Allina Health Services v. Burwell ( 2015 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
ALLINA HEALTH SERVICES, )
et al., )
Plaintiffs, )
)
v. ) Civil Action No. 14-1415 (GK)
)
SYLVIA M. BURWELL, Secretary )
United States Department of )
Health and Human Services, )
)
Defendant. )
````````````````->
MEMORANDUM OPINION
Plaintiffs Allina Heal th Services, et al. ("Plaintiffs") ,
bring this action against Sylvia M. Burwell, in her official
capacity as Secretary of the United States Department of Health
and Human Services ("Secretary" or "Defendant"), challenging the
calculation of certain disproportionate share hospital ( "DSH")
payments as procedurally and substantively invalid.
This matter is before the Court on the Defendant's Motion to
Dismiss for Lack of Jurisdiction or in the Alternative for
Voluntary Remand [Dkt. No. 15]. Upon consideration of the Motion,
Opposition [Dkt. No. 16], Reply [Dkt. No. 18], the entire record
herein, and for the reasons set forth below, the Motion shall be
denied.
1
I. Background
A. Factual Overview1
In Allina Health Services v. Sebelius, a group of hospitals,
including the Plaintiffs in the present case, challenged a 2004
rulemaking by the Secretary ( "2004 Final Rule") pertaining to
calculations for Disproportionate Share Hospital ("DSH") payment
determinations under Medicare. See No. 10-cv-1463 (D.D.C.). In
November 2012, the Court (Collyer, J.) granted summary judgment
for the plaintiffs, finding that the 2004 Final Rule violated the
procedural requirements of the Administrative Procedure Act
("APA") and vacating the rule. See Allina Health Servs. v.
Sebelius, 904 F. Supp. 2d 75 (D.D.C. 2012) ("Allina I").
On appeal, our Court of Appeals affirmed the part of the
Allina I Court's decision vacating the 2004 Final Rule. But, the
Court of Appeals held that the Allina I Court erred when it
directed the Secretary to calculate the DSH payments in a
particular manner, rather than simply remanding. See Allina Health
Servs. v. Sebelius, 746 F.3d 1102, 1111 (D.C. Cir. 2014).
1 For purposes of ruling on a motion to dismiss, the factual
allegations of the complaint must be presumed to be true and
liberally construed in favor of the plaintiff. Aktieselskabet AF
21. November 2001 v. Fame Jeans Inc., 525 F.3d 8, 15 (D.C. Cir.
2008); Shear v. Nat'l Rifle Ass'n of Am., 606 F.2d 1251, 1253 (D.C.
Cir. 1979). Therefore, the facts set forth herein are taken from
Plaintiffs' Complaint [Dkt. No. 1].
2
Plaintiffs allege that after the D.C. Circuit's opinion, the
Secretary published calculations for federal fiscal year 2012 DSH
payments ("2012 DSH Calculations") 2 based on the 2004 Final Rule
that had been vacated. Plaintiffs also allege that the new 2012
DSH Calculations are procedurally invalid. Compl. `` 47-49.
Plaintiffs timely appealed to the Provider Reimbursement Review
Board ("PRRB") challenging the 2012 DSH Calculations, see Compl.
`` 36-39, and requested that the PRRB grant expedited judicial
review. Id. ~ 41.
The PRRB is an independent administrative tribunal that
resolves disputes regarding hospital reimbursement determinations
by Medicare contractors or the Centers for Medicare & Medicaid
Services ("CMS"). See 42 U.S.C. § 1395oo(a). The PRRB may resolve
certain payment disputes without following low-level policy
guidance, see 42 C.F.R. § 405.1867; however, it is bound by agency
regulation and rulings, id., and cannot decide "question[s] of law
or regulations." 42 U.S.C. § 1395oo(f) (1). Section 1395oo(f) gives
providers "the right to obtain judicial review of any action .
which involves a question of law or regulations . . . whenever the
[PRRB] determines . . . that it is without the authority to decide
the question." Id.
