Medicare statute required the net payments methodology. Second, the plain meaning of the Budget Control Act — the source of the sequestration mandate — independently required the net payments methodology. And third, even if none of the relevant statutes compelled one methodology over another, CMS changed its interpretation of the hospice cap provision when it directed the sequestration methodology and failed to adhere to the required administrative procedures for giving notice of the change.
This court reviews the district court‘s grant of summary judgment de novo, Grossmont Hosp. Corp. v. Burwell, 797 F.3d 1079, 1082–83 (D.C. Cir. 2015), and the underlying decision of the Board pursuant to the “considerable deference” standard of the Administrative Procedure Act, Marymount Hosp., Inc. v. Shalala, 19 F.3d 658, 661 (D.C. Cir. 1994). To
A.
“In addressing a question of statutory interpretation, we begin with the text.” Eagle Pharms., Inc. v. Azar, 952 F.3d 323, 330 (D.C. Cir. 2020) (quoting City of Clarksville v. FERC, 888 F.3d 477, 482 (D.C. Cir. 2018)); see Engine Mfrs. Ass‘n v. S. Coast Air Quality Mgmt. Dist., 541 U.S. 246, 252 (2004). The Medicare statute provides that reimbursements for hospice care are subject to a cap:
The amount of payment made under [Medicare Part A] for hospice care provided by (or under arrangements by) a hospice program for an accounting year may not exceed the “cap amount” for the year (computed under subparagraph (B)) multiplied by the number of [M]edicare beneficiaries in the hospice program in that year (determined under subparagraph (C)).
Gentiva maintains that the plain meaning of the hospice cap statute mandates that fiscal-year-end reconciliation use the net payments methodology instead of the sequestration methodology. On Gentiva‘s reading, the statute‘s requirement that the “amount of payment made . . . may not exceed the ‘cap amount’ for the year,”
Critical to Gentiva‘s interpretation is the view that the phrase “amount of payment made” refers to the total periodic payments actually disbursed during the relevant year. That is not, however, the most natural way to read the text. Cf., e.g., HollyFrontier Cheyenne Refin., LLC v. Renewable Fuels Ass‘n, 141 S. Ct. 2172, 2176 (2021). In the hospice cap provision, the word “made” functions not as a past-tense verb, as Gentiva asserts, but rather as an adjectival past participle modifying “amount of payment.” See The Chicago Manual of Style Online § 5.90 (17th ed. 2017). The phrase “amount of payment made” thus should not be read as referring to a discrete historical amount, as Gentiva suggests; rather, it refers to “the amount of payment that is made,” not “the amount of payment that was made.” Indeed, reading the phrase in the past tense, as Gentiva does, renders the rest of the provision ungrammatical and incoherent; the statute goes on to provide
The Supreme Court considered similar statutory language in Henson v. Santander Consumer USA Inc., 137 S. Ct. 1718 (2017), and reached the same conclusion. At issue there was the Fair Debt Collection Practices Act‘s definition of “debt collector” as “anyone who ‘regularly collects or attempts to collect . . . debts owed or due . . . another.‘” Id. at 1721 (quoting
Gentiva‘s attempts to bolster its plain meaning argument fare no better. It points to the Medicare regulations, which provide that “[p]ayments made to a hospice during a cap period that exceed the cap amount are overpayments and must be refunded.”
Ultimately, the regulations and guidance do not support Gentiva‘s contention that the statute unambiguously requires the net payments methodology. Section 1395f(i)(2)(A) does not mandate any one methodology for applying the aggregate cap. Gentiva also maintains that those regulations and policy statements are entitled to deference. But because these
Because the plain meaning of the statute gives no instruction as to how overpayments should be calculated, the court concludes the statute is “silent . . . with respect to the specific issue” of what methodology CMS must use in applying the aggregate cap. Marymount Hosp., 19 F.3d at 661 (quoting Chevron, 467 U.S. at 843). Further, Gentiva offers no reason to doubt that “the [Secretary‘s] answer is based on a permissible construction of the statute,” id. (quoting Chevron, 467 U.S. at 843). Nothing in the text of
B.
