Mercy General Hospital v. Burwell ( 2018 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
_____________________________________
)
MERCY GENERAL HOSPITAL, et al., )
)
Plaintiffs, )
)
v. ) Civil Action No. 16-99 (RBW)
)
ALEX M. AZAR II, in his official capacity )
as Secretary of the United States )
Department of Health and Human Services, )
)
Defendant. )
_____________________________________ )
MEMORANDUM OPINION
The plaintiffs, eighty-one acute care hospitals located in California, seek judicial review
of the final decision of the defendant, the Secretary of the United States Department of Health
and Human Services (“HHS”), denying their claims for reimbursement of deductible and
coinsurance payments that were not paid to the hospitals by Medicare beneficiaries. See
Complaint (“Compl.”) ¶¶ 1–2. The parties filed cross-motions for summary judgment, see
Plaintiffs’ Motion for Summary Judgment; Defendant’s Cross-Motion for Summary Judgment
and Opposition to Plaintiffs’ Motion for Summary Judgment, and United States Magistrate Judge
Deborah A. Robinson issued a Report and Recommendation (the “Report” or “R&R”)
recommending that the Court affirm the Secretary’s decision, deny the plaintiffs’ motion, and
grant the Secretary’s cross-motion, see R&R at 30. Currently before the Court are the plaintiffs’
Objections to the Magistrate Judge’s Report and Recommendation (“Pls.’ Objs.”). Upon
consideration of the parties’ submissions, the parties’ arguments presented at the motions hearing
on February 2, 2018, and the administrative record in this case, 1 the Court concludes that it must
grant in part and deny in part the plaintiffs’ motion for summary judgment, deny the Secretary’s
cross-motion for summary judgment, and remand this case to the Secretary for further
proceedings consistent with this opinion.
I. BACKGROUND
A. Statutory and Regulatory Framework
1. The Medicare Program
The Medicare program, established in 1965 as Title XVIII of the Social Security Act, 42
U.S.C. §§ 1395–1395lll (2012) (the “Medicare Act”), “is a federally funded medical insurance
program for the elderly and disabled,” Fischer v. United States, 529 U.S. 667, 671 (2000)
(internal citation omitted). Relevant here, Part A of the Medicare Act provides insurance
coverage to eligible beneficiaries for the cost of inpatient hospital care, home health care, and
hospice services, see 42 U.S.C. § 1395c, and Part B provides supplemental coverage for
outpatient hospital care and other types of care not covered by Part A, see id. § 1395k.
“Although the costs incurred for most of the care provided to Medicare patients are borne by the
government, individual Medicare patients are ‘often responsible for both deductible and
coinsurance payments for hospital care.’” Cmty. Health Sys., Inc. v. Burwell, 113 F. Supp. 3d
1
In addition to the filings already identified, the Court considered the following submissions in rendering its
decision: (1) the Defendant’s Response to Plaintiffs’ Objections to the Magistrate Judge’s Report and
Recommendation (“Def.’s Objs. Resp.”); (2) the plaintiffs’ Reply in Support of Objections to the Magistrate Judge’s
Proposed Findings and Recommendations (“Pls.’ Objs. Reply”); (3) the Plaintiffs’ Memorandum of Points and
Authorities in Support of Motion for Summary Judgment (“Pls.’ Summ. J. Mem.”); (4) the Defendant’s
Memorandum of Points and Authorities in Support of Defendant’s Cross-Motion for Summary Judgment and in
Opposition to Plaintiffs’ Motion for Summary Judgment (“Def.’s Summ. J. Mem.”); (5) the Plaintiffs’ Reply and
Response Brief in Support of Plaintiffs’ Motion for Summary Judgment and in Opposition to Defendant’s Motion
for Summary Judgment (“Pls.’ Summ. J. Reply”); (6) the Defendant’s Reply in Support of Its Cross-Motion for
Summary Judgment (“Def.’s Summ J. Reply”); (7) the plaintiffs’ Notice and Clarification; (8) the plaintiffs’ Notice
of Submission; (9) the Defendant’s Response to Plaintiffs’ Notice of Submission; (10) the plaintiffs’ Written
Response to the Court’s Queries Pursuant to February 16, 2018 Order (“Pls.’ Resp. to Order”); and (11) the
Defendant’s Response to the Court’s Order (“Def.’s Resp. to Order”).
2
197, 203–04 (D.D.C. 2015) (quoting Hennepin Cty. Med. Ctr. v. Shalala, 81 F.3d 743, 745 (8th
Cir. 1996)).
The Centers for Medicare and Medicaid Services (“CMS”) administers the Medicare
program on behalf of the Secretary, see Ark. Dep’t of Health & Human Servs. v. Ahlborn, 547
U.S. 268, 275 (2006), “through contracts with [M]edicare administrative contractors,” 42 U.S.C.
§§ 1395h(a), 1395u(a), which were known as “fiscal intermediaries” (the “intermediaries”)
during the cost years at issue in this case, id. § 1395h (2000). To receive reimbursement from
Medicare, providers must submit to their intermediaries “cost reports . . . on an annual basis.” 42
C.F.R. § 413.20(b) (2017). The intermediaries then review these reports to determine the
amount of reimbursement due to the providers. See 42 U.S.C. § 1395kk-1(a)(4). Following their
review, the intermediaries “must . . . furnish the provider . . . a written notice reflecting . . .
[their] final determination of the total amount of reimbursement due [to] the provider.” 42
C.F.R. § 405.1803(a).
A provider who “is dissatisfied with a final determination of . . . its [ ] intermediary,” 42
U.S.C. § 1395oo(a)(1)(A)(i), “may obtain a hearing . . . by a Provider Reimbursement Review
Board” (the “Board”), id. § 1395oo(a). “A decision by the Board [must] be based upon the
record made at such hearing, . . . and shall be supported by substantial evidence when the record
is viewed as a whole.” Id. §1395oo(d). The Board’s decision is “final unless the Secretary, [via
the CMS Administrator (the “Administrator”),] . . . reverses, affirms, or modifies the Board’s
decision.” Id. § 1395oo(f)(1); 42 C.F.R. § 405.1875 (recognizing that the Secretary has
delegated to the Administrator his authority to review the Board’s decisions). Finally, a provider
may “obtain judicial review of any final decision of the Board[] or . . . the [Administrator].” 42
3
U.S.C. § 1395oo(f)(1); see 42 C.F.R. § 405.1877 (“[A] provider has a right to obtain judicial
review of a final decision of the Board, or . . . the Administrator.”).
2. The Medicaid Program and “Dual Eligibles”
The Medicaid program, established under Title XIX of the Social Security Act, 42 U.S.C.
§§ 1396–1396w-5, “authorizes federal financial assistance to States that choose to reimburse
certain costs of medical treatment for needy persons,” Pharm. Research & Mfrs. of Am. v.
Walsh, 538 U.S. 644, 650 (2003). “In order to participate in the Medicaid program, a [s]tate
must have a plan for medical assistance approved by the Secretary,” id. (citing 42 U.S.C.
§ 1396a(b)), which must, among other things, “define[] the categories of individuals eligible for
benefits and the specific kinds of medical services that are covered,” id. (citing 42 U.S.C.
§ 1396a(a)(10), (17)).
“Some patients are eligible for both Medicare and Medicaid (known as ‘dual eligibles’).”
Grossmont Hosp. Corp. v. Burwell, 797 F.3d 1079, 1081 (D.C. Cir. 2015). Although “Medicare
is the primary payor” in this situation, “[s]tate Medicaid plans often mandate that the state
Medicaid agency pay for part or all of the Medicare deductibles and coinsurance amounts
incurred in connection with treating these dual eligibles.” Id. Claims submitted to a state
Medicaid program for these unpaid amounts are often referred to as “crossover claims.” Pls.’
Summ. J. Mem. at 8.2 However,
[i]n some instances, the State has an obligation to pay, but either does not pay
anything or pays only a part of the deductible or coinsurance because of a State
payment “ceiling.” For example, assume that a State pays a maximum of $42.50
per day for [ ] services and the provider’s cost is $60.00 a day. The coinsurance is
$32.50 a day so that Medicare pays $27.50 ($60.00 less $32.50). In this case, the
State limits its payment towards the coinsurance to $15.00 ($42.50 less $27.50).
2
Because the plaintiffs did not insert page numbers on their initiating summary judgment brief, the page numbers
cited by the Court when referencing the plaintiffs’ brief are the automatically-generated page numbers assigned to
the plaintiffs’ brief by the Court’s ECF system.
4
CMS Pub. 15-1, § 322.
During the cost years at issue, California participated in Medicaid through a program
known as Medi-Cal. See AR 12. Effective August 1, 1989, Medi-Cal instituted a payment
ceiling for Medicare deductibles and coinsurance for outpatient services. See AR 606. Effective
May 1, 1994, Medi-Cal instituted a similar ceiling for inpatient services. See AR 680–83; see
also AR 1412, 1422.
3. Medicare “Bad Debts”
If Medicare patients fail to pay the deductible and coinsurance payments that they owe to
providers, the providers may seek reimbursement from CMS for these amounts, known as “bad
debts.” See 42 C.F.R. § 413.89(e). 3 To obtain reimbursement for these bad debts, providers
must demonstrate that the debt satisfies four criteria:
(1) The debt must be related to covered services and derived from deductible
and coinsurance amounts.
(2) The provider must be able to establish that reasonable collection efforts
were made.
(3) The debt was actually uncollectible when claimed as worthless.
(4) Sound business judgment established that there was no likelihood of
recovery at any time in the future.
Id.
Chapter 3 of CMS’s Provider Reimbursement Manual (“PRM”) provides further
instruction regarding the requirements for bad debt reimbursement. As to the second bad debt
criterion, regarding “reasonable collection efforts,” § 310 provides that “a reasonable collection
3
“Medicare ‘reimburses providers for this bad debt’ in order to prevent cross-subsidization, i.e., ‘a cost shift from
the Medicare recipient to individuals not covered by Medicare.’” Mountain States Health All. v. Burwell, 128 F.
Supp. 3d 195, 199–200 (D.D.C. 2015) (quoting Cmty. Hosp. of Monterey Peninsula v. Thompson, 323 F.3d 782,
786 (9th Cir. 2003)); see also 42 C.F.R. § 413.89(d) (“To assure that [certain] covered service costs are not borne by
others, the costs attributable to the deductible and coinsurance amounts that remain unpaid are added to the
Medicare share of allowable costs.”).
5
effort . . . must involve the issuance of a bill on or shortly after discharge or death of the
beneficiary to the party responsible for the patient’s personal financial obligations.” CMS Pub.
15-1, § 310 (hereinafter “PRM”). However, § 312, which addresses bad debts associated with
“indigent or medically indigent” patients, provides that “[o]nce indigence is determined and the
provider concludes that there ha[s] been no improvement in the beneficiary’s financial condition,
the debt may be deemed uncollectible without applying the §[ ]310 procedures.” Id. § 312. To
determine indigency, § 312 instructs that “[p]roviders can deem Medicare beneficiaries indigent
or medically indigent when such individuals have also been determined eligible for Medicaid as
either categorically needy individuals or medically needy individuals, respectively.” Id.
“Otherwise, the provider should apply its customary methods for determining the indigence of
patients to the case of the Medicare beneficiary, under [PRM] guidelines[,]” including that “[t]he
provider must determine that no source other than the patient would be legally responsible for
the patient’s medical bill; e.g., title XIX [(Medicaid)], local welfare agency[,] and guardian[.]”
Id.
Finally, § 322 of the PRM provides specific instruction on bad debts associated with dual
eligible patients. Id. § 322. It provides that
[w]here the State is obligated either by statute or under the terms of its [Medicaid]
plan to pay all, or any part, of the Medicare deductible or coinsurance amounts,
those amounts are not allowable as bad debts under Medicare. [However, a]ny
portion of such deductible or coinsurance amounts that the State is not obligated to
pay can be included as a bad debt under Medicare, provided that the requirements
of §[ ]312 or, if applicable, §[ ]310 are met.
Id. Additionally, § 322 addresses situations in which “the State has an obligation to pay, but
either does not pay anything or pays only part of the deductible or coinsurance because of a State
payment ‘ceiling.’” Id. Section 322 instructs that, “[i]n these situations, any portion of the
6
deductible or coinsurance that the State does not pay that remains unpaid by the patient[] can be
included as a bad debt under Medicare, provided that the requirements of §[ ]312 are met.” Id.