2Although the calculations are for the 2012 fiscal year, they were
published on June 30, 2014, after the Court of Appeals vacated the
2004 Final Rule. Compl. ~ 36.
3
By letter dated August 13, 2014, the PRRB granted Plaintiffs'
request for expedited judicial review, finding that "it is without
the authority to decide the legal question of whether the
regulation regarding the [2012 DSH Calculations] is valid and
whether the Secretary's actions subsequent to the decision in
Allina [I] are legal. /1
Letter from the Provider Reimbursement
Review Board to Stephanie Webster 6 (Aug. 13, 2014) [Dkt. No. 14-
1] ( "PRRB Decision") .
B. Procedural Background
On August 19, 2014, Plaintiffs filed their Complaint,
pursuant to the PRRB's grant of expedited judicial review [Dkt.
No. 1]. Plaintiffs filed a Notice of Related Case on the same day
[Dkt. No. 2]. Judge Collyer granted Defendant's objection to the
related case designation on May 18, 2015, and the case was randomly
reassigned to this Court. Minute Order dated May 18, 2015; Case
Assignment [Dkt. No. 20].
On October 27, 2014, Defendant filed her Motion to Dismiss
for Lack of Jurisdiction or in the Alternative for Voluntary Remand
[Dkt. No. 15] ("Motion") . Plaintiffs filed their Opposition on
November 10, 2014 [Dkt. No. 16] ("Opp'n"), and Defendant filed her
Reply on November 20, 2015 [Dkt. No. 18] ("Reply").
II. Standard of Review Under Fed. R. Civ. P. 12{b) (1)
As courts of limited jurisdiction, federal courts possess
only those powers specifically granted to them by Congress or
4
directly by the U.S. Constitution. Kokkone~ v. Guardian Life Ins.
Co. of Arn., 511 U.S. 375, 377 (1994). The plaintiff bears the
burden of establishing by a preponderance of the evidence that the
Court has subject matter jurisdiction to hear the case. See Shuler
v. United States, 531 F.3d 930, 932 (D.C. Cir. 2008). In deciding
whether to grant a motion to dismiss for lack of jurisdiction under
Rule 12 (b) (1), the court must "accept all of the factual
allegations in [the] complaint as true [.] " Jerome Stevens
Pharmaceuticals, Inc. v. Food & Drug Adrnin., 402 F.3d 1249, 1253-54
(D.C. Cir. 2005) (internal quotation marks omitted) (citing United
States v. Gaubert, 499 U.S. 315, 327 (1991)). The Court may also
consider matters outside the pleadings, and may rest its decision
on its own resolution of disputed facts. See Herbert v. Nat'l Acad.
of Sciences, 974 F.2d 192, 197 (D.C. Cir. 1992).
III. Analysis
The Defendant has moved to dismiss this case on the ground
that the PRRB improvidently granted expedited judicial review.
Defendant alleges the PRRB reached the conclusion that it was
"without authority to decide" Plaintiffs' challenge to the 2012
DSH Calculations because it erroneously believed "it was 'bound'
to apply the vacated 2004 Final Rule." Motion at 5. Dismissal,
Defendant argues, will permit the PRRB to reconsider Plaintiffs'
challenge. Id. at 1-2.
5
In the alternative, Defendant requests that the Court "grant
a voluntary remand to the agency, which will allow the PRRB to
adjudicate (P]laintiffs' claims without consideration of the
vacated (2004 Final Rule]." Id. at 2.
Plaintiffs oppose Defendant's Motion, arguing that the PRRB's
expedited judicial review determination is final and not subject
to review. See Opp'n at 6-11. Plaintiffs also contend that, if
subject to review, the PRRB's determination was correct, and that
voluntary remand is improper. The Court will address each argument
in turn.
A. The Court Has Authority to Review the PRRB Expedited
Judicial Review Determination
Plaintiffs argue that judicial review of the PRRB's lack of
authority determination is improper. Opp'n at 7-8. Section
1395oo(f) itself makes plain that judicial review is available.
