St. Francis Hospital v. Becerra

Appellate Case: 20-5097 Document: 010110653247 Date Filed: 03/07/2022 Page: 1
FILED
United States Court of Appeals
Tenth Circuit
PUBLISH
March 7, 2022
UNITED STATES COURT OF APPEALS
Christopher M. Wolpert
FOR THE TENTH CIRCUIT Clerk of Court
___________________________________________
ST. FRANCIS HOSPITAL, INC.;
AHS HILLCREST MEDICAL
CENTER, LLC; ST. JOHN
MEDICAL CENTER,
Plaintiffs - Appellants,
No. 20-5097
v.
XAVIER BECERRA,
Defendant - Appellee.
______________________________________________
Appeal from the United States District Court
for the Northern District of Oklahoma
(D.C. No. 4:19-CV-00170-GKF)
___________________________________________
Daniel J. Hettich, King & Spalding LLP (Juliet M. McBride, with him on
the briefs), Washington, D.C., for Plaintiffs-Appellants.
Kyle T. Edwards, Attorney, U.S. Department of Justice, Civil Division
(Abby C. Wright, Attorney, U.S. Department of Justice, Civil Division;
Brian M. Boynton, Acting Assistant Attorney General; Clinton J. Johnson,
Acting United States Attorney; Daniel J. Barry, of Counsel, Acting General
Counsel, U.S. Department of Health and Human Services; Janice L.
Hoffman, of Counsel, Associate General Counsel, U.S. Department of
Health and Human Services; Susan Maxson Lyons, of Counsel, Deputy
Associate General Counsel for Litigation, U.S. Department of Health and
Human Services; Jonathan C. Brumer, of Counsel, Attorney, Department of
Health and Human Services, with her on the briefs), Washington, D.C., for
Defendant-Appellee.
______________________________________________
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Before HOLMES, BALDOCK, and BACHARACH, Circuit Judges.
_____________________________________________
BACHARACH, Circuit Judge.
_____________________________________________
In this appeal, three teaching hospitals 1 challenge the denial of
Medicare reimbursements. These hospitals had shared the cost to train
residents off-site (at places like community clinics). At that time, a
teaching hospital could obtain reimbursement only by incurring
“substantially all” of a resident’s training costs. Omnibus Reconciliation
Act of 1986, Pub. L. No. 99-509, § 9314, 100 Stat. 1874, 2005. Because
the teaching hospitals had shared the training costs for each resident, the
government denied reimbursement.
The denials led the teaching hospitals to file administrative appeals.
While they were pending, Congress enacted the Affordable Care Act
(ACA), which created a new standard for reimbursement. Under the new
standard, teaching hospitals could obtain reimbursement on a proportional
basis when they shared the training costs. Patient Protection and
Affordable Care Act, Pub. L. No. 111-148, § 5504(a)–(b), 124 Stat. 119,
659 (2010).
But the parties disagree on whether the ACA’s new standard applied
to proceedings reopened when Congress changed the law. The agency
1
These teaching hospitals are St. John Medical Center, St. Francis
Hospital, and Hillcrest Medical Center.
2
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answered no, and the district court granted summary judgment to the
agency. We affirm.
1. The court applies a deferential standard when reviewing
administrative decisions.
We conduct de novo review of the district court’s ruling, applying
the same standard that governed there. See Gross v. Hale-Halsell Co., 554
F.3d 870, 875 (10th Cir. 2009) (review of summary-judgment ruling); Via
Christi Reg’l Med. Ctr., Inc. v. Leavitt, 509 F.3d 1259, 1271 (10th Cir.
2007) (review under the Administrative Procedure Act), abrogated on
other grounds by Azar v. Allina Health Servs., 139 S. Ct. 1804 (2019). The
district court could set aside the administrative decision only if it was
• “arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with the law,”
• beyond the court’s “statutory jurisdiction, authority, or
limitations,” or
• “short of statutory right.”
5 U.S.C. § 706(2)(A), (C) (2018), incorporated in 42 U.S.C.
§ 1395oo(f)(1) (2018).
2. Prior to the ACA, federal law did not allow cost-sharing for
shared residents engaged in off-site training.
The teaching hospitals incurred the disputed costs from 2001 to
2006. 2 At that time, federal law covered reimbursement of costs for shared
2
One of the teaching hospitals (St. Francis Hospital) also incurred
training costs in 2007. But in the teaching hospitals’ opening brief, they
3
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residents in nonhospital sites only “if the hospital [had] incur[red] all, or
substantially all, of the costs for the training program in that setting.”
Omnibus Reconciliation Act of 1986, Pub. L. No. 99-509, § 9314, 100 Stat.
1874, 2005 (covering direct graduate medical education costs) (emphasis
added); Balanced Budget Act of 1997, Pub. L. 105-33, § 4621(b)(2), 111
Stat. 251, 477 (covering indirect costs of medical education) (emphasis
added). Because the noun hospital is singular, reimbursement was available
only if a single hospital bore substantially all of the costs for the training
program.
A. The teaching hospitals misapply the Dictionary Act to
interpret the Medicare statutes.
The teaching hospitals argue that the Medicare statutes didn’t
prevent sharing of costs for residents training in community clinics. For
this argument, the teaching hospitals rely on the Dictionary Act, an
umbrella statute providing basic principles to interpret statutes. 1 U.S.C.
§ 1 (2000 & 2006). The Act states that “unless the context indicates
did not mention these costs. The agency thus argues that the teaching
hospitals waived St. Francis Hospital’s argument for reimbursement of its
2007 costs. In oral argument, the teaching hospitals disagreed, pointing out
that the reimbursement issue for 2007 was identical to the issue involving
costs incurred from 2001 to 2006. Cf. Joint App’x vol. II, at 331 ¶ 20
(stipulating in the administrative appeal that St. Francis Hospital’s “two
individual appeals . . . should be handled as appropriate if prior years are
settled for the same [indirect medical education]/[graduate medical
education] issue discussed herein”). We need not address the issue of
waiver because we reject the teaching hospitals’ claim for reimbursement
of costs incurred from 2001 to 2006.
4
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otherwise,” “words importing the singular include and apply to several
persons, parties, or things.” Id. Interpreted in the plural, the statutes would
allow reimbursement if hospitals “incur all, or substantially all, of the
costs for the training program.”
