Rapid City Regional Hospital v. Leavitt ( 2010 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
RAPID CITY REGIONAL HOSPITAL, :
:
Plaintiff, :
:
v. : Civil Action No. 06-1828 (GK)
:
KATHLEEN SEBELIUS,1 Secretary :
of Health and Human Services, :
:
Defendant. :
MEMORANDUM OPINION
Plaintiff Rapid City Regional Hospital (“Plaintiff” or “Rapid
City”) is a non-profit provider of inpatient hospital services
located in South Dakota. Plaintiff brings this action against
Kathleen Sebelius in her official capacity as Secretary of the
Department of Health and Human Services (“Defendant” or “HHS”),
after Defendant dismissed Rapid City’s administrative appeal for
failure to comply with a filing deadline. Pursuant to the Medicare
Act, 42 U.S.C. § 1395 et seq., and the Administrative Procedure Act
(“APA”), 5 U.S.C. § 551 et seq., Rapid City challenges that
decision. This matter is before the Court on Plaintiff’s Motion for
Summary Judgment [Dkt. No. 14] and Defendant’s Motion for Summary
Judgment [Dkt. No. 15]. Upon consideration of the Motions,
Oppositions, Replies, and the entire record herein, and for the
1
Pursuant to Fed. R. Civ. P. 25(d), Secretary of Health and
Human Services Kathleen Sebelius is automatically substituted as
defendant for former Secretary Michael O. Leavitt.
reasons stated below, Plaintiff’s Motion for Summary Judgment is
denied and Defendants’ Motion for Summary Judgment is granted.
I. BACKGROUND2
Part A of the Medicare Act provides for prospective payments
to healthcare providers, such as Plaintiff, that offer inpatient
care to Medicare beneficiaries. See 42 U.S.C. § 1395ww(d). Under
this “prospective payment system” (“PPS”), hospitals receive a pre-
determined payment that is calculated based on a complex statutory
formula. Providers file annual cost reports that detail the
“reasonable costs” they have incurred and the portion of those
costs that are covered by Medicare. 42 U.S.C. § 1395g(a); 42
C.F.R. § 413.50. HHS delegates Medicare administration to the
Centers for Medicare and Medicaid Services (“CMS”). CMS often
contracts out to “fiscal intermediaries” the task of auditing the
providers’ cost reports and creating a Notice of Program
Reimbursement (“NPR”). 42 C.F.R. §§ 405.1803, 421.100.
Rapid City disagreed with the NPR issued in October of 2005 by
the intermediary for Fiscal Year 1999, arguing that it erred in
calculating the “disproportionate share” adjustment (“DSH”), one of
the several payment adjustments that may be made pursuant to the
PPS under 42 U.S.C. § 1395ww. The Medicare Act permits
dissatisfied providers to bring their claims before the Provider
2
Unless otherwise noted, the facts set forth herein are
drawn from parties’ Statements of Material Facts Not in Dispute.
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Reimbursement Review Board (“PRRB” or “the Board”). 42 U.S.C. §
1395oo(a). In April of 2006, Plaintiff appealed its NPR for FY1999
to the PRRB.
The PRRB is authorized by statute to “make rules and establish
procedures, not inconsistent with the provisions of this subchapter
or regulations of the Secretary, which are necessary or appropriate
to carry out the provisions” of the statute. Id. at § 1395oo(e).
CMS issued PRRB Instructions in March of 2002, setting forth the
Board’s policies and guidelines. See PRRB Instructions at
Introduction.3
The Instructions require both the provider and the
Intermediary to file preliminary and final position papers. Id. at
II.B. The due dates for the provider’s preliminary and final
position papers are included in an Acknowledgment and Critical Due
Dates letter sent from the PRRB to the provider. Id. at I.C.I.