4. The “Bad Debt Moratorium”
“In 1986, the [I]nspector [G]eneral of [HHS] had proposed either eliminating bad debt
reimbursement entirely or attempting to recoup the costs by garnishing the Social Security
checks of debtors.” Hennepin Cty. Med. Ctr., 81 F.3d at 747. Although “[n]either proposal was
adopted[,] [t]he [I]nspector [G]eneral then called for much closer examination of providers’ bad
debt requests.” Id. “On August 1, 1987, in an attempt to shield Medicare providers from the
Inspector General’s proposed policy changes, Congress enacted [legislation that] became known
as the Bad Debt Moratorium.” Foothill Hosp.—Morris L. Johnston Mem’l v. Leavitt, 558 F.
Supp. 2d 1, 3 (D.D.C. 2008); see also Hennepin Cty. Med. Ctr., 81 F.3d at 750–51 (“In passing
the moratorium, Congress was motivated to prevent unexpected consequences to providers from
the [I]nspector [G]eneral’s proposed changes in the criteria for bad debt reimbursement.”). The
legislation, which amended the Medicare Act, sought to “‘freeze’ the Secretary’s Medicare bad
debt reimbursement policies.” Mountain States Health All. v. Burwell, 128 F. Supp. 3d 195, 200
(D.D.C. 2015). Specifically, it provided that
[i]n making payments to hospitals under [the Medicare program], the
Secretary . . . shall not make any change in the policy in effect on August 1, 1987,
with respect to payment under [the Medicare program] to providers of service for
reasonable costs relating to unrecovered costs associated with unpaid deductible
and coinsurance amounts incurred under [the Medicare program] (including criteria
for what constitutes a reasonable collection effort).
Omnibus Budget Reconciliation Act (OBRA) of 1987, Pub. L. No. 100–203, § 4008(c), 101 Stat.
1330, 1330–55 (codified at 42 U.S.C. § 1395f note).
Following the legislation’s enactment, “the [I]nspector [G]eneral continued to urge closer
scrutiny of bad debt requests.” Hennepin Cty. Med. Ctr., 81 F.3d at 747. Thus, in 1988,
7
Congress amended the Medicare Act a second time to clarify that criteria for what constitutes a
“reasonable collection effort . . . includ[ed] criteria for indigency determination procedures, for
record keeping, and for determining whether to refer a claim to an external collection agency.”
Technical and Miscellaneous Revenue Act of 1988, Pub. L. No. 100–647, § 8402, 102 Stat.
3342, 3798 (codified at 42 U.S.C. § 1395f note). The amendment’s legislative history makes
clear that the amendment was intended to address Congress’s “concern[s] about
recommendations made by the Inspector General . . . subsequent to August 1, 1987, . . . [that]
appear[ed] to create requirements in addition to those in the Secretary’s regulations, the decisions
of the . . . Board, and relevant program manual and issuances.” HR Conf. Rep. No. 100–1104
(1988), as reprinted in 1988 U.S.C.C.A.N. 5048, 5337. However, the amendment was “not
intend[ed] to preclude the Secretary from disallowing bad debt payments based on regulations,
[Board] decisions, manuals, and issuance[s] [ ] in effect prior to August 1, 1987.” Id. 4 The Bad
Debt Moratorium ended on October 1, 2012. See Middle Class Tax Relief and Job Creation Act
of 2012, Pub. L. No. 112–96, tit. III, § 3201(d), 126 Stat. 156, 192–93 (codified at 42 U.S.C.
§ 1395f note).
5. PRM § 1102.3L and JSM-370
In November 1995, CMS revised its guidance in the PRM regarding reimbursement of
bad debts associated with dual eligibles. Specifically, it revised § 1102.3L to read as follows:
Evidence of the bad debt arising from Medicare/Medicaid crossovers may include
a copy of the Medicaid remittance showing the crossover claim and resulting
Medicaid payment or nonpayment. However, it may not be necessary for a provider
to actually bill the Medicaid program to establish a Medicare crossover bad debt
4
In 1989, Congress amended the Medicare Act a third time. See Omnibus Budget Reconciliation Act of 1989, Pub.
L. No. 101–239, § 6023, 103 Stat. 2167 (codified at 42 U.S.C. § 1395f note). However, this amendment is not at
issue in this case. See Pls.’ Resp. to Order at 18 (“The plaintiffs rely on the Bad Debt Moratorium as enacted in . . .
1987, and not on the 1989 amendment.” (internal citation omitted)).
8
where the provider can establish that Medicaid is not responsible for payment. In
lieu of billing the Medicaid program, the provider must furnish documentation of:
- Medicaid eligibility at the time services were rendered (via valid Medicaid
eligibility number), and
- Non-payment that would have occurred if the crossover claim had actually been
filed with Medicaid.
The payment calculation will be audited based on the state’s Medicaid plan in effect
on the date that services were furnished.
AR 1248–49.
However, on August 10, 2004, CMS issued a memorandum, known as JSM-370, which
“changed the language in . . . [§] 1102.3L to revert back to pre-1995 language, which requires
providers to bill the individual states for dual eligibles’ co-[insurance] and deductibles before
claiming Medicare bad debt.” AR 1608. According to this memorandum, CMS changed
§ 1102.3L’s language “[a]s a result of [a] Ninth Circuit decision,” which had “found [§] 1102.3L
to be inconsistent with the Secretary’s must[-]bill policy.” AR 1607–08 (citing Cmty. Hosp. of
the Monterey Peninsula v. Thompson, 323 F.3d 782 (9th Cir. 2003)). The memorandum further
explained that the Secretary’s “must[-]bill” policy provides that “where the state owes none or
only a portion of [a] dual[]eligible patient’s deductible or co-pay, the unpaid liability for the bad
debt is not reimbursable to the provider by Medicare until the provider bills the State[] and the
State refuses payment (with a State Remittance Advice).” AR 1607. Finally, the memorandum
includes a “directive to hold harmless providers that can demonstrate that they followed the
instructions previously laid out at [§] 1102.3L[] for open cost reporting periods beginning prior
to January 1, 2004.” AR 1608. Specifically, CMS noted that “[i]ntermediaries who followed the
now-obsolete [§] 1102.3L instructions for cost reporting periods prior to January 1, 2004[,] may
reimburse providers they service for dual-eligible bad debts with respect to unsettled cost reports
that were deemed allowable using other documentation in lieu of billing the state.” AR 1608.
9
B. Factual Background
As noted earlier, the plaintiffs are acute care hospitals located in California that
participate in both Medicare and Medi-Cal. See AR 12. At issue in this case are the plaintiffs’
claims for Medicare reimbursement of unpaid deductible and coinsurance amounts associated
with dual eligible patients, incurred between the fiscal years ending in October 1995 and
December 2004. See AR 2–3. 5 During these fiscal years, the plaintiffs “billed [Medi-Cal] for
some of the dual eligible patients but due to various factors related to the billing process they
decided[] . . . to stop billing, alleging that it was not cost effective” for them to bill Medi-Cal.
AR 12 n.13. Among the problems they encountered were that “Medi-Cal [ ] failed to issue
remittance advices in some instances and also[,] . . . as a result of [Medi-Cal’s] payment ceiling,
the Medi-Cal payments were often zero or only a dollar or two.” AR 12. According to the
plaintiffs, beginning “in 1992 and [ ] continu[ing] . . . in 1995,” they “gathered alternative
documentation and submitted bad debt lists for billed and unbilled cross[]over claims . . . for
audit verification.” Pls.’ Objs. at 19. Additionally, “the [plaintiffs] contracted in 2007[] . . .
with” EDS Corporation (“EDS”), which they claim is “the same contractor used by . . .
California” to process crossover claims, “to produce reports to submit . . . [to the intermediary]
as [ ] alternative documentation to the State remittance advices” (the “EDS reports”). AR 12–13;
see also AR 34 (explaining that the plaintiffs retained EDS “in order to . . . generate certain
reports ‘for the purposes of identifying outpatient and inpatient bad debt payable by the Medicare
program’”).
The plaintiffs’ intermediary ultimately “disallowed the . . . amounts” claimed by the
plaintiffs because “there were no State Medicaid remittance advices,” AR 12, i.e., a “receipt” for
5
According to the plaintiffs, the claims sought represent a monetary value of approximately $55 million. See AR
121.
10
payment or non-payment, Motions Hrg. Tr. 5:9 (Feb. 2, 2018). Thereafter, the plaintiffs
appealed the intermediary’s determination to the Board, which held a hearing on the plaintiffs’
claims on August 23 and 24, 2012. See AR 31–32. On September 14, 2015, the Board issued a
decision affirming the intermediary’s disallowance of the plaintiffs’ claims, see AR 39, which
the plaintiffs then appealed to the Administrator, see AR 2.
On November 12, 2015, the Administrator issued a decision affirming the Board’s
decision. AR 19. The Administrator concluded:
[R]egardless of any alleged omissions by the State to provide the Medicaid
remittance advices and the payment ceiling, or the alleged financial inconvenience
[to the plaintiffs], the [plaintiffs] were required to bill for and produce [ ] remittance
advices as a condition of including crossover bad debt claims on [their] cost
report[s]. Accordingly, the[ir] failure to produce Medicaid remittance advices
represent[ed] a failure on the part of the [p]roviders to meet the necessary criteria
for Medicare payment of bad debts related to these claims and the [intermediary]
was correct to deny the crossover bad debt claims for the cost years at issue.
AR 13. Additionally, regarding the “require[ment] to bill for and produce [ ] remittance
advices,” AR 13, referred to collectively by the Administrator as the Secretary’s “must-bill
policy,” the Administrator found:
[T]he [B]ad [D]ebt [M]oratorium d[id] not prohibit the disallowances in this
case . . . [because t]he must-bill policy [ ] has been in effect since before August 1,
1987, as is evidenced in numerous Administrator and Board decisions[,] . . . the
longstanding PRM sections 310[,] [ ] 312[,] and 322, . . . [and] the longstanding
regulations and [Medicare] statute[, which] require showing a debt is worthless as
claimed and that reasonable collection efforts have been met[,] and . . . maintaining
[ ] contemporaneous documentation to support a claim.
AR 15. The Administrator further found that “any relief CMS grants based on a [p]rovider’s
reliance on [PRM §] 1102.3L is set forth under [the] criteria of the JSM[-370] ‘hold harmless’
policy,” and that the plaintiffs did not qualify for such relief because they “d[id] not show that in
[the] past years the [plaintiffs] had claimed and [ ] the [intermediary] had[ ] . . . allowed payment
under [§] 1102.3L.” AR 17. Alternatively, the Administrator found that “[§] 1102.3L . . .
11
require[s] documentation reflecting ‘data available from [a provider’s] basic accounts, as usually
maintained,’” AR 16 (quoting 42 C.F.R. § 413.26(a)), and “the [plaintiffs] ha[d] not maintained
‘contemporaneous documentation in the ordinary course of business to support their claims[,]’
which in fact[] the State remittance advices represent,” AR 16–17. Finally, the Administrator
rejected “the [plaintiffs]’ contentions that the EDS reports qualif[ied] as remittance advices . . .
[because] the EDS reports [we]re not contemporaneously generated State documents[] . . . [and]
were not validated, certified[,] or adopted as State documents.” AR 18.
On January 19, 2016, the plaintiffs filed this action seeking judicial review of the
Administrator’s decision. See Compl. at 1. 6 Thereafter, the parties filed their cross-motions for
summary judgment, which the Court referred to a magistrate judge for a report and
recommendation. See Order at 1 (Jan. 20, 2016). On August 18, 2017, Magistrate Judge
Robinson issued her Report and Recommendation, which recommended that the Court affirm the
Administrator’s decision, deny the plaintiffs’ motion for summary judgment, and grant the
Secretary’s cross-motion for summary judgment. See R&R at 30. The Magistrate Judge
specifically concluded that because “three provisions of the PRM [that] form the Secretary’s
must-bill policy . . . were in place prior to [ ] 1987[,] . . . the must-bill policy does not violate the
Moratorium.” Id. at 15. Additionally, she found that the must-bill policy was “further
identified” in a 1985 CMS Medicare Intermediary Manual (the “1985 Intermediary Manual”)
and also “consistently applied in several administrative decisions.” Id. at 18. The Magistrate
Judge further concluded that the Administrator’s “application of the must-bill policy to both
6
Section 1395oo(f) of the Medicare Act requires a provider to seek judicial review of the Administrator’s decision
“within [sixty] days of the date on which notice of any final decision . . . is received.” 42 U.S.C. § 1395oo(f).
Although the plaintiffs did not file their complaint in this case until January 19, 2016, see Compl. at 1, more than
sixty days after the Administrator issued his decision on November 12, 2015, see AR 19, the Secretary admitted the
plaintiffs’ factual allegation that “th[e] [c]omplaint [wa]s filed within [sixty] days of receipt of the final decision of
the Secretary [ ] denying reimbursement for the bad debts,” Compl. ¶ 171; see Answer ¶ 171. Thus, this admitted
allegation establishes that the plaintiffs’ action is timely under § 1395oo(f).