Section 1395oo(f) (1) states that providers "shall have the right
to obtain judicial review of any final decision of the [PRRB] ." 42
U.S.C. § 1395oo(f) (1) (emphasis added). In the same paragraph, the
statute designates the PRRB's determination of its authority to
decide the question of law or regulations "a final decision":
"[T]he determination shall be considered a final decision and not
subject to review by the Secretary." Id. Consequently, the statute
is clear that the PRRB' s authority determination is a final
decision and therefore subject to judicial review. Id.
6
The Seventh Circuit reached the same conclusion in Edgewater
Hosp. , Inc. v. Bowen, stating that " [Section 13 9500 ( f)] itself
establishes a right to judicial review of the [PRRB's]
determination that it lacks the authority to decide a question of
law or regulations." 857 F.3d 1123, 1130 (7th Cir. 1989); accord
Providence Yakima Medical Center v. Sebelius, 611 F.3d 1181, 1187-
88 (9th Cir. 2010) (appellate court held PRRB's lack of authority
determination was incorrect and remanded to District Court with
instructions to remand to PRRB) .
The only case Plaintiffs cite in support of their argument is
Lion Health Servs., Inc. v. Sebelius, a case from the Northern
District of Texas that is not binding on this Court. See Opp'n
at 7 (citing 689 F. Supp. 2d 849 (N.D. Tex. 2010), rev'd in part
on other grounds, 635 F.3d 693 (5th Cir. 2011)). The Lion Health
court addressed the issue of judicial review only in passing,
stating in a footnote that its subject matter jurisdiction was
premised on 42 U.S.C. § 1395oo(f) (1) and that it "s[aw] no reason
why it should review the PRRB's determination of its own authority
at th[at] time." Lion Health, 689 F. Supp. 2d at 856 n.6.
Lion Health lends little support to Plaintiffs' argument. The
Lion Health court did not engage in any in-depth analysis of the
issue, nor did it definitively hold that judicial review was
unavailable.
7
Plaintiffs next argue that the Secretary is statutorily
barred from interfering with the PRRB Decision. See Opp'n at 6-7;
42 u. s . c . § 13 9 5 00 ( f ) ( 1) ("the [expedited judicial review]
determination shall be considered a final decision and not subject
to review by the Secretary") . Plaintiffs are correct that the
Secretary may not directly overturn the PRRB's determination, but
I
that is not what the Secretary is attempting to do here--rather,
the Secretary is asking the Court to review the PRRB's lack of
authority determination. 3
For all the foregoing reasons, the Court concludes that it
has the authority to review the PRRB's determination that it is
without the authority to decide the legal questions at hand.
B. The PRRB Correctly Determined that It Lacks the
Necessary Authority
The Secretary argues that the PRRB erroneously determined
that it is without authority to decide Plaintiffs' case because
the PRRB believed it was "bound" to apply the vacated 2004 Final
Rule. Motion at 5. The crux of the Secretary's argument is, because
the 2004 Final Rule was vacated, it no longer existed and th_erefore
the PRRB "could not have been 'bound by' that nonexistent rule."
3
Plaintiffs also argue that the Court "cannot look behind the
[PRRB' s] determination of its own authority to grant relief." Opp' n
at 10 (citing Affinity Healthcare Servs., Inc. v. Sebelius, 746 F.
Supp. 2d 106, 115 (D.D.C. 2010)). Affinity Healthcare is not
instructive here, as that case involved the CMS Administrator's
reversal of the PRRB' s authority determination, not judicial
review of the determination.
8
Id. at 6. The Secretary also argues that the PRRB was under "the
misimpression that the Secretary had a policy of applying the
regulation notwithstanding" the vacatur. Id.
Plaintiffs argue that, despite her contentions in this case,
the Secretary's usual position is that vacatur does not
automatically eliminate the binding nature of a rule, and that a
vacated rule remains binding until the Secretary affirmatively
acquiesces. See Opp'n at 14-15. Therefore, Plaintiffs contend that
the PRRB correctly determined it was bound by the vacated 2004
Final Rule.
