St. Agnes Medical Center v. Leavitt ( 2009 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
__________________________________________
)
ST. AGNES MEDICAL CENTER, )
)
Plaintiff, )
)
v. ) Civil Action No. 06-0820 (PLF)
)
KATHLEEN SEBELIUS, )
Secretary, United States Department of )
Health and Human Services, )
)
Defendant.1 )
__________________________________________)
OPINION
Plaintiff hospital brings suit for relief in the nature of mandamus, asking the Court
to compel defendant, the Secretary of Health and Human Services, through the Centers for
Medicare and Medicaid Services (“CMS”) to reopen a final payment decision issued by the
Secretary’s payment agent and to recalculate the Secretary’s reimbursement of plaintiff for
services it rendered to indigent clients.2 This matter currently is before the Court on defendant’s
motion to dismiss. After careful consideration of the parties’ papers and the entire record in the
case, the Court will grant defendant’s motion to dismiss.3
1
The Court has substituted Kathleen Sebelius, the new Secretary of the Department
of Health and Human Services, as the defendant in place of former Secretary Michael O. Leavitt,
pursuant to Rule 25(d) of the Federal Rules of Civil Procedure.
2
CMS is the component of the Department of Health and Human Services that is
responsible for administering the Medicare program. It was formerly known as the Health Care
Financing Administration (“HCFA”).
3
The following documents are before the Court in connection with this motion:
Plaintiff’s Second Amended Complaint (“Compl.”); Defendant’s Motion to Dismiss Plaintiff’s
I. BACKGROUND
This case relates directly to an issue that has been litigated before this Court and
resolved by the United States Court of Appeals for the District of Columbia Circuit in Monmouth
Med. Ctr. v. Thompson, 257 F.3d 807 (D.C. Cir. 2001), and In re Medicare Reimbursement
Litig., 414 F.3d 7 (D.C. Cir. 2005), cert. denied, 547 U.S. 1054 (2006). In fact, this matter was
originally consolidated with the other civil actions that comprised In re Medicare Reimbursement
Litigation. See In re Medicare Reimbursement Litigation, Misc. No. 03-0090, Order (D.D.C.
March 13, 2006). The issues in In re Medicare Reimbursement Litigation were litigated before
this Court and the court of appeals. The court of appeals’ ruling, described below, resulted in
resolution of many of the individual cases. It did not, however, resolve this matter. On
September 15, 2008, plaintiff filed a second amended complaint. The history of the litigation in
Monmouth and In re Medicare Reimbursement Litigation is described, in brief, below.
The Medicare Act, Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395 et
seq., creates a federally funded health insurance program for the elderly and disabled. Part A of
the Medicare Act reimburses hospitals for the operating costs of certain inpatient services. See
42 U.S.C. § 1395ww. In order to obtain this reimbursement, eligible hospitals file cost reports
with their “fiscal intermediaries,” see 42 C.F.R. § 413.20, usually insurance companies serving as
the Secretary’s agents for the purpose of reimbursing health care providers. See 42 C.F.R.
§ 421.3; In re Medicare Reimbursement Litigation, 414 F.3d at 8. The intermediaries audit the
hospitals’ cost reports and then issue Notice of Program Reimbursements (“NPRs”) in which
Second Amended Complaint; Plaintiff’s Memorandum in Opposition to Defendant’s Motion to
Dismiss (“Opp.”); and Defendant’s Reply Memorandum in Further Support of Defendant’s
Motion to Dismiss Plaintiff’s Second Amended Complaint.
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they determine the amount owed by the Secretary to the hospitals for the fiscal year at issue. See
42 C.F.R. § 405.1803(a). Hospitals may appeal the NPR to the Provider Reimbursement Review
Board (the “PRRB”) within 180 days. See 42 U.S.C. § 1395oo(a). The PRRB may reverse,
affirm or modify the intermediary’s decision; subsequently, the Secretary may similarly reverse
affirm or modify the PRRB’s decision. See 42 U.S.C. §§ 1395oo(d), (f)(1). Hospitals still
dissatisfied with the final decision may seek judicial review by filing suit in the appropriate
United States District Court. See 42 U.S.C .§ 1395oo(f); In re Medicare Reimbursement Litig.,