But the teaching hospitals misapply the Dictionary Act. This Act
reflects “the common understanding that the English language does not
always carefully differentiate between singular and plural word forms, and
especially in the abstract, such as in legislation prescribing a general rule
for future application.” 2A Norman J. Singer & Shambie Singer, Statutes
and Statutory Construction § 47:34, at 505 (7th ed. rev. 2014); see Antonin
Scalia & Bryan A. Garner, Reading Law 130 (2012); 3 see also Cong.
Globe, 41st Cong., 3d Sess. 1474 (1871) (statement of Rep. Poland)
(stating that the purpose of the Dictionary Act was “to avoid prolixity and
3
Justice Scalia and Mr. Garner explained:
[The Dictionary Act’s provision for treating singular
words as plural] is simply a matter of common sense and
everyday linguistic experience: “It is a misdemeanor for any
person to set off a rocket within the city limits without a written
license from the fire marshal” does not exempt from penalty
someone who sets off two rockets or a string of 100. If you
cannot do one, you cannot do any, or many. The best drafting
practice, in fact, is to use the singular number for just that
reason: Each rocket unambiguously constitutes an offense.
Antonin Scalia & Bryan A. Garner, Reading Law 130 (2012).
5
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tautology in drawing statutes and to prevent doubt and embarrassment in
their construction”).
Given this common-sense understanding, legislators often use
singular nouns when creating rules applicable to every entity covered by
the statute. See, e.g., Bryan A. Garner, Guidelines for Drafting and Editing
Legislation § 2.4, at 56 (2015) (“Draft in the singular number unless the
sense is undeniably plural, as when the sentence refers to a habitual
practice.”); Ofc. of the Legislative Counsel, U.S. House of
Representatives, House Legislative Counsel’s Manual on Drafting Style
60–61 (1995) (advising use of the singular for clarity of expression). So
Congress’s use of a singular noun often sheds insight into the meaning. 4
For example, when Congress said that “the hospital” could obtain
reimbursement if it had incurred substantially all of the training costs, the
implication is clear: A hospital couldn’t obtain reimbursement when
sharing the costs with another entity.
4
The government observes that singular articles generally refer to
only one item. Appellee’s Resp. Br. at 22 (quoting Banuelos v. Barr, 953
F.3d 1176, 1181 (10th Cir. 2020)). For example, we’ve noted that the
article a ordinarily “refers to only one item.” Banuelos, 953 F.3d at 1181.
This observation doesn’t help here, though, because the statute uses the
article the. This article can introduce either a singular or plural noun. See
Bryan A. Garner, The Chicago Guide to Grammar, Usage, and Punctuation
410 (2016) (stating that the article the “introduces both singular and plural
nouns”). Here the noun is singular (hospital), so we focus on the noun
rather than the accompanying article.
6
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The Dictionary Act doesn’t allow us to change the meaning by
converting the singular noun hospital to a plural form (hospitals). To do so
would distort Congress’s meaning by authorizing reimbursement for
hospitals banding together to share these costs.
Given the risk of distorting congressional intent, the Supreme Court
stated in United States v. Hayes that courts are to construe singular items
as plural only “[o]n the rare occasions” when “doing so [is] necessary to
carry out the evident intent of the statute.” 555 U.S. 415, 422 n.5 (2009)
(internal quotation marks & citation omitted); see also First Nat’l Bank in
St. Louis v. Missouri ex rel. Barrett, 263 U.S. 640, 657 (1924) (stating that
the Dictionary Act’s provision, treating singular terms as plural, “is not
. . . to be applied except where it is necessary to carry out the evident
intent of the statute”). 5 Applying Hayes, we see no obvious signs of
congressional intent to allow reimbursement of shared costs. 6 If Congress
5
The teaching hospitals point to Rowland v. California Men’s Colony,
Unit II Men’s Advisory Council, 506 U.S. 194 (1993). There the Court
required compliance with the Dictionary Act’s rules unless doing so would
be “forcing a square peg into a round hole.” Id. at 200. But Rowland was
addressing the Dictionary Act’s definition of the term “person,” not
characterization of a singular term as the plural. See id. at 199–200.
Rowland didn’t address the statutory use of singular terms.
6
The teaching hospitals observe that by enacting the statutes,
Congress intended to encourage use of residents outside of hospitals. H.R.
Rep. 99–727 (July 31, 1986), 1986 U.S.C.C.A.N. 3607, 3660. But Congress
never suggested that this purpose would override any other considerations
(such as cost).
7
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had intended to allow reimbursement for hospital sharing costs, we’d
expect the statutes to address the allocation of the reimbursement, the
necessity of a written agreement, and the record-keeping requirements. But
the Medicare statutes contained no such provisions from 2001 to 2006. 7
The teaching hospitals also argue that Hayes, as a 2009 opinion,
doesn’t bear on Congress’s intent when it enacted the statutes (1986 and
1997). But Hayes was interpreting the Dictionary Act, which underlies the
teaching hospitals’ argument. And when the Supreme Court interprets a
statute, it is deciding what the statute has always meant. See United States
v. Rivera-Nevarez, 418 F.3d 1104, 1107 (10th Cir. 2005) (“Decisions of
statutory interpretation are fully retroactive because they do not change the
law, but rather explain what the law has always meant.”). 8 So the statutory
7
As discussed below, Congress enacted a new law in 2010, expressly
allowing hospitals to share training costs. With that new law, Congress
• specified how the hospitals were to allocate the reimbursement,
• required a written agreement between the hospitals sharing the
costs, and
• created record-keeping obligations.
Patient Protection and Affordable Care Act (“ACA”) § 5504(a)–(b), 42
U.S.C. § 1395ww(h)(4)(E), (d)(5) (2012).
8
Though Hayes wasn’t decided until 2009, the Supreme Court had said
the same thing in 1924—over four decades before Congress enacted the
pertinent Medicare provisions. See First Nat’l Bank in St. Louis v.
Missouri ex rel. Barrett, 263 U.S. 640, 657 (1924) (stating that the
Dictionary Act’s provision, treating singular terms as plural, “is not . . . to
8
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text in 1986 and 1997 allowed reimbursement only when a single hospital
had incurred substantially all of a resident’s training costs—not when two
or more hospitals had shared these costs.