Providers submit a preliminary position paper to the Intermediary--
not to the Board--which is tasked with reviewing the provider’s
position paper before engaging in a settlement meeting with the
3
Since the filing of this action, the PRRB Instructions in
place have been modified in key respects. See PRRB Rules (July 1,
2009), available at http://www.cms.hhs.gov/PRRBReview/Downloads
/PRRBRules2009_070109.pdf. These updated Rules apply only to
appeals pending or filed on or after July 1, 2009. Id. at Forward.
For purposes of this Memorandum Opinion, the relevant text is the
2002 PRRB Instructions, available at
http://www.cms.hhs.gov/PRRBReview/Downloads/PRRB_Instructions_Mar
ch_03.pdf, which is the version that governed Plaintiff’s 2006
appeal. Therefore, the Court will rely on the Instructions as they
existed in 2006.
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provider and filing, if necessary, its own position paper with the
Board. Id. at II.B.I. At this early stage of the appeal, the
Board requires the provider to submit to it only the first page of
its preliminary position paper and certification that a full copy
was submitted to the Intermediary. Id.
The PRRB Instructions state that if a provider “fail[s] to
meet the preliminary position paper due date and fail[s] to supply
the Board with the required documentation, the Board will dismiss
[the provider’s] appeal for failure to follow Board procedure.”
Id.4 In addition, the May 9, 2006, Acknowledgment Letter received
by Plaintiff stated that “[y]ou (the provider) are responsible for
pursuing your appeal in accordance with the Board’s procedures,
which are outlined in the Board’s instructions.” AR at 4. It
continued, “[i]f you miss any of your due dates including meeting
either position paper due date, the Board will dismiss your
appeal.” Id. Rapid City received notice in the same letter that
“[t]he Board will not send a due date reminder.” Id.
Federal regulations merely require that the appeal be filed
within 180 days of receipt of the Intermediary’s NPR, and that the
provider identify and explain its reasons for challenging the
Intermediary’s decision, 42 C.F.R. § 405.1841; therefore, the
4
Dismissal is not automatic if the intermediary misses a
deadline; rather, the matter is referred to CMS and the hearing may
continue. PRRB Instructions at I.C.XIV; II.B.I.
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position paper requirement was implemented by the PRRB alone, and
not by statutory or regulatory text.
Rapid City filed a timely appeal on April 21, 2006. The Board
received the letter of appeal on April 25, 2006. The letter
contained information about the substance of Rapid City’s
challenges to the Intermediary’s decision. On May 9, 2006, the
PRRB acknowledged receipt of the appeal, and provided Plaintiff and
the Intermediary with due dates for preliminary and final position
papers. According to the May 9, 2006, letter from the PRRB, Rapid
City’s preliminary position paper was due on August 1, 2006. AR at
3. Plaintiff failed to file its preliminary position paper by that
date, and thus, on August 23, 2006, the Board dismissed its appeal
for failure to comply with PRRB procedures. Id. at 2
Rapid City eventually filed its preliminary position paper
with the Intermediary, which was received on September 13, 2006.
Id. at 1. On the same date, it supplied the Intermediary with a
motion to reinstate its appeal. Id. The Board received a
facsimile copy of the motion filed with the Intermediary. Id. at
10-28. The Board sent Rapid City a letter on December 29, 2006,
informing Plaintiff that its motion to reinstate must be filed
directly with the Board (as opposed to the Intermediary). AR at 8.
The Board then dismissed Plaintiff’s motion for reinstatement.
Plaintiff disputes the claim that it failed to file its motion for
reinstatement with the PRRB.
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II. STANDARD OF REVIEW
The Medicare Act provides for judicial review of a final
decision made by the Board. 42 U.S.C. § 1395oo(f)(1). The Act
instructs the reviewing court to apply the provisions of the APA.
Id. Under the APA, the agency decision is set aside if it is
“arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law.” 5 U.S.C. § 702(2)(A).