12
ceiling and non-ceiling cases [wa]s not plainly erroneous or inconsistent with the regulations,”
and thus, not arbitrary and capricious. Id. at 16. Finally, the Magistrate Judge concluded that the
Administrator’s “rejection of the [plaintiffs’] EDS reports . . . was not arbitrary and capricious or
an abuse of discretion.” Id. at 30. 7
II. STANDARDS OF REVIEW
A. Objections to Report and Recommendation
Federal Rule of Civil Procedure 72(b) governs the Court’s resolution of objections to a
magistrate judge’s report and recommendation on dispositive motions. The Rule provides that
“[t]he district judge must determine de novo any part of the magistrate judge’s disposition that
has been properly objected to.” Fed. R. Civ. P. 72(b)(3). Accordingly, “only those issues that
the parties have raised in their objections to the Magistrate Judge’s report [and recommendation]
will be reviewed by th[e] court. . . . [Thus], objecting to only certain portions of the Magistrate
Judge’s report ‘does not preserve all the objections one may have.’” Aikens v. Shalala, 956 F.
Supp. 14, 19–20 (D.D.C. 1997) (citations omitted). Upon completing a review of the parties’
objections, “[t]he district judge may accept, reject, or modify the recommended disposition;
receive further evidence; or return the matter to the magistrate judge with instructions.” Fed. R.
Civ. P. 72(b)(3).
B. Summary Judgment in Agency Review Cases Under Rule 56(a)
A moving party is entitled to summary judgment “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
7
The Magistrate Judge additionally concluded “that the [plaintiffs] are unable to estop the Secretary from denying
their request for bad debt reimbursement based on their purported reliance on either the statements of CMS officials
or § 1102.3L of the PRM.” R&R at 27. However, because the plaintiffs represent that they “are not making a
detrimental reliance argument in this case,” Pls.’ Objs. at 18, the Court need not address the Magistrate Judge’s
conclusion concerning this point.
13
law.” Fed. R. Civ. P. 56(a). However, because this Court must review the final decisions of the
Secretary under the applicable provisions of the Administrative Procedure Act (“APA”), see 42
U.S.C. § 1395oo(f)(1) (incorporating the “applicable provisions under chapter 7 of Title 5 [of the
United States Code]”), the typical summary judgment standards set forth in Federal Rule of Civil
Procedure 56 are not applicable, see Stuttering Found. of Am. v. Springer, 498 F. Supp. 2d 203,
207 (D.D.C. 2007), aff’d, 408 F. App’x 383 (D.C. Cir. 2010). “Under the APA, it is the role of
the agency to resolve factual issues to arrive at a decision that is supported by the administrative
record, whereas ‘the function of the district court is to determine whether or not as a matter of
law the evidence in the administrative record permitted the agency to make the decision it did.’”
Id. (quoting Occidental Eng’g Co. v. Immigration Naturalization Serv., 753 F.2d 766, 769–70
(9th Cir. 1985)). In other words, “when a party seeks review of agency action under the APA,
the district judge sits as an appellate tribunal,” and “[t]he ‘entire case’ on review is a question of
law.” Am. Bioscience, Inc. v. Thompson, 269 F.3d 1077, 1083 (D.C. Cir. 2001) (footnote and
citations omitted).
The APA requires courts to “hold unlawful and set aside agency action, findings, and
conclusions” that are “arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law.” 5 U.S.C. § 706(2)(A). However, “[t]he scope of review under the
‘arbitrary and capricious’ standard is narrow and a court is not to substitute its judgment for that
of the agency.” Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43
(1983). Nonetheless, “the agency must examine the relevant data and articulate a satisfactory
explanation for its action including a ‘rational connection between the facts found and the choice
made.’” Id. (quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168 (1962)).
However, “[c]ourts ‘will uphold a decision of less than ideal clarity if the agency’s path may
14
reasonably be discerned.’” Pub. Citizen, Inc. v. Fed. Aviation Admin., 988 F.2d 186, 197 (D.C.
Cir. 1993) (quoting Bowman Transp., Inc. v. Ark.–Best Freight Sys., Inc., 419 U.S. 281, 286
(1974)).
An agency’s factual findings must be “supported by substantial evidence on the record as
a whole.” Arkansas v. Oklahoma, 503 U.S. 91, 113 (1992). 8 “The ‘substantial evidence’
standard requires more than a scintilla, but can be satisfied by something less than a
preponderance of the evidence.” Fla. Gas Transmission Co. v. Fed. Energy Regulatory Comm’n,
604 F.3d 636, 645 (D.C. Cir. 2010) (quoting FPL Energy Me. Hydro LLC v. Fed. Energy
Regulatory Comm’n, 287 F.3d 1151, 1160 (D.C. Cir. 2002)). Put differently, it “is the amount of
evidence constituting ‘enough to justify, if the trial were to a jury, a refusal to direct a verdict
when the conclusion sought to be drawn . . . is one of fact for the jury.’” Kay v. FCC, 396 F.3d
1184, 1188 (D.C. Cir. 2005) (quoting Ill. Cent. R.R. v. Norfolk & W. Ry., 385 U.S. 57, 66
(1966)). In determining whether an agency’s factual finding is supported by substantial
evidence, “weighing the evidence is not the court’s function,” United Steel Workers v. Pension
Ben. Guar. Corp., 707 F.3d 319, 325 (D.C. Cir. 2013), and “the possibility of drawing two
inconsistent conclusions from the evidence does not prevent an administrative agency’s finding
from being supported by substantial evidence,” Consolo v. Fed. Mar. Comm’n, 383 U.S. 607,
620 (1966). Ultimately, the substantial evidence standard is “highly deferential,” and “requir[es]
only ‘such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.’” Rossello ex rel. Rossello v. Astrue, 529 F.3d 1181, 1185 (D.C. Cir. 2008) (quoting
8
Although the APA’s substantial evidence standard purports only to apply to notice-and-comment rulemaking and
formal adjudications, see 5 U.S.C. § 706(2)(E), this Circuit has held that an agency’s decision in an informal
adjudication “still must be supported by substantial evidence—otherwise it would be arbitrary and capricious,” Safe
Extensions v. Fed. Aviation Admin., 509 F.3d 593, 604 (D.C. Cir. 2007); see also Ass’n of Data Processing Serv.
Orgs. v. Bd. of Governors of Fed. Reserve Sys., 745 F.2d 677, 684 (D.C. Cir. 1984) (“[I]t is impossible to conceive
of a ‘nonarbitrary’ factual judgment supported only by evidence that is not substantial in the APA sense.”)
15
Pierce v. Underwood, 487 U.S. 552, 565 (1988)); see also Robinson v. Nat’l Transp. Safety Bd.,
28 F.3d 210, 215 (D.C. Cir. 1994) (under the substantial evidence standard, “[t]he court’s
function is to determine only whether the agency . . . could fairly and reasonably find the facts
that it did” (internal citations and quotation marks omitted)).
III. ANALYSIS
As already explained, the Administrator denied the plaintiffs’ claims for Medicare
reimbursement of unpaid deductibles and coinsurance pursuant to the Secretary’s “must-bill
policy,” AR 15, which requires providers seeking Medicare reimbursement for bad debts
associated with dual eligibles to (1) bill the state Medicaid program (the “billing requirement”)
and (2) obtain and submit to the intermediary a remittance advice from the state Medicaid
program (the “remittance advice requirement”), see AR 13 (explaining that the must-bill policy
“require[s] [providers] to bill for and produce remittance advices as a condition of including
crossover bad debt claims on [their] cost report[s]”). 9 The Administrator denied the plaintiffs’
claims for failing to satisfy the remittance advice requirement. See AR 13 (“[T]he [plaintiffs’]
failure to produce the Medicaid remittance advices represent[ed] a failure . . . to meet the
necessary criteria for Medicare payment of bad debts[,] . . . [and] the [intermediary] was correct
to deny the [plaintiffs’] crossover bad debt claims[.]”). In opposition to this conclusion, the
plaintiffs argue that (1) “[t]he Secretary’s purported must-bill policy . . . was not in place prior to
August 1, 1987, and therefore violates the Moratorium,” Pls.’ Objs. at 3, or, alternatively, even if
the must-bill policy is lawful: (2) “the Secretary should be ordered to accept the alternative
documentation the [p]laintiffs submitted” under “PRM [§] 1102.3L, which clearly provided that
9
The Court notes that the Administrator’s description of the must-bill policy as having two components is consistent
with the Secretary’s description of the policy expressed in Grossmont Hospital Corp. See 797 F.3d at 1082
(describing the Secretary’s policy as requiring a hospital to “bill[] the state Medicaid agency (‘must[-]bill policy’)
and obtain[] a determination from the state of its payment responsibility (‘mandatory state determination’)”).
16
providers could submit proper alternative documentation in lieu of billing the State[] . . . and
which was applicable to the [p]laintiffs’ cost years at issue,” id. at 17; and (3) the plaintiffs’
“EDS [reports] were the equivalent of remittance advices from the State, and[, therefore,]
rejecting them was improper,” id. at 24. For the reasons explained below, because the Court
concludes that the Administrator erred by finding that a remittance advice requirement existed
prior to August 1, 1987, and thus, did not violate the Moratorium, the Court must remand this
case to the Secretary for further proceedings without addressing the plaintiffs’ remaining
arguments.
A. The Alleged Violation of the Bad Debt Moratorium
The Administrator concluded that the Secretary’s must-bill policy did not violate the Bad
Debt Moratorium based on his finding that the “policy [ ] ha[d] been in effect since before
August 1, 1987, as is evidenced in numerous Administrator and Board decisions, . . . the
longstanding PRM sections 310 and 312 and 322, . . . [and] the longstanding regulations and
statute.” AR 16. The Magistrate Judge agreed with the Administrator’s conclusion, specifically
“find[ing] that the must-bill policy was established through the three cited portions of the PRM,
was further identified in the [1985 Intermediary Manual], and was consistently applied in several
administrative decisions.” R&R at 18. The plaintiffs object to the Magistrate Judge’s finding
that a must-bill policy existed prior to the Moratorium on numerous grounds. Specifically, they
argue that the Magistrate Judge (1) “applied the wrong standard and misconstrued [the
p]laintiffs’ [action] as one challenging whether the must[-]bill policy is reasonable,” Pls.’ Objs.
at 3; (2) “erred by finding [that] the PRM provisions established the must[-]bill policy because
those provisions do not by their plain terms establish the must[-]bill policy, nor is there
substantial evidence to support the position that the Secretary interpreted them as establishing
17
such a policy before the Moratorium,” id. at 12; (3) “misapplied administrative decisions,
correctly noting that they are incapable of setting policy but incorrectly construing them as
evidence of the existence of the must[-]bill policy,” id. at 15; (4) “improperly considered a
1985 . . . Intermediary Manual [ ] provision . . . that [ ] is not part of the [a]dministrative [r]ecord
in this case,” id. at 13; and (5) erred by “not giv[ing] any weight to the unchallenged testimony at
the [Board hearing] that senior officials at CMS were emphatic that no must[-]bill policy existed
prior to the Moratorium,” id. at 16.
As an initial matter, the Court notes that so far as it is aware, the issue of whether the
Secretary’s must-bill policy violates the Moratorium has not been decided by any other court.
Although a number of courts, including this Circuit, have addressed whether the Secretary’s
must-bill policy is owed judicial deference, see, e.g., Grossmont Hosp. Corp., 797 F.3d at 1086
(deferring to the Secretary’s interpretation of its regulations because “[t]here [wa]s no indication
that the Secretary’s interpretation is contrary to law or to the agency’s intent at the time of the
adoption”), none has specifically addressed whether the must-bill policy constitutes a change in
policy in violation of the Moratorium, see, e.g., id. at 1084 (finding that the plaintiff “failed to
preserve its challenge that the mandatory state determination policy violates the . . .
[M]oratorium”). Thus, despite the Secretary’s insistence that the Administrator’s decision “must
be affirmed because it is settled law, in this [C]ircuit and others, that the must-bill policy is
valid,” Def.’s Summ. J. Mem. at 14 (relying on Grossmont Hospital Corp. and other similar
cases), none of the cases cited by the Secretary directly addresses the issue currently before the
Court.
In its analysis of the issue, the Court will first address the plaintiffs’ argument regarding
the proper standard for the Court’s review of the Administrator’s finding that the Secretary’s
18
must-bill policy existed prior to the Moratorium. Next, because the Administrator relied only on
the remittance advice requirement of the must-bill policy as the basis for rejecting the plaintiffs’
claims, see AR 12, the Court’s Moratorium analysis addresses the remittance advice requirement
first.
1. The Proper Standard of Review
The plaintiffs assert that the Magistrate Judge “applied the wrong standard” in reviewing
the “Administrator’s conclusion that the must[-]bill policy did not violate the Moratorium.” Pls.’