B. If the Medicare statutes from 2001 to 2006 were ambiguous,
the agency’s interpretation would have resolved the
ambiguity by prohibiting reimbursement for shared costs.
Despite the statutory reference to “the hospital” bearing the costs,
let’s assume the existence of an ambiguity in the statutory text. With that
ambiguity, the court could consider whether the agency’s statutory
interpretation had been permissible. Olmos v. Holder, 780 F.3d 1313, 1317
(10th Cir. 2015). We call this “Chevron deference” based on Chevron,
U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842–43 (1984).
The agency interpreted the Medicare statutes in 1998 and 2003. Both
times, the agency interpreted the Medicare statutes to allow reimbursement
only when a single hospital bore substantially all of the training costs.
In 1998, the agency solicited comments and interpreted the statutes
through a new rule. That rule allowed reimbursement to a hospital only if
be applied except where it is necessary to carry out the evident intent of
the statute”). In this 1924 opinion, the Supreme Court was interpreting an
earlier version of the Dictionary Act, which had created discretion to
interpret singular terms as plural. Compare id. (quoting 1 Rev. Stat. § 1
(2d ed. 1878) (“[W]ords importing the singular number may extend and be
applied to several persons or things.”)), with 1 U.S.C. § 1 (2000 & 2006)
(“[W]ords importing the singular include and apply to several persons,
parties, or things.”).
9
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it had incurred substantially all of the training costs for the full
complement of residents. 63 Fed. Reg. 40,954; 40,986 (July 31, 1998)
(“[A] hospital may include the time a resident spends in nonprovider
settings in its indirect medical education . . . and direct [graduate medical
education] full-time equivalent count if it incurs ‘all or substantially all’
of the costs of training residents in the nonhospital site.”). The rule
clarified the prohibition against double-dipping by a hospital and other
healthcare providers that shared residents. But the rule did not allow
reimbursement when multiple entities shared the costs of a training
program.
In 2003, the agency acted again, soliciting comments and interpreting
the statutes through another new rule. This time, the rule limited
reimbursement to a hospital assuming substantially all of the training costs
for the full complement of residents: “A hospital is required to assume
financial responsibility for the full complement of residents training in a
nonhospital site in a particular program” and “cannot count any [full-time
equivalent] residents if it incurs ‘all or substantially all of the costs’ for
only a portion of the [full-time equivalent] residents in that program
training setting.” 68 Fed. Reg. 45,346; 45,439; 45,449–50 (Aug. 1, 2003)
(final rule) (emphasis added). This rule again reflected an understanding
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that reimbursement is allowed only when a single hospital bears
substantially all of the costs for the training program. 9
The teaching hospitals downplay this interpretation, arguing that the
agency was trying to prevent gamesmanship among dental schools, which
often shifted their training costs to hospitals in order to obtain
reimbursement. This was indeed an impetus for the agency’s interpretive
process. 68 Fed. Reg. 27,154; 27,213 (May 19, 2003) (proposed rule). But
the agency also noted that the problem went beyond dental schools. Id.And in explaining that dental schools couldn’t obtain eligibility for
reimbursement only by shifting the costs, the agency illustrated the rule
9
In 2007, the agency also adopted a rule prohibiting reimbursement
when two or more hospitals shared the costs:
[I]f two (or more) hospitals train residents in the same
accredited program, and the residents rotate to the same
nonhospital site(s), the hospitals cannot share the costs of that
program at that nonhospital site . . . as we do not believe this is
consistent with the statutory requirement at section
1886(h)(4)(E) of the Act which states that the hospital must incur
“all or substantially all, of the costs for the training program in
that setting.”
72 Fed. Reg. 26,870, 26,969 (May 11, 2007) (emphasis added). The teaching
hospitals question the validity of the 2007 rule, arguing that the agency
• failed to provide notice and an opportunity to comment and
• incorrectly interpreted the statute.
We need not decide the validity of the 2007 rule: Even if the 2007 rule were
invalid, the agency’s interpretations in 1998 and 2003 would have clarified
the statutory meaning.
11
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with hypothetical situations that didn’t involve dental schools. 68 Fed.
Reg. 45,435. For example, the agency explained how the statute would
treat a hospital that incurred the costs of new residents added to an
existing program. 68 Fed. Reg. 45,439. In this situation, the agency
explained that the statutory language allowed reimbursement of a hospital
only if it had incurred substantially all of the costs for the entire training
program:
We note that, under existing policy, to count residents in a
nonhospital setting, a hospital is required to incur for [sic] “all
or substantially all of the costs of the program” in that setting.
In other words, a hospital is required to assume financial
responsibility for the full complement of residents training in a
nonhospital site in a particular program in order to count any
[full-time equivalent] residents training there for purposes of
[indirect medical education] payment. . . . This policy is derived
from the language of the [indirect medical education] and direct
[graduate medical education] provisions of the statute on
counting residents in nonhospital settings; both sections
1886(d)(5)(B)(iv) and 1886(h)(4)(E) of the Act state that the
hospital must incur “all, or substantially all, of the costs for the
training program in that setting.
Id. (emphasis added).
Granted, the agency was not focused on sharing of costs between
hospitals. But the illustration would have prevented reimbursement when
multiple hospitals had shared the training costs.
The agency’s rules in 1998 and 2003 reflected reasonable
interpretations of the statutes. These interpretations would thus help us
interpret any conceivable ambiguity in the statutes. Coupled with the
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statutory references to costs incurred by “the hospital”—a singular entity—
the agency’s statutory interpretations would clarify any ambiguity by
preventing reimbursement when hospitals had shared the training costs.
C. The teaching hospitals can’t rely on agency contractors’
erroneous interpretation of the Medicare statutes.
Though the statutes didn’t permit reimbursement, the teaching
hospitals complain that agency contractors told them otherwise. The
contractors’ mistakes are unfortunate, but they didn’t bind the agency. See
Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 517 (1994) (“[T]he mere
fact that . . . a fiscal intermediary may have allowed reimbursement to
petitioner for [graduate medical education] costs that appear to have
violated [a regulation] does not render the Secretary’s interpretation of that
[regulation] invalid.”); Heckler v. Cmty. Health Servs. of Crawford Cty.,
Inc., 467 U.S. 51, 63–64 (1984) (stating that the agency isn’t bound by a
contractor’s erroneous advice).
