Ascension Borgess Hospital v. Xavier Becerra

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 22, 2022 Decided March 10, 2023
No. 21-5246
ASCENSION BORGESS HOSPITAL, ET AL.,
APPELLANTS
v.
XAVIER BECERRA, SECRETARY OF THE UNITED STATES
DEPARTMENT OF HEALTH AND HUMAN SERVICES,
APPELLEE
Appeal from the United States District Court
for the District of Columbia
(No. 1:20-cv-00139)
Andrew B. Howk argued the cause for appellants. With
him on the briefs was N. Kent Smith.
Caroline D. Lopez, Attorney, U.S. Department of Justice,
argued the cause for appellee Xavier Becerra. With her on the
brief were Brian M. Boynton, Principal Deputy Assistant
Attorney General, Abby C. Wright, Attorney, U.S. Department
of Health and Human Services, Janice L. Hoffman, Associate
General Counsel, Susan Maxson Lyons, Deputy Associate
General Counsel for Litigation, and Jonathan C. Brumer,
Attorney.
2
Before: PILLARD, Circuit Judge, and EDWARDS and
ROGERS, Senior Circuit Judges.
Opinion for the Court filed by Senior Circuit Judge
ROGERS.
ROGERS, Senior Circuit Judge: Ascension Borgess
Hospital and forty-four other hospitals appeal the grant of
summary judgment to the Secretary of the U.S. Department of
Health and Human Services (“HHS”) dismissing challenges of
certain reimbursements for uncompensated care. The
Hospitals challenged the “disproportionate share hospital”
(“DSH”) payments. The Provider Reimbursement Review
Board (“PRRB”) dismissed the complaint for lack of
jurisdiction pursuant to the statutory bar on administrative and
judicial review of challenges to the methodology for
calculating those payments. See 42 U.S.C. § 1395ww(r)(3).
The Hospitals contend that HHS was required to promulgate
its audit instructions by notice and comment rulemaking
before using audited data from each hospital’s Worksheet
S-10 to estimate the Hospitals’ proportionate shares of the
national total of uncompensated care. See id.
§ 1395ww(r)(2)(C). They maintain that they do not challenge
the Secretary’s estimate, but seek only an order directing
fulfillment of HHS’s notice and comment obligations. For the
following reasons, the court affirms the grant of summary
judgment to the Secretary.
I.
In addition to reimbursements that hospitals receive
pursuant to the Medicare Act, hospitals serving a
disproportionate share of low-income patients may receive
additional Medicare payments, known as “DSH payments.” Id.
§ 1395ww(d)(5)(F)(i)(I).
3
The statutory formula provides that eligible hospitals
receive an “empirically justified DSH payment” equal to 25%
of the amount the hospital would have received but for the
passage of the Affordable Care Act (“the ACA”). Id.
§ 1395ww(r)(1). The remaining portion of the DSH payment is
referred to as the “uncompensated care” payment, id.
§ 1395ww(r)(2), which is determined based on the Secretary’s
estimates of three factors: (1) what the DSH payment would
have been prior to the amendment of the ACA; (2) the decrease
in the national uninsured rate since 2013 (following enactment
of the ACA); and (3) each eligible hospital’s pro rata share of
all nationwide uncompensated care for a fiscal year. See id.
§ 1395ww(r)(2)(A)-(C). That pro rata share of nationwide
uncompensated care is represented by the Secretary’s estimate
of the hospital’s provided amount of uncompensated care, “for
a period selected by the Secretary,” and “based on appropriate
data,” divided by the Secretary’s estimate of the total amount
of uncompensated care nationwide. See id.
§ 1395ww(r)(2)(C).
Since 2013, HHS has proposed and adopted the
methodology for calculating the estimates underlying the
following year’s uncompensated care through rulemaking.
See, e.g., 78 Fed. Reg. 50,496 (Aug. 19, 2013); 84 Fed. Reg.
42,044 (Aug. 16, 2019). Notice and comment rulemaking is
required for any “rule, requirement, or other statement of
policy” that “establishes or changes a substantive legal
standard governing . . . the payment for services.” 42 U.S.C.
§ 1395hh(a)(2); see Azar v. Allina Health Servs., 139 S. Ct.