Objs. at 3. Specifically, they argue that the Magistrate Judge’s finding—“that the [Secretary’s]
application of the must[-]bill policy is not ‘plainly erroneous or inconsistent’ with the
regulations,” id. at 5 (quoting R&R at 16)—“invokes the familiar test of whether deference is
due to an agency’s interpretation of its regulations,” id. at 6, and thus, “makes it . . . apparent that
the Report looked at the Moratorium issue from the perspective of whether the Secretary’s
must[-]bill policy is a reasonable interpretation of the regulations [to which the Court must
defer], . . . [rather than] from the (correct) perspective of whether[] . . . [the Secretary’s] factual
finding[] . . . [that] the must[-]bill policy existed prior to the Moratorium[] . . . [was] ‘[]supported
by substantial evidence,’” id. (quoting Dist. Hosp. Partners, L.P. v. Sebelius, 932 F. Supp. 2d
194, 199 (D.D.C. 2013)). They further argue that the Magistrate Judge’s “citation to cases like
Cove Associates Joint Venture v. Sebelius underscore[s] . . . that the Report . . . applied the
wrong legal standard” because “[i]n [those cases], the Court did not find that the PRM provisions
established the must[-]bill policy; rather, the Court deferred to the Secretary’s interpretation that
those ‘ambiguous’ [ ] provisions could reasonably be interpreted as establishing the must[-]bill
policy.” Id. at 9–10 n.7 (citing 848 F. Supp. 2d 13, 25 (D.D.C. 2012)). The Secretary does not
directly respond to this argument, but generally asserts that “the Magistrate Judge [c]orrectly
19
[c]oncluded [t]hat the [m]ust [b]ill [p]olicy [p]redated the Bad Debt Moratorium.” Def.’s Objs.
Resp. at 2.
The Court agrees with the plaintiffs that the Administrator’s finding that the must-bill
policy existed prior to August 1, 1987, is a factual one, and as such, the Court must review it
under the substantial evidence standard. See Dist. Hosp. Partners, 932 F. Supp. 2d at 200
(reviewing the Administrator’s finding that the challenged policy predated the Bad Debt
Moratorium under the substantial evidence standard); see also Cmty. Health Sys., Inc., 113 F.
Supp. 3d at 220 (same); Lakeland Reg’l Health Sys. v. Sebelius, 958 F. Supp. 2d 1, 7 (D.D.C.
2013) (same). However, the Court cannot agree with the plaintiffs that it is “apparent” that the
Magistrate Judge did not apply this standard. Pls.’ Objs. at 6. Although the Magistrate Judge
did not explicitly purport to apply the substantial evidence standard in reviewing the
Administrator’s finding, see generally R&R at 9–18 (not referencing the substantial evidence
standard), her analysis is consistent with the application of that standard of review, as she
analyzed evidence cited by the Administrator to determine whether it supported the
Administrator’s finding, see id. at 18 (concluding that “the must-bill policy was established
through the three cited portions of the PRM, was further identified in the [1985 Intermediary
Manual], and was consistently applied in several administrative decisions”). And, her citation to
decisions holding that the must-bill policy is a reasonable interpretation of the bad debt
regulations and the PRM provisions as support for her conclusion that “the [relevant] provisions
of the PRM[] . . . establish [the billing] requirement,” id. at 14–15, appears to have been used
only to bolster her independent analysis of the text of the PRM provisions, see id. at 13–15
(analyzing the PRM provisions and concluding that they “form the Secretary’s must-bill
policy”). Moreover, the Magistrate Judge’s conclusion that “the Secretary’s application of the
20
must-bill policy . . . is not plainly erroneous or inconsistent with the regulations,” R&R at 16,
does not demonstrate that the Magistrate Judge “engaged in the wrong analysis,” Pls.’ Objs. at 5.
Notably, the Magistrate Judge’s conclusion was reached in a section of the Report addressing
“whether the Secretary’s interpretation of the must-bill policy—i.e., that i[t] applies to both
ceiling and non-ceiling cases alike—is arbitrary and capricious,” R&R at 15–16, and did not
purport to relate to the Magistrate Judge’s preceding analysis of whether the Administrator
properly concluded that the must-bill policy existed prior to the Moratorium, see id. at 9–15.
Thus, although, for the reasons explained below, the Court reaches a different conclusion than
the Magistrate Judge based on its own de novo assessment of the evidence cited by the
Administrator, the Court declines to reject the Magistrate Judge’s report and recommendation on
the ground that she applied an incorrect standard of review.
2. Chapter 3 of the PRM
The Administrator concluded that sections 310, 312, and 322 of the PRM, “read[] . . .
together,” demonstrate that “in situations where a State is liable for all or a portion of the
deductible and coinsurance amounts, the State . . . is to be billed and a remittance advice[]
issued” “as a prerequisite of payment of the claim by Medicare as a bad debt.” AR 14. The
Magistrate Judge also concluded that “PRM [§§ 310, 312, and 322], taken together, establish a
requirement that providers bill state Medicaid programs for dually eligible beneficiaries,” and
because these “provisions were in place prior to the . . . Moratorium, . . . the must-bill policy
does not violate the Moratorium.” R&R at 15. The plaintiffs object to the Magistrate Judge’s
conclusion, arguing that “although the [Report] may offer a plausible reading of the PRM, the
Report’s reading is in no way compelled by the plain language of the PRM,” and thus, these
PRM provisions do not support “the Administrator[’s] [conclusion] that the Secretary’s . . .
21
must[-]bill policy pre-dated the Moratorium.” Pls.’ Objs. at 7. The Secretary responds that the
Magistrate Judge properly concluded that the PRM provisions “establish a requirement that
providers bill State Medicaid programs for dually eligible beneficiaries.” Def.’s Objs. Resp. at 3
(quoting R&R at 15). For the reasons explained below, the Court agrees with the plaintiffs that
the plain language of the cited PRM provisions does not impose a remittance advice requirement.
As previously referenced, § 310 of the PRM, which addresses the “reasonable collection
efforts” requirement for bad debt reimbursement under 42 C.F.R. § 413.89(e), provides that “a
reasonable collection effort . . . must involve the issuance of a bill on or shortly after discharge or
death of the beneficiary to the party responsible for the patient’s personal financial obligations.”
PRM § 310. Additionally, it provides that “[t]he provider’s collection effort should be
documented in the patient’s file by copies of the bill(s), follow-up letters, reports of telephone
and personal contact, etc.” Id. § 310.B. Section 312, however, creates an exception to PRM
§ 310 for bad debts associated with “indigent or medically indigent” patients. Id. § 312.
Specifically, it provides that “[o]nce indigence is determined and the provider concludes that
there ha[s] been no improvement in the beneficiary’s financial condition, the debt may be
deemed uncollectible without applying the § 310 procedures.” Id. (emphasis added). It further
provides that to determine indigence, “[p]roviders can deem Medicare beneficiaries indigent or
medically indigent when such individuals have also been determined eligible for Medicaid as
either categorically needy individuals or medically needy individuals, respectively.” Id.
“Otherwise, the provider should apply its customary methods for determining the indigence of
patients to the case of the Medicare beneficiary, under [PRM] guidelines,” including that “[t]he
provider must determine that no source other than the patient would be legally responsible for
the patient’s medical bill; e.g., [Medicaid], local welfare agency[,] and guardian.” Id.
22
Finally, § 322 provides instruction on bad debts associated with dual eligible patients in
particular. Id. § 322. It provides:
Where the State is obligated either by statute or under the terms of its [Medicaid]
plan to pay all, or any part, of the Medicare deductible or coinsurance amounts,
those amounts are not allowable as bad debts under Medicare. Any portion of such
deductible or coinsurance amounts that the State is not obligated to pay can be
included as a bad debt under Medicare, provided that the requirements of §[ ]312
or, if applicable, §[ ]310 are met.
Id. Additionally, in situations in which “the State has an obligation to pay, but either does not
pay anything or pays only part of the deductible or coinsurance because of a State payment
‘ceiling,’” § 322 instructs that “any portion of the deductible or coinsurance that the State does
not pay that remains unpaid by the patient, can be included as a bad debt under Medicare,
provided that the requirements of §[ ]312 are met.” Id.
Regarding these three sections of the PRM, the Administrator concluded:
Section 310 of the PRM generally requires a provider to issue a bill to the party
responsible for the beneficiaries’ payment. Section 312 of the PRM, while allowing
a provider to deem a dually eligible patient indigent and claim the associated debt,
first requires that no other party, including the State Medicaid program is
responsible for payment. Section 322 of the PRM addresses the circumstances of
dually eligible patients where there is a State payment ceiling. That section states
that the ‘amount that the State does not pay’ may be reimbursed as a Medicare bad
debt. . . . Reading the sections together, the Administrator concludes that, in
situations where a State is liable for all or a portion of the deductible and
coinsurance amounts, the State is the responsible party and is to be billed and a
remittance advice[] issued in order to establish the amount of bad debts owed under
Medicare.
AR 13–14. The Magistrate Judge, although reaching the same conclusion that these provisions
established the must-bill policy, see R&R at 15, adopted a slightly different interpretation of
these sections. Specifically, she concluded that § 312 does not “render[] the entirety of § 310
inapplicable to dually-eligible beneficiaries,” but instead only “contemplate[s] that the strict
requirements of § 310 need not apply to the issuance of a bill to the beneficiary, when the
provider has determined that the beneficiary is indigent.” Id. at 14. Moreover, she concluded
23
that § 310, “read in conjunction with § 312, [makes it] apparent that the regulations require
providers to submit bills to other [non-patient] sources,” citing § 312’s language that a “provider
must determine that no source other than the patient would be legally responsible for the
patient’s medical bill; e.g., [Medicaid].” Id. (quoting PRM § 312.C). She further noted that
notwithstanding any language in the PRM, “the provider must comply with 42 C.F.R.
§413.89(e), which requires that the provider make ‘reasonable collection efforts.’” Id.
Additionally, she concluded that § 322 provided further support for the applicability of §§ 310
and 312 to the providers in this case, as it “provides that any deductible and coinsurance amounts
that are not paid by the state Medicaid program are ‘allowable bad debts provided that the
requirements of §[ ]312, or if applicable, §[ ]310 are met.” Id. (quoting PRM § 322).
Although the plaintiffs “take no issue with [] PRM[] [§ 310’s] requirement that the
provider must generally bill the responsible party before claiming unpaid coinsurance and
deductibles as bad debt[s],” they do “take issue with the Secretary’s interpretation of the PRM
sections as requiring providers to bill the State in order to determine whether or to what extent
the State is the responsible party.” Pls.’ Objs. at 8. They argue that although § 312 requires the
“provider [to] determine[] that no other party, including the state Medicaid program, is
responsible for payment,” Pls.’ Objs. at 7, “[n]owhere does the PRM say that the only way a
provider can determine the State is not responsible for payment is by billing the State,” id. at 8.
And they point out that, “[i]ndeed, as recognized by the Secretary himself, there are other ways
to determine whether and the extent to which the State is responsible for payment,” id. at 8–9,
and “[t]he mere fact that [§] 3[1]2 of the PRM use[s] the language[,] ‘[t]he provider must
determine[,]’ indicates that the provider is able to make the determination of the State’s liability
on its own, albeit through information that is subject to verification,” Pls.’ Summ. J. Mem. at 29
24
n.13. They further argue that § 322 “does not impos[e] a requirement that the State must be
billed,” which is significant because it “contains an example that specifically contemplates
ceiling cases like those at issue in this case.” Pls.’ Objs. at 7. Finally, they argue that “it is not
enough that the Secretary can, for the first time after 1987, point to language in guidance and
interpret that guidance as supporting the [must-bill] policy,” because “even though th[e] PRM
provisions did predate the Moratorium[,] . . . the Secretary’s interpretation [of them] in this case
did not predate the Moratorium as a factual matter.” Id. at 12.
Upon review of these PRM provisions, the Court agrees with the plaintiffs that they do
not establish a remittance advice requirement or otherwise support that one existed prior to the
Moratorium. Although it is undisputed that these provisions existed prior to the Moratorium,
“that fact does not end the inquiry.” Winder HMA LLC v. Burwell, 206 F. Supp. 3d 22, 37
(D.D.C. 2016). Rather, “[t]he question facing the Court[] [ ] is whether the Secretary’s current
understanding of . . . th[e] [provisions] is consistent with the agency’s understanding of th[em] . .
. in 1987.” Id.; see also Foothill Hosp., 558 F. Supp. 2d at 10 (rejecting the Secretary’s argument
that “the [bad debt] regulation . . . provide[d] sufficient support for [his] decision” because the
Secretary “[wa]s confusing the regulation with his agency’s interpretations of th[e] regulation.