“The arbitrary and capricious standard [of the APA] is a
narrow standard of review.” Citizens to Preserve Overton Park,
Inc. v. Volpe, 401 U.S. 402, 416 (1971). It is well established in
our Circuit has held that “[t]his court’s review is . . . highly
deferential” and “we are ‘not to substitute [our] judgment for that
of the agency’ but must ‘consider whether the decision was based on
a consideration of the relevant factors and whether there has been
a clear error of judgment.’” Bloch v. Powell, 348 F.3d 1060, 1070
(D.C. Cir. 2003) (citations and internal quotation marks omitted);
see also United States v. Paddack, 825 F.2d 504, 514 (D.C. Cir.
1987).
If the “agency’s reasons and policy choices . . . conform to
‘certain minimal standards of rationality’ . . . the [agency
decision] is reasonable and must be upheld.” Small Refiner Lead
Phase-Down Task Force v. EPA, 705 F.2d 506, 521 (D.C. Cir. 1983)
(citation omitted); see Kisser v. Cisneros, 14 F.3d 615, 619 (D.C.
Cir. 1994).
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Summary judgment will be granted when there is no genuine
issue as to any material fact. See Fed. R. Civ. P. 56(c). Since
this case involves a challenge to a final administrative decision,
the Court’s review on summary judgment is limited to the
administrative record. Holy Land Found. for Relief and Dev. v.
Ashcroft, 333 F.3d 156 (D.C. Cir. 2003) (citing Camp v. Pitts, 411
U.S. 138, 142 (1973)); Richards v. Immigration & Naturalization
Serv., 554 F.2d 1173, 1177 (D.C. Cir. 1977)) (“Summary judgment is
an appropriate procedure for resolving a challenge to a federal
agency’s administrative decision when review is based upon the
administrative record.”).
III. ANALYSIS
A. The PRRB’s Decision to Dismiss Rapid City’s Appeal for
Failure to Meet a Filing Deadline Was Not Arbitrary or
Capricious.
Plaintiff first argues that in dismissing the appeal, the
Board acted arbitrarily and capriciously because it relied only on
the procedural rule regarding the timely filing of a preliminary
position paper. In doing so, Rapid City contends, the Board failed
to look beyond the preliminary paper rule to the purpose that it
was meant to serve, i.e. to determine whether prior filings by
Plaintiff sufficiently described its position for the Board. In
relying solely on the procedural rule, the PRRB allegedly failed to
examine all of the factors relevant to its ultimate decision to
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dismiss the appeal. See Pl.’s Mot. for Summ. J. at 10-11 (“Pl.’s
Mot.”).
Plaintiff simultaneously claims that it is “not insensitive
to, or unappreciative of . . . the heavy workload under which the
[Board] operates, or to the complexity of the issues before it.”
Pl.’s Opp’n and Reply at 1 [Dkt. No. 20]. The Board hears
thousands of appeals each year, and as a result of the volume and
complexity of the appeals, faces a substantial backlog of cases.
See High Country Home Health Inc. v. Thompson, 359 F.3d 1307, 1310
(10th Cir. 2004) (describing PRRB’s burdensome case load); Rehab.
Ass’n of Virginia, Inc. v. Kozlowski, 42 F.3d 1444, 1450 (4th Cir.
1994) (“There can be no doubt but that the statutes and provisions
in question, involving the financing of Medicare and Medicaid, are
among the most completely impenetrable texts within human
experience.”). Plaintiff insists that despite its massive docket,
“there are limits to the Board’s ability to dismiss [a]ppeals
before it.” Pl.’s Opp’n and Reply at 1.
The Board must provide a “rational connection between the
facts found and the choice made.” Motor Vehicle Mfrs. Ass’n v.