Recognizing that these statements weren’t binding, the teaching
hospitals argue that the contractors’ mistakes reflect a lack of fair notice
involving the agency’s interpretation. But the statutes themselves supplied
the required notice. “[T]hose who deal with the Government are expected
to know the law and may not rely on the conduct of Government agents
contrary to law.” Heckler, 467 U.S. at 63; see Cmty. Health Sys., Inc. v.
Burwell, 113 F. Supp. 3d 197, 233 (D.D.C. 2015) (“While the plaintiffs
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have supplied evidence of confusion by some intermediaries and an
accountant in a Medicare component seventeen years ago, this does not
prove lack of fair notice to the plaintiffs of the agency’s policy.”).
We thus conclude that the teaching hospitals couldn’t obtain
reimbursement based on the contractors’ erroneous statements.
** *
Together, the statutory language and the agency’s interpretation
limited reimbursement to a single hospital bearing substantially all of the
costs of the training program. So when the three teaching hospitals shared
the training costs, the Medicare statutes would not have permitted
reimbursement.
3. The ACA expanded reimbursement only for future costs, not
those already incurred.
The ACA changed the law in 2010, allowing reimbursement when
hospitals share the residents’ costs. Patient Protection and Affordable Care
Act, Pub. L. No. 111-148, § 5504(a)–(b), 124 Stat. 119, 659 (2010)
(codified at 42 U.S.C. § 1395ww) (2012)). Going forward, teaching
hospitals could obtain reimbursement on a proportional basis. 42 U.S.C.
§ 1395ww(d)(5)(B)(II), § 1395ww(h)(4)(E)(ii) (2012). But the ACA stated
that the change would be “effective [only] for [discharges or cost-reporting
periods] on or after July 1, 2010.” 42 U.S.C. § 1395ww(h)(4)(E)(ii),
§ 1395ww(d)(5)(B)(iv)(II) (2012). Given this change, the parties disagree
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on the applicability of the new reimbursement standards to training costs
incurred prior to July 1, 2010. We conclude that the new reimbursement
standards do not apply to those costs.
A. We presume that the new reimbursement standards don’t
apply to costs preceding enactment of the ACA.
We ordinarily presume that new laws don’t apply retroactively.
Landgraf v. USI Film Prods., 511 U.S. 244, 278–80 (1994). To determine
the applicability of the presumption, we apply two steps:
1. We first ask whether Congress expressly addressed retroactive
application. Id. at 280.
2. If not, we consider whether application of the law would affect
someone’s substantive rights, duties, or liabilities based on
conduct that had preceded the statutory enactment. Fernandez-
Vargas v. Gonzales, 548 U.S. 30, 37 (2006).
If we answer yes to the second question, we “apply the presumption against
retroactivity by construing the statute as inapplicable to the event or act in
question owing to the ‘absence of a clear indication from Congress that it
intended such a result.’” Id. at 37–38 (cleaned up) (quoting INS v. St. Cyr,
533 U.S. 289, 316 (2001), superseded by statute on other grounds by
REAL ID Act of 2005, 8 U.S.C. § 1252(a)(4)–(5)) (2006)).
B. First Step: The ACA did not expressly provide for
retroactive application of the new reimbursement standards.
At the first step, we consider congressional intent based on the
ACA’s text. To determine Congress’s intent, we consider the ACA’s
language. See In re John Q. Hammons Fall 2006, LLC, 15 F.4th 1011, 1019
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(10th Cir. 2021) (stating that we first “employ ordinary statutory-
interpretation tools ‘to determine whether Congress has expressly
prescribed the statute’s proper reach.’” (quoting Landgraf v. USI Film
Prods., 511 U.S. 244, 280 (1994))). The ACA’s text doesn’t expressly
apply the new reimbursement standards to previous costs. 10
i. Section 5504(a) and (b) states that reimbursement for
past costs reports would be governed by the prior
reimbursement standards.
In § 5504 of the ACA, subsections (a) and (b) state that the new
reimbursement standards apply only to discharges or cost reports on or
after July 1, 2010—not before. ACA § 5504(a)–(b), 42 U.S.C.
§ 1395ww(h)(4)(E)(ii), § 1395ww(d)(5)(B)(iv)(II) (2012). Going forward,
hospitals could claim reimbursements proportional to their own costs. Id.
Subsections (a) and (b) also address the standard governing costs that
had preceded the ACA. For those costs, Congress incorporated the prior
statutory language, allowing a hospital to count time spent in outpatient
settings only “if the hospital [had] incur[red] all, or substantially all, of
the costs for the training program in that setting.” ACA § 5504(a), 42
U.S.C. § 1395ww(h)(4)(E)(i) (2012); ACA § 5504(b), 42 U.S.C.
§ 1395ww(d)(5)(B)(iv)(I) (2012).
10
The agency goes further, arguing that the ACA expressly prohibits
retroactive application of the new reimbursement standards. We need not
address this argument.
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ii. Section 5504(c) does not expressly or necessarily make
the new reimbursement standards retroactive.
Despite these express statements of prospective application, the
teaching hospitals argue that Subsection (c) made the new reimbursement
standards retroactive. But Subsection (c) does not say anything about
retroactivity or application of the new reimbursement standards to past
costs.
Congress knew how to make the ACA’s new provisions retroactive.
An example appears in § 5505, where Congress amended the
reimbursement provisions for residents’ time in scholarly and didactic
activities. ACA § 5505, 124 Stat. at 660 (codified at 42 U.S.C. § 1395ww
(2012)). For these provisions, Congress expressly mandated retroactive
application of these changes to cost-reporting periods beginning on or after
January 1, 1983. ACA § 5505(c)(1), 42 U.S.C. § 1395ww note (2012).
Another example appears in § 5506, where Congress amended the
reimbursement provisions for residents’ slots upon the closing of a
hospital. ACA § 5506, 124 Stat. at 661 (codified at 42 U.S.C. § 1395ww)
(2012). There Congress again specified retroactivity, requiring the agency
to establish a process for increasing the limit on residents at other
hospitals when a hospital had closed in the last two years. ACA § 5506(a),
42 U.S.C. § 1395ww(h)(4)(H)(vi) (2012).
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But Congress said nothing like that when addressing the new
reimbursement standards. The difference suggests that Congress may not
have intended retroactive application of the new reimbursement standards.