414 F.3d at 8.
Reimbursement to hospitals varies based on hospital-specific factors, see 42
U.S.C. § 1395ww(d)(5); those hospitals that serve a “significantly disproportionate number of
low-income patients” receive increased reimbursements known as “disproportionate share”
(“DSH”) adjustments. 42 U.S.C. § 1395ww(d)(5)(F)(i)(I). Congress enacted legislation that
established detailed criteria for determining hospital eligibility and the extent of any DSH
adjustment. See 42 U.S.C. § 1395ww(d)(5)(F); In re Medicare Reimbursement Litig., 414 F.3d
at 9. The HCFA promulgated interpretive regulations to implement these provisions —
regulations that four circuits subsequently found to be inconsistent with the Medicare Act
because they improperly restricted DSH eligibility and reduced payments to eligible hospitals.
See Cabell Hunting Hosp. Inc. v. Shalala, 101 F.3d 984 (4th Cir. 1996); Legacy Emanuel Hosp.
& Health Ctr. v. Shalala, 97 F.3d 1261 (9th Cir. 1996); Deaconess Health Servs. Corp. v.
Shalala, 83 F.3d 1041 (8th Cir. 1996) (per curiam); Jewish Hosp., Inc. v. Sec’y of Health and
Human Servs., 19 F.3d 270 (6th Cir. 1994).
3
In light of these decisions, the Administrator of HCFA issued a ruling that
rescinded the challenged regulation nationwide, announcing a new interpretation more favorable
to hospitals. See Health Care Financing Administration Ruling 97-2 (February 27, 1997)
(“HCFAR 97-2”); see also In re Medicare Reimbursement Litigation, 414 F.3d at 9. In
Monmouth Med. Ctr. v. Thompson, 257 F.3d at 813-15, the court of appeals addressed the reach
of HCFAR 97-2 in conjunction with 42 C.F.R. § 405.1885(b) (1997), which required an NPR to
be reopened and revised if, within three years, the HCFA provided notice to the intermediary that
the decision was “inconsistent with the applicable law.” Id. at 813. The court held that because
HCFAR 97-2 constitutes “notice” under 42 C.F.R. § 405.1885(b) (1997), that regulation imposed
a clear duty on intermediaries, enforceable through mandamus, to reopen NPRs issued for the
three years prior to the Secretary’s issuance of HCFAR 97-2. Id. at 814. The court found that
even though HCFAR 97-2 stated that it only had prospective effect, the mandatory language of
42 C.F.R. § 405.1885(b) (1997) created a nondiscretionary duty to reopen NPRs decided under
the rescinded regulation within the three years prior to its issuance. Id. at 813-15. The court of
appeals subsequently ruled in In re Medicare Reimbursement Litig., 414 F.3d at 11, that this duty
to reopen applied to NPRs issued in the three years prior to the issuance of HCFAR 97-2, even if
the hospitals had not previously applied for reopening, because it would have been futile for the
hospitals to have timely sought reopening in view of the Secretary’s original ruling that HCFAR
97-2 only applied prospectively.
Plaintiff seeks a writ of mandamus ordering the Secretary to compel the
intermediary to reopen and recalculate plaintiff’s DSH payment determination for the Fiscal Year
Ending May 31, 1990 (“FY 1990”) in accordance with HCFAR 97-2. The intermediary issued
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the NPR for FY 1990 on December 11, 1992. See Compl. ¶ 28. On May 24, 1995, plaintiff
requested a reopening of the NPR for FY 1990. See Compl. ¶ 29. The intermediary denied the
request for reopening. See Compl., Ex. 1, June 4, 1997 Letter (“St. Agnes Medical Center . . .
filed an appeal from the refusal of the Blue Cross of California (the ‘Intermediary’) to reopen its
May 31, 1990 cost report. . .”).4 At some point thereafter, although the date is unclear from the
parties’ papers, plaintiff filed an appeal with the PRRB. See Compl. ¶ 34. On June 6, 1997, the
parties agreed to settle plaintiff’s appeal. See Compl. ¶ 29. On March 31, 1998, the intermediary
notified plaintiff that plaintiff did not meet the qualifying threshold for a DSH adjustment
payment. See Compl. ¶ 32. The intermediary used the method of calculation that preceded
HCFAR 97-2 and which was less favorable to hospitals. See id. On June 24, 1999, the PRRB
dismissed plaintiff’s pending appeal because it did not have jurisdiction over an intermediary’s
refusal to reopen a reimbursement decision. See Compl. ¶ 34; see also Your Home Visiting
Nurse Services, Inc. v. Shalala, 525 U.S. 449, 454 (1999). Plaintiff filed suit in this Court on
May 3, 2006 seeking a writ of mandamus.