While [the regulation] certainly predate[d] the Moratorium, [his] current interpretation of [it] . . .
d[id] not.”).
The Court cannot conclude that the plain language of these three PRM provisions
establishes a remittance advice requirement. Notably, although the Administrator claims that
these provisions “plainly require[] that the provider bill the State as a prerequisite of payment of
the claim by Medicare as a bad debt,” he does not make any such claim as to a remittance advice
requirement, only asserting that such a requirement arises from “[r]eading the[se] sections
25
together.” AR 14. Beginning with § 310, although the Court agrees with the Administrator that
the plain language of this provision “generally requires a provider to issue a bill to the party
responsible for the beneficiaries’ payment,” AR 13, that section makes no reference to a
remittance advice or any other documentation of a response from the state, see PRM § 310.
Indeed, the portion of § 310 specifically addressing “[d]ocumentation required” only addresses
“copies of bills” and does not refer to any documentation from the state. Id. § 310.B. In any
event, § 310 appears to be inapplicable here because § 312, read literally, exempts providers
from complying with that section when seeking reimbursement for dual eligible patients. See id.
§ 312 (stating that a “[p]rovider[] can deem Medicare beneficiaries indigent . . . when such
individuals have also been determined eligible for Medicaid,” and “[o]nce indigence is
determined and the provider concludes that there ha[s] been no improvement in the beneficiary’s
financial condition, the debt may be deemed uncollectible without applying the § 310
procedures” (emphasis added)).10 Therefore, § 310 alone does not establish a remittance advice
requirement.
Additionally, the Court cannot conclude that language in § 312.C establishes a remittance
advice requirement either. First, although not raised by the plaintiffs, the plain language of § 312
renders § 312.C “literally inapplicable to Medicaid patients.” Cmty. Hosp. of Monterey
Peninsula, 323 F.3d at 795. As already explained, § 312 provides that a “[p]rovider[] can deem
10
The Magistrate Judge’s interpretation of § 312—that it only exempts a provider from “the issuance of a bill to the
beneficiary,” R&R at 14—may be reasonable, but it is not evident from the plain language of the provision. And in
any event, to the extent that the Secretary adopts that interpretation in this litigation, see Def.’s Summ. J. Mem. at 18
(“Under Section 312 of the manual, if a provider determines that a patient is ‘indigent,’ then it need not seek
payment from the patient using the Section 310 procedures[.]” (emphasis added)), because the Administrator did not
interpret § 312 this way, see AR 13–14, that position constitutes a post-hoc rationalization that cannot support the
Administrator’s decision, see Summer Hill Nursing Home LLC v. Johnson, 603 F. Supp. 2d 35, 39 (D.D.C. 2009)
(rejecting the Secretary’s position in litigation because “[n]owhere in the Secretary’s decision is that rationale
articulated, and the Court cannot accept the lawyers’ post hoc rationalization”).
26
Medicare beneficiaries indigent . . . when such individuals have also been determined eligible for
Medicaid . . . . Otherwise, the provider should apply its customary methods for determining the
indigence of patients . . . under [certain] guidelines,” PRM § 312 (emphasis added), which
include that “[t]he provider must determine that no source other than the patient would be legally
responsible for the patient’s medical bill, e.g., [Medicaid],” id. § 312.C (emphasis added). 11
Even assuming that § 312.C applies to all indigent patients, as the plaintiffs contend, that section
nowhere states that a provider must receive a remittance advice from a state Medicaid program
in order to “determine that no source other than the patient would be legally responsible for the
patient’s medical bill,” id. § 312.C, and indeed, it does not establish any requirements for how a
provider must make this determination, see id. Moreover, although the Administrator concluded
that “[i]t is only through the State’s records and claims system that the amount of any payment
can be determined,” AR 13; see also AR 8 (“The State maintains the most accurate patient
information to make the determination of a patient’s Medicaid eligibility status at the time of
service and thus, to determine the State’s cost sharing liability for unpaid Medicare deductibles
and coinsurance.”), as the plaintiffs point out, the Administrator’s conclusion is undermined by
the fact that CMS previously “recognized that there [a]re alternative methods for determining the
State’s responsibility for bad debts in ceiling cases” when it “promulgated section 1102.3L[] in
November 1995,” which provided that “in lieu of billing the State, . . . [a] provider ‘[may]
establish that Medicaid is not responsible for payment’ by ‘furnish[ing] documentation of . . .
[n]on payment that would have occurred if the crossover claim had actually been filed with
11
Although it may be “difficult to understand why . . . [the Medicare] program would insist on a provider pursuing
those secondarily liable in cases where the patient is ‘determined’ to be indigent, and not so insisting where the
patient is ‘deemed’ to be indigent because he or she qualifies for Medicaid,” Cmty. Hosp. of Monterey Peninsula,
323 F.3d at 795, it remains that the plain language of § 312 does not require providers to comply with § 312.C once
they have deemed a patient indigent based on the patient’s Medicaid eligibility.
27
Medicaid,’” Pls.’ Summ. J. Mem. at 30 & n.14 (quoting AR 1248).12 Therefore, § 312.C does
not independently establish a remittance advice requirement.
Finally, the Court also cannot conclude that the plain language of § 322 imposes a
remittance advice requirement. Again, like the other two provisions, § 322 does not explicitly
impose any such requirement. The relevant language of § 322 provides as follows:
In some instances, the State has an obligation to pay, but either does not pay
anything or pays only part of the deductible or coinsurance because of a State
payment “ceiling.” . . . In these situations, any portion of the deductible or
coinsurance that the State does not pay that remains unpaid by the patient, can be
included as a bad debt under Medicare, provided that the requirements of § 312 are
met.
PRM § 322. The Court is not persuaded by the Administrator’s conclusion that § 322’s
reference to the amount that the State “does not pay,” id., “presumes that the State has been
billed as all responsible parties are expected to be billed,” AR 8. Notably, the Administrator
does not conclude that this language presumes that a state has denied payment, and in any event,
the plain language of this provision does not reference a remittance advice or any other
documentation reflecting a state’s response and does not make apparent that any such
documentation is required for Medicare reimbursement. Thus, § 322 does not independently
establish a remittance advice requirement.
Finally, the Court is not persuaded by the Administrator’s position that “[r]eading the[se]
sections together” establishes a remittance advice requirement. AR 14. Because the Court has
concluded that none of these provisions independently establishes a remittance advice
12
The Court cites PRM § 1102.3L only to illustrate that the Administrator’s conclusion is based on a flawed
assumption, and it does not cite the provision as evidence that the Secretary’s must-bill policy did or did not exist
prior to the Moratorium. As explained in Part III.A.4, infra, because this provision was not “in effect” before
August 1, 1987, it is not part of the Secretary’s pre-1987 policy, OBRA, Pub. L. No. 100–203, § 4008(c), 101 Stat.
1330, 1330–55 (codified at 42 U.S.C. § 1395f note), and any statements of policy contained within the provision are
at best “a retrospective characterization of the Secretary’s pre-Moratorium policy” and “do[] not illustrate how [the
policy] was actually applied prior to 1987,” Mountain States Health All., 128 F. Supp. 3d at 218.
28
requirement, or even refers to one, it cannot discern any reason to conclude that viewing these
provisions together somehow creates that requirement. Thus, the Court concludes that PRM
§§ 310, 312, and 322 do not demonstrate that a remittance advice requirement existed prior to the
Moratorium.
The Secretary’s additional counterarguments regarding these PRM provisions are also not
persuasive. Specifically, the Secretary argues that “whether or not there might be another
plausible interpretation of agency guidance, the Court must defer to the Secretary’s interpretation
unless it is plainly erroneous.” Def.’s Objs. Resp. at 6. He further argues that a number of
courts, including this Circuit, “ha[ve] concluded[] [that] the must-bill policy is a reasonable
interpretation of a validly promulgated regulation.” Def.’s Summ. J. Mem. at 14 (first citing
Grossmont Hosp. Corp., 797 F.3d at 1085–86; then citing Me. Med. Ctr. v. Burwell, 775 F.3d
470, 479 (1st Cir. 2015); then citing Cmty. Hosp. of Monterey Peninsula, 323 F.3d at 792–93;
then citing Cove Assocs. Joint Venture, 848 F. Supp. 2d at 25; and then citing GCI Health Care
Ctrs., Inc. v. Thompson, 209 F. Supp. 2d 63, 71 (D.D.C. 2002)). However, as another member
of this Court has explained,
courts typically give substantial deference to an agency’s interpretation of its own
regulations[;] . . . [however, t]he Bad Debt Moratorium complicates the deference
issue, [ ] as it requires the Court to follow the agency’s 1987 interpretation of its
own regulations, rather than the agency’s present-day interpretation of the same.
Under the Moratorium, an otherwise “reasonable” interpretation of a bad-debt
regulation, if inconsistent with the Secretary’s pre-1987 policy, is no longer so.
And to defer to the Secretary’s arguments now about what the agency’s policy was
then, rather than discerning such policy from the pronouncements of the agency at
that time, would have the effect of thwarting the Moratorium’s central “freezing”
purpose altogether.
Winder HMA LLC, 206 F. Supp. 3d at 36–37 (internal citations and quotation marks omitted).13
13
For the reasons explained in Winder, the Court respectfully disagrees with other members of this Court who have
found that “the reasonableness of the agency’s interpretation of its own regulation [and guidance,] and the level of
(continued . . . )
29
Therefore, the conclusions of this Circuit, other members of this Court, and other courts
that a remittance advice requirement is a reasonable interpretation of the bad debt regulations or
the relevant PRM provisions is not determinative here. This is so because, as the plaintiffs note,
“none of [these cases] dealt with the Moratorium and none . . . found as a factual matter that the
must[-]bill policy was established by th[e] PRM provisions.” Pls.’ Objs. at 9. And, none of
these decisions concluded that the Administrator’s interpretation of the bad debt regulations or
the PRM provisions to require a remittance advice is the only interpretation of the PRM. See,
e.g., Grossmont Hosp., 797 F.3d at 1082, 1085–86 (not analyzing the PRM provisions, but
holding that the agency’s interpretation of the bad debt regulation to require a provider to
“obtain[] a determination from the state of its payment responsibility” “[wa]s sensible . . .
because state policies vary widely and the state will have all of the necessary information under
its Medicaid system,” and “[t]here [wa]s no indication that the Secretary’s interpretation [wa]s
contrary to law or to the agency’s intent at the time of the adoption”); see also Me. Med. Ctr.,
775 F.3d at 479 (concluding that “the [b]illing [r]equirement is a natural interpretation of the[]
regulations”); Cmty. Hosp. of Monterey Peninsula, 323 F.3d at 793 (“Given that billing the state
is the most straightforward and reliable way of determining whether, and, if so, how much the
state will pay, we are unable to say that the must-bill policy is inconsistent with the statute or
regulations or is an unreasonable interpretation of them”); Cove Assocs. Joint Venture, 848 F.
Supp. 2d at 25 (concluding that “PRM §§ 310, 312, and 322 are reasonably read to require that
( . . . continued)
deference due to that interpretation,” may “support[] the [Administrator’s] conclusion that the agency’s policy
regarding bad debt reimbursement was the same on August 1, 1987 as it is now.” Cmty. Health Sys., Inc., 113 F.
Supp. 3d at 221 (“Th[e] Court finds [ ] the agency’s interpretation of a longstanding regulation to be no less
reasonable because its current interpretation is the same as it would have given, if asked, prior to the effective date
of the Moratorium.” (emphasis added)); see Lakeland Reg’l Health Sys., 958 F. Supp. 2d at 8 (concluding that
because the Administrator’s decision was “based on an interpretation of an agency regulation, . . . [it] is entitled to
great deference”).
30
the state be billed,” which “is consistent with the Medicare statute and regulations[] and is not an
unreasonable implementation of either”); GCI Health Care Ctrs., Inc., 209 F. Supp. 2d at 71
(concluding “that the reasoning contained within the Secretary’s interpretation of . . . PRM
§§ 310, 312[] is both valid and sound”). Indeed, at least two of these cases acknowledge that the
PRM provisions are ambiguous. See Cmty. Hosp. of Monterey Peninsula, 323 F.3d at 793, 796
(observing that “[i]t may be true[] . . . that the[] regulations can be read as not precluding the
possibility of a provider’s establishing the [bad debt] criteria . . . by alternative means,” and that
“[a]t most, the[] [PRM] provisions are ambiguous”); see also Cove Assocs., 848 F. Supp. 2d at
25 (“At most, the[] PRM provisions are ambiguous[.]” (citing Cmty. Hosp. of Monterey
Peninsula, 323 F.3d at 796)).