See Ad Hoc Shrimp Trade Action Comm. v. United States, 802 F.3d 1339,
1350 (Fed. Cir. 2015) (concluding that retroactive application isn’t implied
when the statute contained other provisions expressly providing retroactive
effect).
Given the absence of any express provision calling for retroactive
application of the new reimbursement standards, the teaching hospitals rely
on an implication from § 5504(c). This implication suffices only if
retroactive construction is “necessary.” Fernandez-Vargas v. Gonzales,
548 U.S. 30, 37 (2006) (quoting United States v. St. Louis, S.F. & Tex. Ry.,
270 U.S. 1, 3 (1926)). And such construction is necessary only if the
implication of retroactivity were “so clear that it could sustain only one
interpretation.” INS v. St. Cyr, 533 U.S. 289, 316–17 (2001), superseded by
statute on other grounds by REAL ID Act of 2005, 8 U.S.C. § 1252(a)(4)–
(5) (2006).
Subsection (c) does not necessarily imply retroactive application of
the new reimbursement standards. The teaching hospitals’ contrary
argument stems from the subsection’s double negative, which says that the
new law would not be applied when there wasn’t a proper appeal pending
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as of July 1, 2010. ACA § 5504(c), 124 Stat. at 660, 42 U.S.C. § 1395ww
note (2012). From this double negative, the teaching hospitals argue that
• reopening was mandatory when there was a properly perfected
appeal pending as of July 1, 2010, and
• the new reimbursement standards applied in these reopened
proceedings.
As the teaching hospitals argue, the double negative could
conceivably be read to require reopening of cost reports when
jurisdictionally-proper appeals—including theirs—were pending as of
July 1, 2010. But this interpretation is at least debatable because Congress
might have intended to preserve the discretionary nature of reopenings.
In Subsection (c), Congress said that § 5504 doesn’t require
reopening unless there’s a proper appeal. The teaching hospitals analogize
this language to a sign in a bar stating, “No liquor sold to those under 21.”
With this analogy, the teaching hospitals argue that most people would
interpret this sign to mean that liquor would be sold to those over 21.
But context matters. In the bar example, the teaching hospitals’
implication comes from a background assumption: Bars sell liquor, so
anyone would assume that the bar would sell the liquor to someone. If the
bar wouldn’t sell to someone under 21, patrons could safely assume that
the bar would sell to individuals 21 or over.
The background assumptions here are different because reopenings
have long been considered discretionary. Your Home Visiting Nurse Servs.,
19
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Inc. v. Shalala, 525 U.S. 449, 457 (1999). The reimbursement context,
then, more clearly resembles a context where everyone in a bar understands
that bartenders can decide who to serve. With that understanding, patrons
might assume that a bartender could refuse to sell liquor even to the
elderly.
The teaching hospitals’ argument relies not only on background
assumptions, but also on the fallacy of drawing a positive inference from a
negative statement. Consider this example from the district court’s
opinion: “Because it’s not cold outside, it’s not snowing. It is now cold
outside, therefore it must be snowing.” Joint App’x vol. II, at 277 (citing
Ace Fire Underwriters Ins. Co. v. Romero, 831 F.3d 1285, 1291 n.7 (10th
Cir. 2016)). We know that cold air doesn’t always bring snow, so there’s
something wrong with the logic of this sentence pair. The error consists of
drawing a positive inference from a negative statement. Here too, the
teaching hospitals err by drawing a positive inference from a negative
statement: We know that reopening isn’t required in the absence of a
proper appeal. But that doesn’t mean that when there’s a proper appeal,
reopening is required.
Finally, the teaching hospitals argue that the agency interpreted
nearly identical statutory language in §§ 5505(d) and 5506(c) to require
reopening when the claimant had an administrative appeal pending upon
enactment of the ACA. This isn’t true of the agency’s interpretation of
20
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§ 5505(d): “This provision may not be applied in a manner that would
require the reopening of settled cost reports, except those cost reports on
which, as of March 23, 2010, there is a jurisdictionally proper appeal
pending on direct [graduate medical education] or [indirect medical
education] payments.” 42 C.F.R. § 412.105(f)(1)(iii)(C) (emphasis added).
Under the teaching hospitals’ theory, the term except in § 5505(d)
creates a double negative, making the first clause positive. So the teaching
hospitals would treat the regulatory interpretation to require reopening
where there is a jurisdictionally proper appeal. But stated positively, this
provision would say that it may “be applied in a manner that would require
the reopening of settled cost reports” when there’s a jurisdictionally proper
appeal pending as of March 23, 2010. The agency’s interpretation of
§ 5505(d) thus suggests that reopening is discretionary, not automatic. See
Ofc. of the Legislative Counsel, U.S. Senate, Legislative Drafting Manual,
§ 315(a), at 76 (1997) (“Use ‘may’ . . . to grant a right, privilege, or
power.”).
Though the teaching hospitals argue that § 5504(c) requires
reopening of the cost reports underlying their administrative appeal, the
teaching hospitals could prevail here only if the new reimbursement
standards were to apply in the reopened proceedings. In our view, however,
application of the new reimbursement standards would contradict the
statutory language addressing the effective dates (subsections (a) and (b)).
21
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See pp. 14–16, above. The teaching hospitals disagree, arguing that
Subsection (c) just qualifies the effective dates in subsections (a) and (b)
by providing an exception to the general rule that the new reimbursement
standards apply to discharges and cost-reporting periods starting on or
after July 1, 2010. But Subsection (c) doesn’t say anything about effective
dates.
Congress included an effective date in subsections (a) and (b) and
could easily have done so in Subsection (c). And when Congress wanted to
make parts of the ACA retroactive, Congress made the retroactivity
explicit. ACA § 5505(c), 42 U.S.C. § 1395ww note (2012); see p. 17,
above. But Subsection (c) is silent on retroactivity. That silence arguably
implies “that Congress did not want the Act’s reimbursement rules to be
retroactive.” Covenant Med. Ctr., Inc. v. Burwell, 603 Fed. App’x 360, 364
(6th Cir. 2015) (unpublished) (emphasis in original). At a minimum,
however, Subsection (c) didn’t expressly or necessarily mandate
retroactive application of the new reimbursement standards.