The Court need not determine at this time whether a vacated
rule immediately becomes nonbinding or if it remains binding until
the Secretary affirmatively acquiesces to it, because Plaintiffs
allege that the Secretary did in fact apply the vacated 2004 Final
Rule in the 2012 DSH Calculations, so as to "constitute unlawful
nonacquiecence [sic] of binding D.C. Circuit law." PRRB Decision
at 5; Opp'n at 12. Even if the 2004 Final Rule became non-binding
upon vacatur, Plaintiffs allege that the Secretary unlawfully
continued to apply it. Therefore, the legality of the 2012 DSH
Calculations is a legal question that the PRRB correctly determined
it does not have the authority to decide.
Although the Secretary's Motion and Reply both ignore it,
Plaintiffs brought a second allegation before the PRRB: if the
2012 DSH Calculations do not involve an application of the vacated
9
2004 Final Rule, then the 2012 DSH Calculations are a procedurally
invalid adoption of a new rule. Specifically, Plaintiffs allege
that the 2012 DSH Calculations violate the notice and comment
requirements of the Medicare Act and the APA. Opp'n at 14.
Plaintiffs correctly contend that the PRRB lacked the
authority to decide this second issue, and Defendant has offered
no argument in opposition. Opp'n at 12-13
For the foregoing reasons, the Court finds that the PRRB
properly determined that it was without the authority to decide
the legal questions brought by Plaintiffs. Because the PRRB's grant
of expedited judicial review was proper, Defendant's Motion to
Dismiss is denied.
c. Voluntary Remand Is Improper
The Secretary argues that regardless of whether the PRRB
Decision was proper, the case should be voluntarily remanded to
the PRRB. The Secretary's sole rationale is that the PRRB
erroneously concluded that it was bound to apply the 2004 Final
Rule, and therefore the agency should be given the opportunity to
cure its own mistake. See Motion at 7.
The Court finds that remand is not appropriate in this
instance. The Secretary's voluntary remand argument is identical
to its prior argument that the PRRB Decision was erroneous, which
the Court has already rejected. See supra, Section III.B. To be
clear, the Secretary is not conceding that the vacated 2004 Final
10
Rule was mistakenly applied in the 2012 DSH Calculations, nor is
she seeking to cure any alleged errors in the 2012 DSH
Calculations- -the only mistake identified by the Secretary is
PRRB's grant of expedited judicial review. However, the Court has
already concluded that expedited judicial review was appropriate.
In addition, any error by the PRRB in its expedited judicial
review determination is not the Secretary's to cure. While the
Secretary requests that this Court "allow the [PRRB] to cure its
own mistake," Mot. at 7 (citing Edward w. Sparrow Hosp. Ass'n v.
Sebelius, 796 F. Supp. 2d 104, 207 (D.D.C. 2011)), the PRRB itself
does not allege that it made any mistake at all. And Section
139500 (f) (1) states that the PRRB' s expedited judicial review
determination is "not subject to review by the Secretary." 42
U.S.C. § 1395oo(f) (1). Granting voluntary remand in this instance,
by reason of the Secretary's determination that the PRRB's decision
was a mistake, would circumvent the statute.
Finally, the Secretary's voluntary remand argument fails to
address one of the bases for the PRRB's decision. The Secretary
does not argue that the PRRB erred in determining that it does not
have the authority to decide whether the 2012 DSH Calculations
violate procedural requirements. As there was no error on this
question, voluntary remand would be inappropriate.
For the foregoing reasons, the Secretary's request for
voluntary remand is denied.
11
IV. Conclusion
Upon consideration of the Motion, Opposition, Reply, the entire
record herein, and for the foregoing reasons, it is hereby
ORDERED, that Defendant's Motion to Dismiss for Lack of
Jurisdiction or in the Alternative for Voluntary Remand is denied;
and it is further
ORDERED, that an Initial Scheduling Conference shall be held
on this matter on November 3, 2015, at 10:30 a.m.
October 29, 2015 Gla