In 2011, Congress passed the Budget Control Act, Pub. L. No. 112-25, 125 Stat. 240, amending the Balanced Budget and Emergency Deficit Control Act of 1985, Pub. L. No. 99-177, 99 Stat. 1038. The amended statute provided a mechanism of “budget enforcement,”
Under the Budget Control Act, when sequestration is triggered, federal spending must be reduced by a certain percentage across the board (with certain kinds of spending exempted from sequestration altogether). See
When sequestration is triggered under the Act, OMB calculates the reduction in Medicare payment amounts needed to meet the overall percentage reduction required:
To achieve the total percentage reduction in those programs required by section 902 or 903 of this title . . . , OMB shall determine, and the applicable Presidential order under section 904 of this title shall implement, the percentage reduction that shall apply . . . to individual payments for services furnished during the one-year period beginning on the first day of the first month beginning after the date the order is issued . . . such that the reduction made in payments under that order shall achieve the required total percentage reduction in those payments for that period.
According to Gentiva, independent of the Medicare statute, the total reduction provision mandates the net payments methodology because it provides that the percentage reduction required for sequestration applies “to individual payments for services,”
“It is a ‘fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.‘” Nat‘l Ass‘n of Home Builders v. Defs. of Wildlife, 551 U.S. 644, 666 (2007) (quoting FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132–33 (2000)). Viewing the phrase “individual payments” in isolation ignores key statutory indications of the meaning of the total reduction provision as a whole. Indeed, “individual payments” lies between two other phrases that contradict Gentiva‘s interpretation. The provision opens by explaining that “[t]o achieve the total percentage reduction in [the affected programs],” OMB is to calculate the percentage reduction required.
Using the net payments methodology that Gentiva advocates would have brought the total reduction of Medicare spending below 2%, violating the clear mandate of the total reduction provision. As the district court ably illustrated, see Gentiva, 523 F. Supp. 3d at 88–89, and as explained above by
Read as a whole, the statute permits the sequestration methodology, which “achieve[s] the total percentage reduction” required,
Gentiva takes issue with the view that the periodic disbursements are preliminary and that any reconciliation takes place under the hospice reimbursement scheme, as hospices are paid at a flat per diem rate, as opposed to a fee-for-service or cost-based model under which a year-end review might deem certain costs unallowable and adjust reimbursement accordingly. But, as the Secretary explains, there are a number of adjustments that might take place at cap-year end even under the flat-rate hospice system — a beneficiary might be retroactively determined ineligible for hospice benefits, see
Because the Secretary‘s chosen methodology comports with the statutory text, purpose, and operation, Gentiva has not shown that the Board‘s decision was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” Marymount Hosp., 19 F.3d at 661 (quoting
C.
Finally, Gentiva maintains that CMS changed its existing policy — the net payments methodology — when it adopted
When an agency changes its “existing polic[y],” it must “provide a reasoned explanation for the change.” Encino Motorcars, LLC v. Navarro, 579 U.S. 211, 221 (2016). This requires “at least ‘display[ing] awareness that it is changing position’ and ‘show[ing] that there are good reasons for the new policy.‘” Id. (quoting FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009)).
This, however, was no “‘[u]nexplained inconsistency’ in agency policy,” Encino Motorcars, 579 U.S. at 222 (quoting Nat‘l Cable & Telecomms. Ass‘n v. Brand X Internet Servs., 545 U.S. 967, 981 (2005)). Gentiva‘s objection rests on the unstated assumption that the adoption of the sequestration methodology represented a reinterpretation of the Medicare statute when, in fact, it represented a blank-slate implementation of the Budget Control Act. The sequestration methodology therefore was not a change in agency policy at all.
Nor has Gentiva demonstrated that the net payments methodology was the agency‘s policy prior to sequestration. For much the same reasons, the statutes, regulations, and policy statements governing hospice care reimbursements do not mandate the net payments methodology, so Gentiva‘s reliance on those provisions as evidence of the agency‘s pre-sequestration policy is misplaced. Similarly, the few individual
To the extent Gentiva maintains that the Secretary was required to act by notice-and-comment rulemaking, Gentiva misperceives the interplay between the Medicare statute and the Budget Control Act. Gentiva invokes the Medicare statute‘s requirement that “[n]o rule, requirement, or other statement of policy (other than a national coverage determination) that establishes or changes a substantive legal standard governing . . . the payment for services . . . under this subchapter shall take effect unless it is promulgated by the Secretary by regulation under paragraph (1),”
Accordingly, the court affirms the district court‘s grant of summary judgment to the Secretary and denial of summary judgment to Gentiva.