To interpret Subsection (c) as an exception to the rule stated in
subsections (a) and (b), the teaching hospitals rely on a book by Justice
Antonin Scalia and Mr. Bryan Garner, which states that courts can
sometimes synthesize contradictory provisions by treating one provision as
a specific exception to a general rule. Appellant’s Opening Br. at 31
(discussing Antonin Scalia & Bryan A. Garner, Reading Law § 28, at 183
22
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(2012)). But the court can synthesize the provisions this way only when
they’d otherwise clash. Id.; see United States v. Henry, 1 F.4th 1315, 1325
(11th Cir. 2021) (“The general/specific canon only applies when ‘the
attribution of no permissible meaning can eliminate the conflict.’”)
(quoting Antonin Scalia & Bryan Garner, Reading Law § 28, at 183
(2012)).
And we can easily synthesize Subsection (c) with subsections (a) and
(b). Subsections (a) and (b) provide both the general rule and the exception
regarding the new reimbursement standards: The general rule authorizes
future application of the new reimbursement standards, and the exception
prohibits application of these standards to past discharges and cost-
reporting periods. Subsection (c) addresses the separate issue of
reopenings.
Despite the distinction between these issues, the teaching hospitals
argue that the new reimbursement standards would presumably apply to
reopenings because they would otherwise be futile. This is true for the
three teaching hospitals’ administrative appeals, but may not be true for
many other disputes over reimbursement.
In a proceeding reopened under Subsection (c), the underlying
standard would depend on the claim. As noted above, the ACA not only
allowed reimbursement for hospitals sharing costs, but also loosened the
restrictions on reimbursement for residents’ time in scholarly and didactic
23
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activities. ACA § 5505(a), 124 Stat. at 660 (codified at 42 U.S.C.
§ 1395ww (2012)); see p. 17, above. So a reopening could allow a hospital
to take advantage of the new reimbursement standards for scholarly and
didactic activities. 11
At the first step, we thus conclude that Congress did not expressly or
necessarily make the new reimbursement standards retroactive.
C. Second Step: Application of the new reimbursement
standards would retrospectively affect the government’s
rights.
Because Subsection (c) didn’t expressly or necessarily mandate
retroactive application, we consider whether application of the new
reimbursement standards would increase the government’s liability for
reimbursement of earlier costs. See Landgraf v. USI Film Prods., 511 U.S.
244, 280 (1994). Prior to passage of the ACA, the government had no
obligation to reimburse the teaching hospitals for costs incurred between
2001 and 2006. See Part 2, above. If we were to apply the ACA’s new
reimbursement standards, the government would incur a new obligation
11
The teaching hospitals argue that the agency has admitted that
Congress wouldn’t have required reopening only to apply the same single-
hospital requirement that had existed previously. This argument
misinterprets what the agency said. It said that reopening isn’t required
and that even if it were, Subsection (c) had said nothing about the
substantive standard. As the agency pointed out, that standard will vary
from case to case, depending on the nature of the administrative appeal.
24
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that hadn’t existed earlier. So on its face, application of the new
reimbursement standards would create a new governmental liability.
The teaching hospitals downplay the effect of this new governmental
liability, arguing that
• the government incurs no harm by paying hospitals for using
residents and
• the presumption doesn’t apply here because the retrospective
burden would fall on the government rather than a private
party.
But the presumption against retroactivity applies even when
• the burden falls on the government and
• the governmental burden involves Medicare reimbursement.
See Edwards v. Lujan, 40 F.3d 1152, 1154 n.1 (10th Cir. 1994) (applying
this presumption to prevent retroactive application of a provision that
would require the government to pay interest on awards); see also
Landgraf v. USI Film Prods., 511 U.S. 244, 271 n.25 (1994) (“While the
great majority of [Supreme Court] decisions relying on the antiretroactivity
presumption have involved . . . burden[s on] private parties, [the Supreme
Court has] applied the presumption in cases involving new monetary
obligations that fell only on the government.”); United States v. Magnolia
Petroleum Co., 276 U.S. 160, 162–63 (1928) (applying the presumption to
prohibit retroactive application of a new rule increasing the amounts of tax
refunds); Yale-New Haven Hosp. v. Leavitt, 470 F.3d 71, 87 n.16 (2d Cir.
25
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2006) (applying the presumption to a Medicare regulation when the
payment obligation would fall on the government); Harrod v. Glickman,
206 F.3d 783, 791–92 (8th Cir. 2000) (applying the presumption to protect
the government’s preexisting right to reimbursement for erroneous
payments). So the presumption against retroactivity applies, prohibiting
application of the new reimbursement standards. See Fernandez-Vargas v.
Gonzales, 548 U.S. 30, 37–38 (2006) (prohibiting retroactive application
of a statute in the absence of a clear congressional intent to make the law
retroactive). The ACA thus did not create a new right to reimbursement for
costs incurred from 2001 to 2006.
4. The teaching hospitals can’t obtain relief based on the 2010
administrative regulations.
Though the new statutory reimbursement standards can’t be applied
here, the teaching hospitals rely in the alternative on the agency’s own
regulations. The agency adopted two regulations: one in 2010 and another
in 2014. The teaching hospitals rely on the 2010 regulation, stating that it
authorized reimbursement for shared costs. 12 We reject this argument: The
2010 regulation was either superseded by the 2014 regulation or could not
retroactively apply to costs incurred from 2001 to 2006.
12
The parties clash on the validity and meaning of the 2010
interpretation. We need not resolve that clash.
26
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First, the 2014 regulation automatically superseded the agency’s
interpretation in 2010. See Vawter v. Comm’r of Internal Rev., 83 F.2d 11,
14 (10th Cir. 1936) (stating that a newer regulation supersedes the older
version “under familiar rules of construction . . . in respect of any conflict
between them”). The 2014 regulation clarified that “[c]ost reporting
periods beginning before July 1, 2010” were “not governed” by the new
reimbursement standards. 42 C.F.R. § 413.78(g)(6) (2014).