4
The body of the complaint alleged that the intermediary granted the request for
reopening and assigned an appeal number. See Compl. ¶ 29. As noted above, and as pointed out
by defendant, however, this allegation is contradicted by plaintiff’s own exhibit. See also Opp. at
2 (“the Intermediary declined to reopen its original DSH eligibility determination.”).
When resolving a motion to dismiss for lack of subject matter jurisdiction under
Rule 12(b)(1) of the Federal Rules of Civil Procedure, the Court may consider materials beyond
the pleadings. See Bush v. Butler, 521 F. Supp. 2d 63, 67 (D.D.C. 2007) (citing Herbert v. Nat’l
Academy of Sciences, 974 F.2d 192, 197 (D.C. Cir. 1992)).
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II. DISCUSSION
The matter is before the Court on defendant’s motion to dismiss. Defendant
argues that the Court does not have subject matter jurisdiction over plaintiff’s claim because it is
barred by the statute of limitations and because the complaint does not meet the legal
requirements for mandamus jurisdiction. As to whether plaintiff meets the requirements for
mandamus jurisdiction, the Court recently considered virtually identical arguments in an action
also seeking an order requiring that a hospital’s NPR be reopened and recalculated. See Baptist
Memorial Hospital v. Johnson, 603 F. Supp. 2d 40 (D.D.C. 2009). The complaint in this matter
suffers from the same defects as did the complaint in Baptist Memorial Hospital — namely, that
plaintiff has not identified a clear right to relief or a nondiscretionary duty on defendant’s part,
both of which are necessary to give rise to a right to mandamus. The Court will adopt its analysis
from Baptist Memorial Hospital, as explained below, and will dismiss the complaint for lack of
subject matter jurisdiction in the nature of mandamus. Accordingly, the Court need not reach the
question of whether the statute of limitations has expired or any of the other bases for dismissal
raised in defendant’s motion.
A. Standard for Relief in the Nature of Mandamus
Section 1361 of Title 28 provides that “[t]he district courts shall have original
jurisdiction of any action in the nature of mandamus to compel an officer or employee of the
United States or any agency thereof to perform a duty owed to the plaintiff.” 28 U.S.C. § 1361.
The remedy of mandamus “is a drastic one, to be invoked only in extraordinary circumstances.”
Allied Chemical Corp. v. Daiflon, Inc., 449 U.S. 33, 34 (1980). Mandamus is available only if:
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“(1) the plaintiff has a clear right to relief; (2) the defendant has a clear duty to act; and (3) there
is no other adequate remedy available to the plaintiff.” In re Medicare Reimbursement Litig.,
414 F.3d at 10 (quoting Power v. Barnhart, 292 F.3d 781, 784 (D.C. Cir. 2002)). The party
seeking mandamus “has the burden of showing that ‘its right to issuance of the writ is clear and
indisputable.’” Northern States Power Co. v. U.S. Dep’t of Energy, 128 F.3d 754, 758 (D.C. Cir.
1997) (quoting Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 289 (1988)).5
B. Application of HCFAR 97-2 to Plaintiff’s NPR
The courts in Monmouth and In re Medicare Reimbursement Litigation found that
defendant had a nondiscretionary duty to reopen certain hospitals’ NPRs because the agency’s
reopening regulation required reopening if the notice of inconsistency occurs “within the three
year period” after the date of the determination or decision. 42 C.F.R. § 405.1885(b) (1997); see
also Monmouth Med. Ctr. v. Thompson, 257 F.3d at 814-15; In re Medicare Reimbursement
Litig., 414 F.3d at 9-10. Plaintiffs in those cases contested NPRs that were all issued in the three
years immediately prior to the issuance of HFCAR 97-2 on February 27, 1997. In contrast,
plaintiff’s NPR for FY 1990 was issued on December 11, 1992. See Compl. ¶ 28. Because the
date of plaintiff’s payment decision was more than three years before the notice of inconsistency
in the law announced in HCFAR 97-2, nothing in 42 C.F.R. § 405.1885(b) (1997), or any other
applicable law or regulation, imposed a duty on defendant or its agents, the intermediaries, to
5
A plaintiff who makes a showing of these three legal elements still will only be
awarded relief in mandamus if it is equitable to provide relief. See In re Medicare
Reimbursement Litig., 414 F.3d at 10 (citing 13th Regional Corp. v. U.S. Dep’t of Interior, 654
F.2d 758, 760 (D.C. Cir. 1980) (relief may be provided only when there exist “compelling . . .
equitable grounds”)).