1804, 1810 (2019).
To estimate the third factor in the uncompensated care
payment for fiscal year 2020, HHS relied for the first time on
data from the 2015 Worksheet S-10 cost reports each Hospital
was required to submit to HHS. 84 Fed. Reg. at 42,364. By
4
notice and comment rulemaking, the Secretary proposed to use
a subset of Worksheet S-10 data on the volume and value of
uncompensated care provided to low-income patients as the
basis for the pro rata share estimates. See id. at 19,158, 19,419
(proposed May 3, 2019). The Secretary also developed “more
uniform review protocols” for Medicare contractors to audit
Worksheet S-10 data for accuracy. 81 Fed. Reg. 56,762,
56,963–64 (Aug. 22, 2016). The Worksheet S-10 data that the
Secretary proposed to use to calculate the 2020 DSH payments
included data updated by Medicare contractors as a result of
these audits, 84 Fed. Reg. at 19,419, and the Secretary noted
that any audit protocols would remain confidential, 81 Fed.
Reg. at 56,964.
In Federal Register notices, the Secretary observed that
“Worksheet S-10 could potentially provide the most complete
data for Medicare hospitals” because it was “developed
specifically to collect information on uncompensated care
costs” from each Medicare hospital. 78 Fed. Reg. at 50,635;
see also 84 Fed. Reg. at 19,417–18. Upon considering
comments on use of Worksheet S-10 data and audit procedures,
the Secretary concluded that the data subset represented the
most “appropriate data,” 42 U.S.C. § 1395ww(r)(2)(C)(ii), on
which to base the uncompensated care estimates and, in turn,
the payments for fiscal year 2020, 84 Fed. Reg. at 42,364–66.
By amendment to the Affordable Care Act in 2014, Congress
specified:
There shall be no administrative or judicial review
under section 1395ff of this title, section 1395oo of this
title, or otherwise of . . . [a]ny estimate of the Secretary
for purposes of determining the factors described in
paragraph (2)[; or] [a]ny period selected by the
Secretary for such purposes.
5
42 U.S.C. § 1395ww(r)(3).
II.
Relying on the Supreme Court’s ruling in Allina Health,
139 S. Ct. 1804, the Hospitals contend that the Secretary was
required to promulgate the audit instructions by notice and
comment rulemaking before using audited Worksheet S-10
data to estimate the Hospitals’ proportionate shares of the
national total uncompensated care under
section 1395ww(r)(2)(C). See id. at 1810. Although the
Secretary’s proposed estimation methodology was subject to
notice and comment, see 84 Fed. Reg. at 19,419; id. at 42,364–
68, the audit protocol itself was not.
After the PRRB determined that the statutory bar, 42
U.S.C. § 1395ww(r)(3), deprived it of jurisdiction over the
challenge, the district court granted summary judgment to the
Secretary because the Hospitals’ attempts to evade the statutory
bar were foreclosed by DCH Regional Medical Center v. Azar,
925 F.3d 503 (D.C. Cir. 2019), and Florida Health Sciences
Center, Inc. v. Secretary of HHS, 830 F.3d 515 (D.C. Cir.
2016). This court conducts a de novo review of the grant of
summary judgment, Am. Clinical Lab’y Ass’n v. Becerra, 40
F.4th 616, 621 (D.C. Cir. 2022); Am. Hosp. Ass’n v. Azar, 895
F.3d 822, 825 (D.C. Cir. 2018), considering whether the data
on which the Secretary relied is “inextricably intertwined” with
the Secretary’s uncompensated care estimates in calculating
DSH payments, DCH, 925 F.3d at 506–07.
In Florida Health, 830 F.3d 515, the court rejected the
hospital’s position that the Secretary’s use of 2010-2011 data
to calculate DSH payments for the 2014 fiscal year violated the
Administrative Procedure Act and the Medicare Act. See id. at
519. Looking to the text of section 1395ww(r)(3), the court
6
concluded it constituted a “reliable indicator” of Congress’s
intent to bar such review, see id. at 518, reasoning that the
Secretary’s estimate and the data underlying it were
indistinguishable because the data was an integral component
of the estimate itself, review of which was barred. Id. at 518–
19. Because “[t]he data are the entire basis for the estimate,”
id., a challenge to that data would “eviscerate the bar on judicial
review,” id. (citing El Paso Nat. Gas Co. v. United States, 632
F.3d 1272, 1278 (D.C. Cir. 2011)).