For all of these reasons, the Court cannot conclude that the PRM provisions support the
Administrator’s finding that a remittance advice requirement existed prior to August 1, 1987. As
another member of this Court observed, the Administrator “is confusing the [PRM provisions]
with his agency’s interpretations of [the PRM provisions].” Foothill Hosp., 558 F. Supp. 2d at
10. Therefore, the Court must look to other evidence in the record to determine whether the
Administrator’s finding that a remittance advice requirement existed prior to August 1, 1987 may
be upheld.
3. Pre-Moratorium Board Decisions
The Administrator cited two Board decisions issued prior to the Moratorium—Concourse
Nursing Home v. Travellers Insurance Co., PRRB Dec. No. 83-D152 (Sept. 27, 1983); and St.
Joseph Hospital v. Blue Cross & Blue Shield Association, PRRB Dec. No. 84-D109 (Apr. 16,
1984)—as support for his position that the Secretary’s must-bill policy, including the remittance
advice requirement, “has been consistently articulated in the final decisions of the Secretary
31
addressing this issue . . . and applied to [ ] cost years prior to August 1, 1987.” AR 14 & n.16.
Like the Administrator, the Magistrate Judge concluded that these decisions constitute “evidence
of the Secretary’s consistent implementation of the must-bill policy since 1983.” R&R at 12.
The plaintiffs raise a number of objections to these decisions, including that “CMS
administrative decisions do not and cannot set policy for the Secretary,” Pls.’ Objs. Reply at 9,
and that “non-ceiling case [ ] decisions related to the need to bill the State when the State was the
responsible payor[,] . . . have no bearing on whether there is a must[-]bill policy by which a
provider must bill [and receive a remittance advice from] the State when the provider otherwise
determines or demonstrates the State is not the responsible payor,” id. at 7–8 (internal citation
omitted). For the reasons explained below, the Court concludes that neither of these decisions
supports the Administrator’s finding that, prior to August 1, 1987, the Secretary interpreted his
regulations or PRM provisions to require providers to obtain and submit a remittance advice in
order to receive Medicare reimbursement. Consequently, the Court need not address each of the
plaintiffs’ remaining arguments regarding these decisions. 14
In Concourse Nursing Home, a provider sought Medicare reimbursement for unpaid
deductible and coinsurance payments that it contended were “owed by the [state] Medicaid
program.” AR 1538. The provider represented to the Board that prior to seeking Medicare
reimbursement for these amounts, it had made “formal appeals and [had] informal discussions
with appropriate state officials,” which it argued were “reasonable” efforts given that the state
“had repeatedly refused to pay the[] claims until recently.” Id. (contending that “any further
collection efforts would be futile”). The intermediary disagreed and disallowed the claims,
14
Because the Court concludes that these administrative decisions do not support a remittance advice requirement,
and because it need not decide whether they support a billing requirement for the reasons explained in Part III.B,
infra, the Court need not address the plaintiffs’ remaining arguments as to these Board decisions.
32
concluding that “the provider ha[d] not met the [bad debt] requirements of 42 C.F.R.
[§] 405.420(e)”15 because, inter alia, it “ha[d] not demonstrated that a reasonable collection
effort was made before the debts were deemed to be worthless.” Id. The Board affirmed the
intermediary’s decision, providing the following brief analysis:
The Board finds that the provider has furnished no documentation which would
support its contentions that it had established collection policies and procedures or
that actual collection efforts were made to obtain payments from the patients or the
Medicaid authorities before an account balance was considered an uncollectible bad
debt for Medicare purposes. The Board also notes that payments have been
received for the bad debts claimed by the provider, which would also demonstrate
that the amounts claimed were not properly chargeable to the Medicare program.
AR 1544.
In St. Joseph Hospital, decided approximately six months later, the Board again
considered a provider’s claims for Medicare reimbursement for unpaid deductible and
coinsurance payments associated with dual eligible patients. See AR 1549. In that case, the
intermediary had also disallowed the provider’s claims “based upon its determination that the
provider had not made reasonable collection efforts for the[] [ ] accounts.” AR 1550.
Specifically, as to the provider’s Medicare reimbursement claims for Medicaid patients, the
intermediary had concluded that because “[t]he State of Georgia . . . will pay for the deductible
and coinsurance amounts applied to a charge for service allowed by Medicare regulations[,] [ ]
reasonable collection efforts related to Medicare bad debts should have included action to collect
amounts owed by . . . [the] State of Georgia,” but “[t]he provider ha[d] not demonstrated that
such action took place.” Id. In affirming the intermediary’s disallowance, the Board
conclude[d] that the bad debts claimed did not meet the regulatory requirements of
[42 C.F.R. §] 405.420(e) because the provider could not support its claims that:
they related to covered services and derived from deductibles and coinsurance;
reasonable collection efforts were made; all accounts were not collectible; and there
15
42 C.F.R. § 405.420 was ultimately re-codified as 42 C.F.R. § 413.89. See Dist. Hosp. Partners, 932 F. Supp. 2d
at 200 n.7.
33
was no likelihood of future recovery. While the number of in-house billings was
consistent for all parties, the provider did not attempt to bill the State of Georgia
for its Medicaid patients. [Therefore, t]he provider’s collection efforts were more
token than genuine.
AR 1550–51.
These cases do not demonstrate that the Secretary interpreted his regulations or the PRM
provisions as requiring a remittance advice as a prerequisite for reimbursement of unpaid
deductibles and coinsurance associated with dual eligible patients. Notably, the Secretary
himself does not claim that either decision demonstrates such a requirement. See Def.’s Summ.
J. Mem. at 16–17 (asserting only that these two cases support a “billing requirement”). Indeed,
neither decision refers to a remittance advice or any other documentation of the state’s response
to a claim, let alone a requirement that providers must obtain from the state and submit such
documentation in order to receive Medicare reimbursement. Although the Board in Concourse
Nursing Home suggested that a provider must “furnish[] [ ] documentation . . . [to] support . . .
that actual collection efforts were made to obtain payments from the patients or the Medicaid
authorities,” AR 1544, it does not specify what documentation is required or assert that a
provider must demonstrate that a state Medicaid program has denied payment in order to receive
Medicare reimbursement for deductibles and coinsurance associated with dual eligible patients.
Additionally, even assuming that these cases support a billing requirement (which the
Court does not decide for the reasons explained in Part III.B, infra), these cases would still fall
short of supporting a remittance advice requirement. Although receiving a remittance advice or
other determination of liability from the state may be a natural consequence of billing the state in
many cases, and thus, the two requirements are logically related, as the plaintiffs’ experience in
this case demonstrates, a provider may not always receive a remittance advice in response to a
bill submitted to the state. See AR 12. In any event, any causal relationship between the billing
34
and remittance advice requirements would not compel the Court to presume the existence of a
remittance advice requirement solely from the existence of a billing requirement. As the
Administrator and this Circuit have recognized, the two requirements are analytically distinct.
See AR 2 (“The issue is whether the [p]roviders were required to bill the State Medicaid program
and submit a State remittance advice . . . to the Medicare [intermediary] as a precondition for the
Medicare program to pay bad debts[.]” (emphasis added)); see also Grossmont Hosp. Corp., 797
F.3d at 1086 (“The must[-]bill policy encompasses two requirements[:] a requirement to bill the
state . . . for the bad debt claims as well as a requirement to obtain the state’s determination as to
its financial responsibility on those claims.” (emphasis added)). And, as this Circuit has
recognized, “[s]ubstantial evidence . . . must do more than create a suspicion of the existence of
the fact to be established.” Morall v. DEA, 412 F.3d 165, 176 (D.C. Cir. 2005). Therefore,
neither of these decisions supports the Administrator’s finding that a remittance advice
requirement existed prior to August 1, 1987.
4. Post-Moratorium Administrator Decisions
In addition to the evidence already discussed, the Administrator relied on two
administrative decisions issued after August 1, 1987, as support for his finding that the
Secretary’s must-bill policy, including a remittance advice requirement, existed prior to that date.
See AR 14 n.16 (first citing Cal. Hosps. 90-91 Outpatient Crossover Bad Debts Grp. Appeal,
PRRB Dec. No. 2000-D80 (Oct. 31, 2000); then citing Hosp. de Area de Carolina, Admin. Dec.
No. 93-D23). The plaintiffs argue that “the Secretary cannot cite [ ] post-Moratorium
administrator decision[s] for evidence of a pre-Moratorium policy.” Pls.’ Objs. Reply at 7. The
Court agrees that these decisions do not support the Administrator’s finding that a remittance
advice requirement existed prior to August 1, 1987.
35
First, neither of these decisions recognizes a remittance advice requirement. Rather, they
only purport to recognize and apply a billing requirement. See AR 1570 (concluding in
California Hospitals 90-91 that “in order to be reimbursed [for] Medicare bad debts where a
State has a ceiling, the provider is required to bill the State,” and denying the providers’ claims
for reimbursement because “[t]he [p]roviders did not bill the State”); AR 1556–57 (recognizing
in Hospital de Area de Carolina the provider’s “obligation [to] submit[] claims to the [ ]
Medicaid program” and concluding that because “the [p]rovider failed to request payment from
the Commonwealth for deductibles and coinsurance amounts attributable to Medicare/Medicaid
patients for which the Commonwealth was obligated to pay, those amounts are not properly
included as bad debts”).16 And, even if these decisions had recognized a remittance advice
requirement, because neither decision was issued until long after August 1, 1987—Hospital de
Area de Carolina in 1993, see AR 1553, and California Hospitals 90-91 in 2000, see AR 1565—
neither represents the Secretary’s policy “in effect” as of that date, OBRA, Pub. L. No. 100–203,
§ 4008(c), 101 Stat. 1330 (codified at 42 U.S.C. § 1395f note); see also Winder HMA LLC, 206
F. Supp. 3d at 37 (explaining that “‘[t]he Secretary’s current interpretation of [Medicare] rules
and guidelines is not determinative’ as to whether the present interpretation was consistent with
the pre-1987 policy of the Secretary” (quoting Detroit Receiving Hosp. v. Shalala, No. 98-1429,
1999 WL 970277, at *7 (6th Cir. Oct. 15, 1999)).
Moreover, although both decisions suggest that a billing requirement existed prior to the
Moratorium by citing two pre-1987 decisions as a source for that requirement, those decisions
16
Although the Administrator in Hospital de Area de Carolina noted that “the [p]rovider was never denied
reimbursement by the Commonwealth’s Medicaid program under a ceiling limitation or [o]n any other basis,” AR
1556, he made no mention of a remittance advice requirement or any other requirement to produce documentation
from the state Medicaid program. Moreover, the Administrator only recognized and applied an “obligation [to]
submit[] claims to the [ ] Medicaid program,” AR 1556; see also AR 1557 (rejecting the provider’s claims because
the provider “failed to request payment from the Commonwealth”), and did not purport to recognize or apply any
requirement that a provider also be denied reimbursement, see AR 1556–57.
36
are St. Joseph Hospital and Concourse Nursing Home, see AR 1557 & n.7; AR 1571 & n.16
(asserting that “the final decisions of the Secretary have consistently held that the bad debt
regulation and 42 C.F.R. [§] 413.20 require providers to bill the Medicaid programs for
payment”), which, as already explained, do not support a remittance advice requirement. In any
event, post-Moratorium statements about what the Secretary’s pre-1987 policy required are
“simply a retrospective characterization of the Secretary’s pre-Moratorium policy” and “do not
illustrate how [the policy] was actually applied prior to 1987.” Mountain States Health All., 128
F. Supp. 3d at 218; see Winder HMA LLC, 206 F. Supp. 3d at 37 (“The question facing the
Court [ ] is whether the Secretary’s current understanding of the regulation[s] and the [PRM] is
consistent with the agency’s understanding of those materials in 1987, . . . [which] requires
recourse to the [Board] decisions that predate the Moratorium and reflect the agency’s position at
that time.”); Dist. Hosp. Partners, 932 F. Supp. 2d at 204 (finding that the Secretary’s decision
was not supported by various administrative decisions, in part because those decisions
“postdate[d] the Moratorium by several years”). Thus, neither of these decisions supports the
Administrator’s finding that a remittance advice requirement existed prior to August 1, 1987. 17
5. 1985 Intermediary Manual
The Magistrate Judge concluded that language from a 1985 Intermediary Manual cited in
the Secretary’s opening brief “is further evidence of the must-bill policy,” including a remittance
advice requirement. R&R at 18. In reaching this conclusion, the Magistrate Judge rejected the
plaintiffs’ argument that consideration of this evidence, which was not cited in the
17
The Secretary argues that Hospital de Area de Carolina, although issued after the Moratorium, is nonetheless
relevant because it “applied the Secretary’s pre-1987 policy [given that] the cost reporting periods at issue [in that
case] were 1985 and 1986.” Def.’s Summ. J. Reply at 6 n.4. However, the Court need not resolve this issue
because, even if it concluded that Hospital de Area de Carolina should be considered, for the reasons already
explained, the Court would find that the Administrator’s decision in that case does not support the existence of a
remittance advice requirement prior to August 1, 1987.