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reopen plaintiff’s NPR. Indeed, to find that the defendant had such a duty to act would suggest
that defendant is obliged to reopen every payment decision made prior to the issuance of HCFAR
97-2 and pursuant to the now invalid regulation, no matter how old those decisions are. Because
plaintiff’s NPR was issued outside the three year window, plaintiff cannot show that it has a clear
right to relief or that defendant had a nondiscretionary duty to act. This Court therefore lacks
mandamus jurisdiction. See Northern States Power Co. v. U.S. Dep’t of Energy, 128 F.3d at
758; see also Baptist Memorial Hospital v. Johnson, 603 F. Supp. 2d at 45.
Plaintiff relies on the “appeal provision” in HCFAR 97-2 as a basis for finding
that the Secretary had a nondiscretionary duty to reopen plaintiff’s NPR. See Opp. at 11. The
relevant paragraph reads:
We will not reopen settled cost reports based on this issue. For
hospital cost reports that are settled by fiscal intermediaries on or
after the effective date of this ruling, these days may be included.
For hospital cost reports which have been settled prior to the
effective date of this ruling, these days may be included. For
hospital cost reports which have been settled prior to the effective
date of this ruling, but for which the hospital has a jurisdictionally
proper appeal pending on this issue pursuant to either 42 C.F.R.
§ 405.1811 or 42 C.F.R. § 405.1835, these days may be included
for purposes of resolving the appeal.
See HCFAR 97-2 at 4 (emphasis added). Plaintiff argues that it had an appeal pending before the
PRRB at the time that HCFAR 97-2 was issued and that the intermediary settled its cost report
after HCFAR 97-2 was issued. It concludes that these two facts created a nondiscretionary duty
for defendant to reopen and recalculate the NPR. See Opp. at 11. The Court cannot agree.
In contrast to the decision in Monmouth that HCFAR 97-2 triggered a mandatory
duty to act under 42 C.F.R. § 405.1885(b) (1997) by treating then current DSH regulations as
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inconsistent with the Medicare statute, see Monmouth Med. Ctr. v. Thompson, 257 F.3d at 814,
the “appeal provision” in HCFAR 97-2 did not create any similar duty with regard to then
pending appeals or later settlements by intermediaries. Plaintiff’s arguments to the contrary are
foreclosed by the use of the word “may” in HCFAR 97-2 rather than “shall” or “must.” While
the paragraph just quoted from HCFAR 97-2 plainly permitted the Secretary and the Review
Board to rely on HCFAR 97-2’s policy change when settling appeals pending at the time HCFAR
97-2 was issued, it does not require them to do so. See In re Medicare Reimbursement Litig.,
309 F. Supp. 2d 89, 96-97 (D.D.C. 2004) (contrasting discretionary reopening pursuant to
regulatory use of the word “may” with mandatory reopening pursuant to use of the word “shall”),
aff’d 414 F.3d 7 (D.C. Cir. 2005); see also Your Home Visiting Nurse Servs. v. Shalala, 525 U.S.
at 457 (“The reopening regulations do not require reopening, but merely permit it: ‘A
determination of an intermediary . . . may be reopened . . . by such intermediary . . . on the
motion of the provider affected by such determination.”) (quoting 42 C.F.R. § 405.1885(a)
(1997)). Without proof of a clear nondiscretionary duty on defendant’s part, the Court has no
mandamus jurisdiction. See Northern States Power Co. v. U.S. Dep’t of Energy, 128 F.3d at
758; see also Baptist Memorial Hospital v. Johnson, 603 F. Supp. 2d at 45-46.
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III. CONCLUSION
For the foregoing reasons, the Court will grant defendant’s motion to dismiss for
lack of mandamus jurisdiction. The case will be dismissed. An Order consistent with this
Opinion will issue this same day.
_/s/_____________________
PAUL L. FRIEDMAN
United States District Judge
DATE: June 25, 2009
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