Given the content of the 2014 regulations, the teaching hospitals
argue that application of these regulations would violate another provision
in the Medicare statute, which limited retroactive application of
substantive changes. In the hospitals’ view, the 2014 regulations
substantively changed the 2010 regulations. Given that substantive change,
the teaching hospitals argue, we would need to apply the 2010 regulation. 13
The teaching hospitals’ argument doesn’t follow because any
application of the 2010 regulation would itself constitute a retroactive
application of a substantive change. The teaching hospitals had incurred
13
Retroactive application of the 2014 regulation would be permissible
if the agency determined that retroactive application was necessary to
comply with a statute or to promote the public interest. 42 U.S.C.
§ 1395hh(e)(1) (2012). When adopting the 2014 regulation, the agency
explained that it was amending the language to carry out the language of
the Affordable Care Act’s restriction on applicability prior to July 1, 2010.
79 Fed. Reg. 50,119 (2014). We need not decide whether the agency’s
explanation constitutes a determination of the need for retroactive
application to comply with the statute or to promote the public interest.
27
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the costs from 2001 to 2006—years before the agency adopted the 2010
regulation. And the 2010 regulation, as interpreted by the teaching
hospitals, would substantively change the prior statutory standard for
reimbursement. See Part 2(A)–(B), above. So if the 2014 regulation
couldn’t retroactively apply, neither could the 2010 regulation. 14
Only two possibilities exist:
1. A court couldn’t retroactively apply the regulations from either
2010 or 2014 or
2. the 2010 regulation was valid, but superseded by the 2014
version.
Either way, the teaching hospitals couldn’t rely on the 2010 regulation. 15
As a result, the 2010 regulation couldn’t support reimbursement for the
costs incurred from 2001 to 2006.
14
Federal law similarly forbids retroactive application of the 2010
regulation unless the agency expressly found a need to retroactively apply
the regulation for the public interest or to comply with statutory
requirements. 42 U.S.C. § 1395hh(e)(1) (2012); see p. 27 n.13, above. But
the teaching hospitals don’t argue that
• the agency made either of those findings or
• another statute mandated retroactive application.
15
The agency goes further, arguing that we should apply Chevron
deference to the agency’s view that the ACA’s new reimbursement
standards weren’t retroactive. See Chevron, U.S.A., Inc. v. Nat. Res. Def.
Council, Inc., 467 U.S. 837, 842–43 (1984). We need not address the
applicability of Chevron deference because any potential ambiguity is
resolved through the presumption against retroactivity. See Epic Sys. Corp.
v. Lewis, 138 S. Ct. 1612, 1630 (2018) (noting that courts apply Chevron
deference only as a necessary tool when other “traditional tools of
28
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5. Conclusion
When the teaching hospitals incurred the training costs, the Medicare
statutes didn’t permit reimbursement for shared costs. Although the ACA
later softened these restrictions, the new reimbursement standards don’t
apply retroactively to costs incurred years earlier. We thus conclude that
the teaching hospitals are not entitled to reimbursement for their shared
costs in training residents from 2001 to 2006. Given this conclusion, we
affirm the district court’s award of summary judgment to the agency.
statutory construction” fail to resolve an ambiguity) (internal citations &
quotations omitted); see also INS v. St. Cyr, 533 U.S. 289, 320 n.45 (2001)
(citation omitted) (“Because a statute that is ambiguous with respect to
retroactive application is construed under our precedent to be
unambiguously prospective, there is, for Chevron purposes, no ambiguity
in such a statute for an agency to resolve.”), superseded by statute on other
grounds by REAL ID Act of 2005, 8 U.S.C. § 1252(a)(4)–(5) (2006).
29
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No. 20-5097, St. Francis Hospital v. Becerra
BALDOCK, J., concurring
The outcome the Court reaches in this case is correct. I write separately merely to
present a differing view on statutory analysis from the one presented in the majority
opinion. To some, these differences may appear semantic. But law demands precision,
and our duty as a Court is to provide clarity while adhering to “our usual, prudent practice
of not reaching out to decide unnecessary issues.” Soc’y of Prof’l Journalists v. Sec’y of
Labor, 832 F.2d 1180, 1186 (10th Cir. 1987) (Seymour, J., concurring). These principles
guide my approach to this case.
The first step in resolving any question of statutory interpretation is to look at the
text of the statute. See Lamie v. U.S. Tr., 540 U.S. 526, 534 (2003); Robinson v. Shell Oil
Co., 519 U.S. 337, 340 (1997); see also Conn. Nat’l Bank v. Germain, 503 U.S. 249, 253–
54 (1992) (“[C]ourts must presume that a legislature says in a statute what it means and
means in a statute what it says there.” (citations omitted)). “It is well established that ‘when
the statute’s language is plain, the sole function of the courts—at least where the disposition
required by the text is not absurd—is to enforce it according to its terms.’” Lamie, 540
U.S. at 534 (quoting Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530
U.S. 1, 6 (2000)). Of that, the majority and I are in complete agreement. We diverge,
however, on how to approach this threshold question and what its implications are with
respect to the specific statutes at issue here. The fundamental question in this case is
whether the statutory provisions before us are ambiguous or not. See Robinson, 519 U.S.
at 340 (“Our first step in interpreting a statute is to determine whether the language at issue
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has a plain and unambiguous meaning with regard to the particular dispute in the case.”);
Landgraf v. Usi Film Prods., 511 U.S. 244, 280 (1994). The Supreme Court has provided
clear guidance to help us answer that question. “The plainness or ambiguity of statutory
language is determined by reference to the language itself, the specific context in which
that language is used, and the broader context of the statute as a whole.” Robinson, 519
U.S. at 341 (citations omitted). When we follow these instructions, we can reach the
correct result in this case in a more straightforward manner than the circuitous path laid out
in the majority opinion.
Let us begin with the statutes governing reimbursement before Congress passed the
Affordable Care Act, the Omnibus Reconciliation Act of 1986, Pub. L. No. 99-509, § 9314,
100 Stat. 1874, 2005 and the Balanced Budget Act of 1997, Pub. L. 105-33, § 4621(b)(2),
111 Stat. 251, 477: The majority opinion correctly concludes that the singular language in
these provisions precluded the Hospitals from recovering the funds they sought for off-site
training because both statutes contain the language “if the hospital incurs all, or
substantially all, of the costs for the training program in that setting.” Id. (emphasis added).