37
Administrator’s decision, “represent[ed a] ‘post-hoc rationalization by agency counsel,’” id. at
17 (quoting Pls.’ Summ. J. Reply at 10), reasoning that the Secretary’s “additional citation to
the . . . [1985 Intermediary Manual]” merely constituted a “more detailed explanation” of the
Administrator’s decision of the type that may be considered by the Court, id. The plaintiffs
argue that the Magistrate Judge’s consideration of this evidence was “improper” because it is
“extra-record evidence” that cannot be used to “prove the existence of a policy that pre-dated the
Moratorium.” Pls.’ Objs. at 13–14. The Secretary responds that “[t]he Magistrate [Judge]
correctly followed the D.C. Circuit’s conclusion in the very context of the must-bill policy that
‘[c]ourts can accept a more detailed explanation that does not present a new basis for the
agency’s action.’” Def.’s Objs. Resp. at 7 (first quoting Grossmont Hosp. Corp. v. Sebelius, 903
F. Supp. 2d 39, 58 n.10 (D.D.C. 2012); then citing Clifford v. Pena, 77 F.3d 1414, 1418 (D.C.
Cir. 1996)).
The Court agrees with the plaintiffs that the 1985 Intermediary Manual provision cited by
the Secretary may not be considered. It is well-established that “the focal point for judicial
review should be the administrative record already in existence, not some new record made
initially in the reviewing court.” Camp v. Pitts, 411 U.S. 138, 142 (1973); see also Walter O.
Boswell Mem’l Hosp. v. Heckler, 749 F.2d 788, 792 (D.C. Cir. 1984) (“Review [of the
Secretary’s decision] is to be based on the [ ] administrative record that was before the Secretary
at the time he made his decision.” (emphasis added) (quoting Citizens to Preserve Overton Park,
Inc. v. Volpe, 401 U.S. 402, 420 (1971))). The Administrator did not cite or refer to the 1985
Intermediary Manual provision in his decision, see generally AR 2–18, and the Secretary does
not argue that the provision was in the record before the Administrator, see generally Def.’s
Objs. Resp. Therefore, under the general rule applicable to this Court’s review of agency action,
38
the Court may not consider the 1985 Intermediary Manual provision. See Dist. Hosp. Partners,
932 F. Supp. 2d at 203 (in the Moratorium context, rejecting “the Secretary’s attempts in her
[m]otion for [s]ummary [j]udgment to ‘bolster’ the weight” of evidence “by referencing a . . .
[CMS m]emorandum” because it “was not included in the [a]dministrative [r]ecord and therefore
need not be considered”); see also Ctr. for Auto Safety v. Fed. Highway Admin., 956 F.2d 309,
314 (D.C. Cir. 1992) (concluding that because evidence cited by the agency had been
“exclude[d] . . . at the administrative stage, the [agency] c[ould ]not [ ] rely on th[e] [evidence] to
provide the requisite evidentiary support during judicial review”); Algonquin Gas Transmission
Co. v. Fed. Energy Regulatory Comm’n, 948 F.2d 1305, 1316 (D.C. Cir. 1991) (“declin[ing] to
rely on evidence as a ground for affirming the [Commission’s] order” where that “evidence was
nowhere considered in either of the Commission’s orders below”).
The cases cited by the Secretary and the Magistrate Judge do not provide the Secretary
any relief from this general rule. The Grossmont Hospital decision provides no support for the
Secretary’s position, as the district court simply found it appropriate to consider “further
explanation . . . [provided by the Secretary] during the course of litigation,” 903 F. Supp. 2d at
58 n.10, where that explanation was based on evidence contained in the administrative record,
see id. at 58 (recognizing that the Secretary’s “further explanation” was based on the provider’s
testimony before the Board).18 Therefore, the district court did not assess whether a court may
consider additional evidence not included in the administrative record, and, if anything, this
18
The Court is perplexed by the Secretary’s citation to a district court case to support his reference to “the D.C.
Circuit’s conclusion in the very context of the must-bill policy.” Def.’s Objs. Resp. at 7 (emphasis added) (citing
Grossmont Hosp., 903 F. Supp. 2d at 58 n.10). In any event, although the district court in Grossmont Hospital did
consider a provider’s challenge to the must-bill policy, the conclusion cited by the Secretary did not appear in the
context of the Court’s consideration of that challenge, but instead appeared in the context of the provider’s challenge
to the Secretary’s finding that the provider did not qualify for hold harmless relief under JSM-370. See Grossmont
Hosp., 903 F. Supp. 2d at 58. Therefore, the Secretary’s suggestion that the conclusion in Grossmont Hospital is
somehow supportive or factually on point is meritless.
39
decision undermines the Secretary’s position because it underscores that the administrative
record must be “the focal point” of the Court’s review. See Camp, 411 U.S. at 142. The
Circuit’s decision in Clifford v. Pena is likewise unavailing for the Secretary, as the Circuit there
concluded only that the district court could consider a declaration from an agency official that
“merely illuminate[d] reasons obscured but implicit in the administrative record.” 77 F.3d at
1418 (rejecting the plaintiff’s argument that the district court improperly permitted the agency to
supplement the record with a declaration from an agency official that “provide[d] the court with
background information about the [agency’s] subsidy program and the current state of the
American shipping industry” (quoting Seafarers Int’l Union v. United States, 891 F. Supp. 641,
647 (D.D.C. 1995))). As to the 1985 Intermediary Manual provision at issue here, first, it is not
a declaration of an agency official, and second, the provision is not offered to “merely illuminate
reasons obscured but implicit in the administrative record,” id., but is instead offered to “bolster
the weight” of the evidence cited by the Administrator as support for his position, Dist. Hosp.
Partners, 932 F. Supp. 2d at 203, which the court cannot condone. Therefore, the Court
concludes that neither of the decisions cited by the Secretary provides support for his position
that the 1985 Intermediary Manual provision may be considered notwithstanding its absence
from the administrative record.
6. Statements by CMS Officials
The plaintiffs contend that the Magistrate Judge erred by “not giv[ing] any weight to
unchallenged testimony” offered by the plaintiffs at the Board hearing regarding statements
allegedly made by senior CMS officials “that there was no must[-]bill policy prior to 1987.”
Pls.’ Objs. at 16. However, the CMS officials’ statements were allegedly made at a meeting held
in December 1993. See Pls.’ Summ. J. Mem. at 27. Given the plaintiffs’ position that the
40
Secretary may not “rely[] on post-Moratorium materials,” Pls.’ Objs. at 5, including statements
made on behalf of the Secretary in “post-Moratorium Administrator decision[s],” id. at 11 n.9,
the Court is perplexed as to why the plaintiffs insist that the Court should consider post-
Moratorium statements by CMS officials. The plaintiffs “cannot have it both ways.” Winder
HMA LLC, 206 F. Supp. 3d at 38. These statements, like the post-Moratorium administrative
decisions, are “simply a retrospective characterization of the Secretary’s pre-Moratorium policy”
and “do[] not illustrate how [the policy] was actually applied prior to 1987.” Mountain States
Health All., 128 F. Supp. 3d at 218. Therefore, the Court adopts the Magistrate Judge’s refusal
to consider the CMS officials’ statements.
7. Other Legal Authority and Evidence
The Administrator cited a number of other legal authorities and record evidence to
support his conclusion that the must-bill policy, including the remittance advice requirement,
predated the Moratorium. However, for the reasons explained below, the Court finds this
remaining evidence also unavailing.
First, the Administrator appeared to rely on language in the regulation setting forth the
Secretary’s bad debt criteria, see 42 C.F.R. § 413.89, as evidence of the must-bill policy,
including the remittance advice requirement. Specifically, he asserted that the policy is reflected
in § 413.89(d)(1), which provides that “the costs of Medicare deductible and coinsurance
amounts, which remain unpaid (i.e., were billed) may be included in allowable costs,” AR 13,
and also § 413.89(e), which “requires . . . [that] a provider [must] establish that a reasonable
collection effort from the responsible party (i.e.[,] the State) was made and that the debt was
actually uncollectible when claimed,” id. And, regarding the “uncollectible” requirement of
§ 413.89(e), he asserted that “[a] fundamental requirement to demonstrate that an amount is, in
41
fact, unpaid and uncollectible, is to bill the responsible party.” Id. However, none of the
provisions cited by the Administrator refers to a remittance advice or the receipt of any other
documentation from the state. Rather, § 413.89(d) and (e) are silent as to what constitutes a
“reasonable collection effort” or what a provider must do to demonstrate that a debt was
“uncollectible” when claimed. See 42 C.F.R. § 413.89(d)–(e). Thus, the Administrator “is
confusing the regulation with his agency’s interpretations of the regulation.” Foothill Hosp., 558
F. Supp. 2d at 10. Consequently, the bad debt regulation itself does not demonstrate that a
remittance advice requirement existed prior to August 1, 1987.
Additionally, the Administrator concluded that “preservation of the remittance advice is
an essential and required record keeping criteria for Medicare reimbursement since the beginning
of the program,” AR 15, as recognized by “the general record keeping rules of Section 1815(a)
[of the Medicare Act] and 42 C.F.R. [§§] 41[3].20 and 41[3].24 requiring contemporaneous
auditable documentation kept in the normal course of business to support a claim for payment,”
AR 8. However, these cited authorities do not state that a provider must obtain a remittance
advice or other state documentation. Although § 1815(a) purports to authorize the Secretary to
impose requirements on providers seeking Medicare reimbursement, it does not demonstrate that
the Secretary in fact imposed a remittance advice requirement prior to the Moratorium or, for
that matter, at any time. See 42 U.S.C. § 1395g(a) (providing that “no [ ] payment [to a
provider] shall be made . . . unless [a provider] has furnished such information as the Secretary
may request in order to determine the amounts due such provider”). Likewise, assuming that the
cited regulations require providers to support their claims for Medicare reimbursement of bad
debts with “contemporaneous documentation in the ordinary course of business to support their
claims,” AR 17, they do not state that remittance advices are the only documentation that would
42
satisfy such a requirement, see 42 C.F.R. § 413.20(a) (requiring, inter alia, that “providers
maintain sufficient financial records and statistical data for proper determination of costs payable
under the program,” and that providers follow “[s]tandardized . . . reporting practices that are
widely accepted in the hospital and related fields”); see also id. § 413.24(a)–(b) (requiring that
“[p]roviders receiving payment on the basis of reimbursable cost must provide adequate cost
data,” which “must be based on their financial and statistical records . . . [and] capable of
verification[,] . . . based on an approved method of cost finding and on the accrual basis of
accounting,” and “derived from the accounts ordinarily kept by a provider”). Again, the
Administrator “is confusing [these laws] with his agency’s interpretations of [these laws].”
Foothill Hosp., 558 F. Supp. 2d at 10.
The Administrator also asserted that § 1903(r)(1) of the Medicare Act provides further
support for a remittance advice requirement because it “requires automated facilitation of cross-
over claims between State Medicaid programs and the Medicare program for dual eligible
patients,” and thus, it “recognize[s]” the “necessity” that “[i]t is only through the State’s records
and claims system that the amount of any payment can be determined.” AR 13. However, once
again, this provision on its face does not require that a provider must receive a remittance advice
from the state in order to receive Medicare reimbursement. See 42 U.S.C. § 1396b(r)(1)
(providing that “a State must[] . . . have in operation mechanized claims processing and
information retrieval systems” that, inter alia, “provide for electronic transmission of claims
data[,] . . . including[] . . . data elements from the automated data system”).
Finally, the Administrator cited JSM-370 as support for his position that the must-bill
policy, including the remittance advice requirement, existed prior to August 1, 1987, see AR 8
(“[]JSM-370[] restated Medicare’s longstanding bad debt policy[.]”), as well as “letters from
43
three [fiscal i]ntermediaries setting forth the must-bill policy,” AR 14 n.16. Although JSM-370
does state that a remittance advice is required in certain dual eligible situations, see AR 1607
(“[W]here the state owes none or only a portion of [a] dual-eligible patient’s deductible or co-
pay, the unpaid liability for the bad debt is not reimbursable to the provider by Medicare until the
provider bills the State, and the State refuses payment (with a State Remittance Advice).”), it was
not issued until August 10, 2004, see AR 1607. Similarly, although the letters from the
intermediaries reflect their opinions that providers must bill Medi-Cal and receive a denial of
payment in order to receive Medicare reimbursement for dual eligible payments, each letter is
dated in November or December of 1989, see AR 604, 610, 612, two years after August 1, 1987,
and only purports to opine on whether these requirements existed as of those dates. Therefore,
these letters are at best “a retrospective characterization of the Secretary’s pre-Moratorium
policy,” and they “do[] not illustrate how [the policy] was actually applied prior to 1987.”