State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). The August
23, 2006, dismissal informed Plaintiff that “the preliminary
position paper was not submitted to the Intermediary and the
required information was not submitted to the Board.” AR at 2. As
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a result, the Board “close[d] this case and remove[d] it from the
docket.” Id.The PRRB relied on its rule that a Plaintiff must meet its
filing deadlines or suffer dismissal of its appeal. See PRRB
Instructions at II.B.I. Courts have time and again found that the
crafting of such procedural rules is well within agency authority
and expertise. See, e.g., Inova Alexandria Hosp. v. Shalala, 244
F.3d 342, 349 (4th Cir. 2000); Novacare, Inc. v. Thompson, 357 F.
Supp. 2d 268, 273 (D.D.C. 2005); United Home Care v. Thompson, No.
99-3123, slip op. at 11 (D.D.C. Sept. 30, 2002). Rapid City does
not dispute that it had notice of the rule, and that it violated
it.5 Pl.’s Mot. at 5-6. In dismissing the appeal, the PRRB
considered the relevant factors before it, and rendered a
reasonable decision based on those factors. Therefore, the Board’s
decision was not arbitrary or capricious. Cf. State Farm, 463 U.S.
at 43. Several courts have reached the same conclusion when faced
with similar facts. See UHI, Inc. v. Thompson, 250 F.3d 993, 996
(6th Cir. 2001); Novacare, 357 F. Supp. 2d at 271-72; United Home
Care, slip op. at 15; Little Co. of Mary Hosp. and Health Care
Ctrs. v. Shalala, No. 98-8232, slip op. at 9 (N.D. Ill. Mar. 30,
2000); Saint Joseph Hosp. and Healthcare Ctr. v. Shalala, No. 99-
7775, slip op. at 10-11 (N.D. Ill. Dec. 11, 2000).
5
Plaintiff’s explanation for missing the deadline is that
there was a “miscommunication between the hospital and its
reimbursement consultant.” Pl.’s Mot. at 5.
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Additionally, an appellate court addressed directly the
counter-argument raised by Plaintiff, that the Board could have and
should have relied on other submissions by Rapid City as a
substitute for the preliminary position paper. Plaintiff argues
that in failing to look behind the purpose of the position paper
rule, the Board’s decision did not consider all the relevant
factors. In High Country, the Tenth Circuit rejected the
provider’s “argument that the final position paper was unnecessary
because [the provider’s] arguments could be gleaned from other”
filings, including the preliminary position paper. 359 F. 3d at
1313. The court found that, “[t]he PRRB was under no duty to hunt
around in the record . . . in an attempt to discern the nature of
High Country’s legal claims,” even if such a search would have
yielded the same information that was supposed to be filed in the
tardy position paper. Id. Accordingly, the Tenth Circuit held
that dismissal was not arbitrary or capricious. The Court concurs
with the reasoning and outcome of High Country.
Rapid City attempts to salvage its arguments by distinguishing
this case law. In doing so, it relies on distinctions without
differences. Plaintiff’s argument is that the above cases dealt
with the late filing of final position papers, whose function is
entirely different from that of preliminary position papers. Pl.’s
Opp’n and Reply at 9-12. Plaintiff implies that the requirement to
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file the preliminary position paper is redundant in this case, as
all of the information was already before the Board. Id.The decisions, however, do not rely on the unique nature of a
final position paper to affirm the Board’s dismissals. See, e.g.,
Novacare, 357 F.2d at 271 (citing to UHI, 250 F.3d at 996-97)
(affirming dismissal for failure to submit “the required
paperwork”); Inova, 244 F.3d at 345 (affirming dismissal where
provider failed to file either position paper). Rather, the cases
rely solely on the more general proposition that legitimate
procedural rules can be relied upon to control the Board’s docket
by dismissing appeals that are not timely filed. Id.; see also
High Country, 359 F.3d at 1311 (discussing utility of strict
procedural deadlines and need for Board to manage docket); cf.
Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 506-07 (1994)
(noting that “substantial deference” granted to agency’s
interpretation of own regulations); Dillmon v. Nat’l Transp. Safety
Bd., 588 F.3d 1085, 1089 (D.C. Cir. 2009) (observing that arbitrary
and capricious review is deferential).