The plain language of these provisions, then, does not contemplate multiple
hospitals sharing the costs of the training. Having looked at the “language itself,” we next
consider the “specific context in which that language is used, and the broader context of
the statute as a whole.” Robinson, 519 U.S. at 341. The specific context of the language
limits the availability of the funds the Hospitals seek through direct reference. The broader
statutory context includes the Dictionary Act because that provision, by its own terms,
applies to “the meaning of any Act of Congress, unless the context indicates otherwise.” 1
2
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U.S.C. § 1. The majority correctly concludes the Dictionary Act does not modify the
statutes at issue to entitle the Hospitals to relief. Based on the guidance from the Supreme
Court, then, the statutes are unambiguous, and the Hospitals cannot claim reimbursement
under the pre-ACA standard. Nevertheless, in Section 2.B of its opinion, the majority
“assume[s] the existence of an ambiguity in the statutory text” so that it can address agency
regulations through the lens of Chevron deference. Op. at 9–13. We do not need to create
an ambiguity where none exists. Accordingly, “that portion of the Court’s opinion [is]
pure dictum because it is entirely unnecessary to an explanation of the Court’s decision.”
Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 121 (1998) (Stevens, J., concurring).
Next, let us proceed to the second set of statutes at issue, the Patient Protection and
Affordable Care Act, Pub. L. No. 111-148, §§ 5504(a)–(c), 124 Stat. 119, 659 (2010).
Sections 5504(a) and 5504(b) established a new standard that enables the Hospitals to
recover costs for shared off-site training. Unfortunately for the Hospitals, however,
§ 5504(a) and § 5504(b) are clearly and unambiguously prospective because Congress
expressly limited their application to “cost reporting periods beginning on or after July 1,
2010” and “discharges occurring on or after July 1, 2010.” This language means that, by
definition, the provisions have no retroactive effect and afford the Hospitals no relief.
Nevertheless, in an attempt to circumvent this obstacle, the Hospitals argue another
provision, § 5504(c), modifies those provisions because, according to them, it requires the
agency to reopen their cost reports and it would be futile to mandate reopening only to
apply the pre-ACA standard. The majority analyzes this argument in terms of the
presumption against retroactivity.
3
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The first question when considering the application of the presumption against
retroactivity is “whether Congress has expressly prescribed the statute’s proper reach.”
Landgraf, 511 U.S. at 280. In other words, is the statute ambiguous as to its retroactive
application? The majority rightly begins its analysis on this question by looking to the
statute’s language. The majority, however, rejects the Government’s argument “that the
ACA expressly prohibits retroactive application of the new reimbursement standards” by
declining to address it. Op. at 16 n.10. The majority’s approach is misguided.
As previously noted, the Supreme Court has instructed us to consider both the
language and the context of the statute when we address questions of statutory ambiguity.
Robinson, 519 U.S. at 341. The best way to do that is to reproduce the language of the
provision at issue. Section 5504(c) states the following:
Application.—The amendments made by this section shall not be applied in
a manner that requires reopening of any settled hospital cost reports as to
which there is not a jurisdictionally proper appeal pending as of the date of
the enactment of this Act on the issue of payment for indirect costs of medical
education under section 1886(d)(5)(B) of the Social Security Act (42 U.S.C.
1395ww(d)(5)(B)) or for direct graduate medical education costs under
section 1886(h) of such Act (42 U.S.C. 1395ww(h)).
Beginning with the language of the statute: The Hospitals believe § 5504(c)’s use of the
phrase “shall not be applied in a manner that requires reopening of any settled hospital cost
reports as to which there is not a jurisdictionally proper appeal pending as of the date of
the enactment of this Act” requires the agency to reopen cost reports if they were the subject
of a “jurisdictionally proper appeal” on that date. See Applts.’ Br. at 20 (quoting
§ 5504(c)). They support this argument by presenting several hypotheticals, one of which
4
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is that a sign outside a liquor store reading “No alcoholic beverages sold to those under 21”
means the liquor store must sell alcohol to someone over 21. See id. at 20–21, 26. As the
majority correctly notes, this is a logical fallacy. The negative implication of the sign is
that the liquor store may sell liquor to someone over 21—it is a reservation of discretion.
Likewise, the language of § 5504(c) does not require the agency to reopen cost reports if
they were subject to “jurisdictionally proper appeal[s]” on the day Congress passed the
ACA. Quite the opposite is true. The correct reading of § 5504(c) is as a limitation on the
agency’s ability to interpret the provisions of the ACA. Section 5504(c) states “[t]he
amendments made by this section shall not be applied in a manner that requires reopening
of any settled hospital cost reports as to which there is not a jurisdictionally proper appeal
pending.” The meaning of this provision is clear—if a cost report was not subject to a
jurisdictionally proper appeal on the specified date, the agency has no discretion to reopen
it. If, however, a proper appeal was pending, the agency may still exercise its inherent
discretionary authority to reopen those cost reports. Cf. 42 C.F.R. § 405.1885(c). The
plain meaning of the statute, then, is that it serves as a limitation on agency discretion. This
provision in no way suggests, implies, or requires the retroactive application of § 5504(a)
or § 5504(b).
Next, to consider the context of § 5504(c), we must look to the other provisions of
§ 5504, namely § 5504(a) and § 5504(b). These provisions, as previously noted, expressly
apply prospectively. Reading § 5504(c) as a limitation on agency discretion in the context
of these provisions, it is clear no ambiguity appears on the question of retroactive
application. None of these provisions apply retroactively, and there is no reasonable way
5
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to construe them to do so. The fact that § 5504(c) is poorly worded does not make its
meaning ambiguous. Likewise, the fact that a party presents a weak argument does not
mean we should hesitate in dismissing it. Accordingly, the majority opinion should have
ended its analysis on the first question under the presumption against retroactivity and
concluded, as the Government suggested, that the language of § 5504 precludes retroactive
application. By failing to do so, the majority strayed from “our usual, prudent practice of
not reaching out to decide unnecessary issues.” Soc’y of Prof’l Journalists, 832 F.2d at
1186 (Seymour, J., concurring). I respectfully concur except as to parts 2.B, 3.B.2, and
3.C of the majority opinion.
6