Similarly, in DCH Regional, the court rejected the
challenge to the Secretary’s calculation of a hospital’s DSH
payment following a merger that did not incorporate data from
the acquired hospital. The court reiterated that under the
Medicare Act’s statutory scheme, “a challenge to the
methodology for estimating uncompensated care is
unavoidably a challenge to the estimates themselves.” DCH,
925 F.3d at 506.
The Hospitals here similarly would challenge the
Secretary’s methodology in order to reach the substantive
estimate barred from review. They seek vacatur and
recalculation of the DSH payments on the theory that the
Secretary’s audit protocol was procedurally defective. See
Ascension Borgess Hosp. v. Becerra, 557 F. Supp. 3d 122, 127
(D.D.C. 2021). Yet the Hospitals’ framing of their challenge as
purely procedural under the Medicare Act’s notice and
comment requirement does not save their appeal,
notwithstanding the “strong presumption in favor of judicial
review of final agency action.” Am. Hosp. Ass’n v. Becerra,
142 S. Ct. 1896, 1902 (2022). That presumption “‘may be
overcome by,’ inter alia, ‘specific language . . . that is a
reliable indicator of congressional intent’ . . . to preclude
judicial review.” Bowen v. Mich. Acad. of Fam. Physicians,
7
476 U.S. 667, 673 (1986) (citing Block v. Cmty. Nutrition Inst.,
467 U.S. 340, 349 (1984)).
Even if, as the Hospitals contend, the alleged procedural
violation is reviewable, the Hospitals have failed to identify
any standard required to be set by rule that was not. Although
neither DCH nor Florida Health addresses whether notice and
comment rulemaking is required for protocols or procedures
used to modify providers’ raw uncompensated care data before
calculating DSH payment estimates, routine audit instructions
to Medicare contractors ordinarily fall outside of section
1395hh’s rulemaking requirement. See Clarian Health W.,
LLC v. Hargan, 878 F.3d 346, 354–56 (D.C. Cir. 2019); Texas
All. for Home Care Servs. v. Sebelius, 681 F.3d 402, 411 (D.C.
Cir. 2012). The Medicare Act requires notice and comment
rulemaking for any “rule, requirement, or other statement of
policy” that “establishes or changes a substantive legal
standard governing . . . the payment for services.” 42 U.S.C.
§ 1395hh(a)(2) (emphasis added); see also Allina Health, 139
S. Ct. at 1810. In Clarian, 878 F.3d 346, the hospital
challenged Medicare “manual instructions” that had not
undergone notice and comment prior to promulgation, and the
court ruled that although the instructions govern the payment
of services, they did not “establish[] or change[] a substantive
legal standard.” Id. at 351, 354 (quoting 42 U.S.C.
§ 1395hh(a)(2)). The Medicare Act did not require HHS to
promulgate the instructions by regulation. Id. at 356. Likewise,
here, the Secretary’s audit protocol does not constitute a “rule”
or “requirement” that changes a substantive legal standard, but
is a statement of policy regarding the Secretary’s procedural
methodology. The audit protocol neither alters the Hospitals’
substantive obligations nor changes the DSH payment
calculation scheme. It only sets the procedures by which the
Secretary will determine the third factor of the uncompensated
8
care payment, without altering the substance of the DSH
calculation scheme or other related legal standards.
Finally, the Hospitals forfeited their argument, raised for
the first time at oral argument on appeal to this court, that HHS
inserted a new and unannounced definition of “uncompensated
costs” into the undisclosed audit protocol that should have been
subject to notice and comment. Because the Hospitals failed to
make “timely assertion” of their right to bring that challenge,
the court cannot now consider it. United States v. Olano, 507
U.S. 725, 731, 733 (1993); Nemariam v. Fed. Dem. Rep. Eth.,
491 F.3d 470, 483 (D.C. Cir. 2007).
Accordingly, the court affirms the grant of summary
judgment to the Secretary.