Plaintiffs would have the Court look behind the rule to
determine whether the purpose of the preliminary position paper
requirement was met by earlier submissions. As discussed further
below, the procedural default rule was a legitimate exercise of
agency authority, and was necessary to assist the Board in
controlling its docket. High Country, 359 F.3d at 1312 (explaining
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need for deadlines); Novacare, 357 F. Supp. 2d at 272 (stressing
importance of “smooth functioning of agency’s appellate process”)
(citation omitted). It is completely rational and reasonable for
a court, or agency, to impose deadlines, and to interpret them
strictly and uniformly. See Hooper v. Nat’l Transp. Safety Bd.,
841 F.2d 1150, 1151 n.2 (D.C. Cir. 1988) (“We do not, of course,
hold that the [Board] has no power to enforce its [procedural
default] rule as strictly as it pleases. . . .”). Consistent with
the authority and need to promulgate such rules, the Court cannot
credit Plaintiff’s suggestion that the Board may not dismiss the
appeal for a procedural default because the regulations only allow
it to “affirm, modify, or reverse a determination of an
intermediary,” 42 C.F.R. § 405.1869. See Pl.’s Mot. at 15-16. The
Board has the authority to manage its docket and dismiss appeals in
the event of procedural defaults. See United Home Care, slip op.
at 9.
B. PRRB Instructions Did Not Exceed the Board’s Statutory
Authority and Were Not Inconsistent with HHS Regulations.
Rapid City also contends that the rule allowing for dismissal
improperly shifts the burden for developing pre-hearing positions
from the intermediary to the provider. In doing so, Plaintiff
maintains, the rule runs afoul of regulations that require the
Intermediary to gather pre-hearing information and present it to
the PRRB. See 42 C.F.R. § 405.1853(a). Plaintiff argues that
because the Board was permitted by Congress to formulate rules that
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were not “inconsistent with regulations . . . of the Secretary,” 42
U.S.C. § 1395oo(e), the dismissal rule exceeds the Board’s
statutory authority. Pl.’s Mot. at 14-15.
The regulations do assign the Intermediary certain duties,
including assembling evidence, attempting to meet with the
provider, and “ensur[ing] that all available documentary evidence
in support of each party’s position is part of the record.” 42
C.F.R. § 405.1853(a).6 “Such evidence,” according to the
regulations, “will ordinarily include a position paper from the
provider.” Id.Plaintiff admits that “the Board’s interpretation of the
Agency’s regulation is entitled to substantial deference.” Pl.’s
Opp’n and Reply at 15. The Supreme Court instructs that “the
agency’s interpretation must be given ‘controlling weight unless it
is plainly erroneous or inconsistent with the regulation.’” Thomas
Jefferson, 512 U.S. at 511 (citation and quotation marks omitted).
If the Board’s Instructions “sensibly conform[] to the purpose and
wording of the regulation,” the Instructions will be upheld.
Northern Indiana Pub. Serv. Co. v. Porter County Chapter of Izaak
Walton League of America, Inc., 423 U.S. 12, 15 (1975).
6
Although the exact provisions of this regulation have
been amended, the Secretary still requires the Intermediary to
perform certain duties in an effort to narrow the issues. C.F.R.
§ 405.1853(a)
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The agency’s regulations, while they assign certain
responsibilities to the Intermediary, do not exempt the provider
from fulfilling any of its obligations set forth in the PRRB
Instructions. In fact, for the Intermediary to fulfill its duties,
it must have the compliance of the provider, which is what the
Instructions seek to ensure. The Intermediary must assemble all
“available” evidence, which “ordinarily” includes a position paper
from the provider. 42 C.F.R. § 405.1853(a). This language
suggests that the provider will have independent obligations to
provide such evidence and submit its position paper. In short, the
PRRB Instructions requiring the provider to meet certain
requirements are not inconsistent with regulations that place
affirmative obligations on the Intermediary. Under the
regulations, it is critical that both parties participate in the
narrowing of the issues that will be before the Board; therefore,
the Board’s Instructions “sensibly conform” to the regulations’
“wording and purpose.” See Northern Indiana, 423 U.S. at 15.
C. The Board’s Refusal to Consider Plaintiff’s Motion for
Reinstatement Was Not Arbitrary or Capricious.
Rapid City faxed a copy of its Motion to Reinstate its appeal
to the PRRB on December 6, 2006. AR at 10 (cover sheet showing
facsimile sent from Rapid City to fax number of PRRB, to the
attention of Maureen Sacratini). The Motion had earlier been
provided to the Intermediary. AR at 11. In a letter date-stamped
December 29, 2006, the Board notified Plaintiff that the faxed
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version of the Motion did not meet procedural requirements. AR at
8. The letter informed Rapid City that it had to file a copy of
the Motion, “by mail, . . . directly with the Board” if Rapid City
wanted to the Board to consider it. Id.There is no evidence in the record that Rapid City ever filed
its Motion by mail after receiving this letter. Parties disagree
as to whether the Motion was satisfactorily filed with the Board on
December 6. Rapid City insists that the Board rendered an
arbitrary and capricious decision in refusing to consider its faxed
Motion for Reinstatement. Pl.’s Reply at 20-21.
The text of the PRRB Instructions sets forth procedures
controlling how parties must seek reinstatement of their appeals.
PRRB Instructions at I.C.XIII.7 Nowhere in Part I.C.XIII of the
Instructions does the PRRB require the provider to file for
reinstatement via mail. However, the Instructions, in setting
forth “Board Policies and Procedures for Pursuing an Appeal,”
provide that “[t]he Board requires a confirmation copy by mail of
any documents sent by telephone facsimile.”8 Id. at I.C.II.
The Board’s stated reason for deciding not to consider the
Motion is that it was improperly filed. AR at 8. In conducting
7
This is the only section of the Instructions that is
cited to in the Board’s December 29 letter explaining that the
Motion had to be filed by mail. AR at 8.
8
The policy of requiring confirmations via mail is
eminently reasonable, given that facsimile transmission is not a
totally reliable means of submission.
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arbitrary and capricious review, courts are highly deferential to
agency decisions, and cautious to “not substitute [their] judgment
for that of the agency.” Rural Cellular Ass’n v. FCC, 588 F.3d
1095, 1105 (D.C. Cir. 2009); see also Eagle Broadcasting Group,
Ltd. v. FCC, 563 F.3d 543, 551 (D.C. Cir. 2009) (commenting on
standard of review applied to arbitrary and capricious claims).
The Board cannot be said to have offered “an explanation for
its decision that runs counter to the evidence before the agency,”
463 U.S. at 4, and thus cannot be found to be in violation of State
Farm. Instead, it took note that the Motion was not mailed to the
PRRB, and explained that faxing the Motion was not an adequate
substitute for mailing it. The letter referenced that more
specific guidance was contained in the PRRB Instructions. Cf. id.(“We will . . . uphold a decision of less than ideal clarity if the
agency’s path may reasonably be discerned.”) (internal citation and
quotation marks omitted). The letter provided Rapid City an
opportunity to properly file its Motion pursuant to those
Instructions and the notice contained in the letter. Rapid City
never re-filed. Therefore, the Board’s refusal to consider the
Motion was not arbitrary or capricious.
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IV. CONCLUSION
For the foregoing reasons, Defendant’s Motion for Summary
Judgment is granted, and Plaintiff’s Motion for Summary Judgment is
denied. An order shall issue with this Memorandum Opinion.
/s/
February 2, 2010 Gladys Kessler
United States District Judge
Copies to: attorneys on record via ECF
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