Mountain States Health All., 128 F. Supp. 3d at 218.
In sum, the Court concludes that because the relevant statutory provisions, regulations,
and PRM provisions do not on their face require a provider to obtain and submit a remittance
advice from the state Medicaid program as a prerequisite for Medicare reimbursement of unpaid
deductibles and coinsurance associated with dual eligibles, those authorities do not support a
finding that the Secretary imposed such a requirement prior to August 1, 1987. Moreover, the
two pre-1987 Board decisions cited do not demonstrate that the Secretary interpreted those
authorities to require a remittance advice. Finally, the administrative decisions issued after the
Moratorium and alleged statements by CMS officials or intermediaries made after the
Moratorium do not constitute the Secretary’s pre-1987 policy and “do not illustrate how [the
policy] was actually applied prior to 1987.” Mountain States Health All., 128 F. Supp. 3d at 218.
44
For all of these reasons, the Court concludes that the Administrator’s finding that a
remittance advice requirement existed prior to the Moratorium is not supported by substantial
evidence. Although substantial evidence review is “highly deferential,” Rossello, 529 F.3d at
1185, in the absence of any evidence to support the Administrator’s finding, the Court cannot
conclude that there exists “such relevant evidence as a reasonable mind might accept as adequate
to support” his finding, id. (quoting Pierce, 487 U.S. at 565). Consequently, in the absence of
any evidence to support the existence of a pre-Moratorium remittance advice requirement, the
Court concludes that the remittance advice requirement applied by the Administrator in this case
is a “requirement[] in addition to those in the Secretary’s regulations, the decisions of the . . .
Board, and relevant program manual and issuances” as of August 1, 1987. HR Conf. Rep. No.
100–1104 (1988), as reprinted in 1988 U.S.C.C.A.N. 5048, 5337. As such, it represents a
“change in the policy in effect on August 1, 1987,” in violation of the Bad Debt Moratorium.
See OBRA, Pub. L. No. 100–203, § 4008(c), 101 Stat. 1330 (codified at 42 U.S.C. § 1395f note);
see also Dist. Hosp. Partners, 932 F. Supp. 2d at 206 (concluding that the challenged policy
violated the Moratorium in part because “the Secretary ha[d] pointed to no persuasive evidence
that supports her contention, much less pre-1987 evidence”); Foothill Hosp., 558 F. Supp. 2d at
10 (concluding that the challenged policy “constitute[d] a change in policy, . . . [because it] did
not exist prior to the effective date of the Moratorium”).
B. Alternative Grounds for the Administrator’s Decision
Having concluded that the Administrator’s finding that a remittance advice requirement
existed prior to the Moratorium is not supported by substantial evidence and that imposing the
requirement in this case violated the Moratorium, the Court cannot affirm the Secretary’s final
decision on the grounds provided by the Administrator. As already explained, the Administrator
45
denied the plaintiffs’ claims for reimbursement because “the [plaintiffs’] failure to produce [ ]
Medicaid remittance advices represent[ed] a failure on the part of the [plaintiffs] to meet the
necessary criteria for Medicare payment of bad debts related to these claims.” AR 13. Although
this Circuit recognized in Grossmont Hospital that a court may “affirm an agency decision on a
ground other than that relied upon by the agency . . . ‘when there is not the slightest uncertainty
as to the outcome of a proceeding on remand,’” 797 F.3d at 1086 (quoting Manin v. NTSB, 627
F.3d 1239, 1243 (D.C. Cir. 2011)), the Court does not find it appropriate to do so here. In
Grossmont Hospital, after concluding that the state determination requirement of the Secretary’s
must-bill policy was “sensible” and upholding the Secretary’s denial of a provider’s claims based
on a failure to meet that requirement, the Circuit went on to “conclude that an independent basis
for affirming the Secretary’s disallowance of [the provider]’s claims [wa]s the failure of [the
provider] to timely bill Medi–Cal for those claims.” Id. Specifically, the Circuit found that
“[a]lthough the Secretary relied only on the state determination requirement for her disposition,
she stated that the record [ ] supports a conclusion that these claims were not in the States’s
system, that is, they were not billed.” Id. (internal quotation marks omitted).
Here, unlike in Grossmont Hospital, the Court concludes that “there is . . . uncertainty as
to the outcome of [this] proceeding on remand.” Id. (quoting Manin, 627 F.3d at 1243).
Although the Administrator in this case concluded that “the [plaintiffs] were required to bill . . .
as a condition of including crossover bad debt claims on [their] cost report[s],” AR 13, he did not
make any factual finding “that the record [ ] supports a conclusion that the[] claims [at issue] . . .
were not billed,” Grossmont Hosp., 797 F.3d at 1086. To the contrary, the Administrator
acknowledged that “[t]he p[laintiffs] testified [at the Board hearing] that they billed for some of
the dual eligible patients.” AR 12 n.13; see Pls.’ Resp. to Court at 1 (representing that “some of
46
the inpatient claims at issue were billed” and “some of the outpatient claims at issue [likely] were
billed”). 19 Thus, the Court cannot affirm the Administrator’s decision by concluding that, on
remand, the Administrator would again deny all of the plaintiffs’ claims for reimbursement on
the independent basis that the plaintiffs failed to bill the state for those claims.
Finally, there exists no other independent basis for affirming the Administrator’s decision
that would make the outcome on remand certain, at least not as to all of the plaintiffs’ claims.
Although it may be certain that the Administrator would again deny any claims that he found had
not been billed on the ground that the plaintiffs would not qualify for an exception to the billing
requirement under the terms set forth in § 1102.3L, see AR 15–16, 20 the Court cannot be certain
as to the outcome of any of the claims that the Administrator may find were billed. As to these
claims, whether the plaintiffs qualify for relief under § 1102.3L or whether their documentation
ultimately satisfies the requirements of that provision would not be dispositive because
§ 1102.3L merely creates an exception to billing. See AR 1248 (addressing the documentation a
provider must provide “in lieu of billing”). Moreover, the only other basis the Administrator
provided for rejecting the plaintiffs’ claims was that the alternative documentation the plaintiffs
provided was not the equivalent of a remittance advice or any other official state documentation,
see AR 18 (refusing to accept the plaintiffs’ EDS reports because they “are not
19
Although the Administrator asserted in one instance that “the [plaintiffs] ha[d] not submitted claims to the State,”
AR 15–16, he did not assert that the plaintiffs had not submitted any of the claims to Medi-Cal, and the Court does
not interpret the Administrator’s statement that way, given the Administrator’s explicit recognition of the plaintiffs’
specific testimony that “they billed for some of the dual eligible patients,” AR 12 n.13.
20
The Administrator specifically concluded that “any relief CMS grants based on a [p]rovider’s reliance on section
1102.3L is set forth under criteria of the JSM[-370] ‘hold harmless’ policy[,] . . . [and] the [plaintiffs] did not
demonstrate that they meet the criteria for the hold harmless provision set forth in JSM-370 for the cost years in this
case.” AR 17. And, the plaintiffs do not argue that they have satisfied these criteria. See Motions Hrg. Tr. 57:25–
58:1 (acknowledging that “hold harmless relief[] . . . is very narrow and [the plaintiffs are] not claiming [they are]
entitled to it”).
47
contemporaneously generated State documents” and “were not validated, certified or adopted as
State documents and do not qualify as State remittance advices”), and because this basis for
rejection of the plaintiffs’ documentation necessarily relied on the remittance advice requirement
that the Court has already rejected, absent further development of the record, the Administrator
may not again apply this requirement. 21
Therefore, the Court cannot conclude that the fate of any claims the Administrator finds
were billed would be certain on remand. Consequently, the Court must vacate the
Administrator’s decision and remand this case to the Secretary for further consideration of the
plaintiffs’ claims. See Palisades Gen. Hosp., Inc. v. Leavitt, 426 F.3d 400, 403 (D.C. Cir. 2005)
(“[W]hen a court reviewing agency action determines that an agency made an error of law, the
court’s inquiry is at an end: the case must be remanded to the agency for further action consistent
with the correct legal standards.”); see also Ne. Hosp. Corp. v. Sebelius, 699 F. Supp. 2d 81, 96
(D.D.C. 2010) (remanding to the Secretary for further consideration of her Medicare
reimbursement determination rather than instructing the Secretary as to how the reimbursement
should be calculated because “the Court ‘ha[s] jurisdiction only to vacate the Secretary’s
21
Although the Administrator suggested that the plaintiffs’ documentation also failed to satisfy 42 C.F.R.
§ 413.26(a)’s requirement that providers submit “documentation reflecting ‘data available from [a provider’s] basic
accounts, as usually maintained,’” AR 16 (quoting 42 C.F.R. § 413.26(a)), he appeared to take the position that only
a remittance advice could satisfy that requirement, see AR 16–17 (concluding that “the [p]roviders ha[d] not
maintained ‘contemporaneous documentation in the ordinary course of business to support their claims[,]’ which in
fact[] the State remittance advices represent”). Because that position effectively imposes a remittance advice
requirement, which the Court has rejected, it also could not provide a basis for the Administrator’s denial of the
claims on remand. To the extent that the Secretary argues that the Court may affirm the Administrator’s decision on
the ground that the plaintiffs’ documentation fails to satisfy § 413.26(a) for other reasons, see Motions Hrg. Tr.
33:9–34:8 (arguing that the plaintiffs’ 2007 EDS reports failed to satisfy a “contemporaneous requirement” because
they were “not . . . contemporaneous with the cost reporting periods” and “stale,” and therefore, “[i]t[] [is] hard to
know whether that information would even be accurate”), the Administrator’s decision does not purport to rely on
those reasons and therefore, the Secretary’s position constitutes a post-hoc rationalization that cannot support the
Administrator’s decision, see Summer Hill Nursing Home, 603 F. Supp. 2d at 39. Alternatively, because the
Secretary did not argue this position in his briefings before the Magistrate Judge, the Court need not consider it. See
Aikens, 956 F. Supp. at 19 (explaining that Federal Rule of Civil Procedure 72(b) “does not permit a litigant to
present new initiatives to the district judge”).
48
decision . . . and to remand for further action consistent with its opinion,’ and it would be error to
do anything more” (alteration and omission in original) (quoting Palisades Gen. Hosp., 426 F.3d
at 403)). Although the plaintiffs raise a number of other challenges to the Administrator’s
decision, including that (1) the Secretary’s billing requirement violated the Moratorium, see Pls.’
Objs. at 3; (2) the Secretary erred in failing to apply PRM § 1102.3L to the plaintiffs’ claims, see
id. at 17 (“PRM [§] 1102.3L . . . must be given legal effect[.]”); and (3) “the Secretary’s decision
denying the [p]laintiffs’ claims for reimbursement was arbitrary and capricious,” id. at 2,
“[b]ecause the Court concludes that remand is appropriate, it need not reach these arguments,”
Mountain States Health All., 128 F. Supp. 3d at 222 (remanding the case to the Secretary for
further consideration of the plaintiff’s claims and declining to consider the plaintiff’s alternative
argument upon concluding that the Secretary erred in finding that the challenged bad debt policy
did not violate the Moratorium,); see Dist. Hosp. Partners, 932 F. Supp. 2d at 199 n.5 (“Because
the Court concludes that the Administrator erred when she determined that there was no change
in policy in violation of the . . . Moratorium, the Court need not address . . . whether the
[Secretary’s policy] is arbitrary and capricious.”).
IV. CONCLUSION
For the foregoing reasons, the Court concludes that the Administrator’s finding that the
Secretary’s remittance advice requirement predated the Moratorium is not supported by
substantial evidence, and thus, based on the administrative record before the Secretary,
application of such a requirement to the plaintiffs’ claims violated the Moratorium. Accordingly,
the Administrator erred when he concluded that the remittance advice requirement did not
violate the Moratorium. Therefore, the Court cannot affirm the Secretary’s denial of the
plaintiffs’ claims on the basis that the plaintiffs failed to provide remittance advices to support
49
their claims. Moreover, because the Administrator did not find that the plaintiffs failed to bill the
state for all of the claims at issue, the Court cannot affirm the Administrator’s decision denying
all of the plaintiffs’ claims on the alternative ground that the plaintiffs failed to satisfy any billing
requirement. Accordingly, the Court declines to adopt, except as otherwise indicated, the
Magistrate Judge’s recommendation, grants in part and denies in part the plaintiffs’ motion for
summary judgment, denies the defendant’s cross-motion for summary judgment, and remands
this case to the Secretary for further proceedings consistent with this opinion. 22
SO ORDERED this 29th day of September, 2018.
REGGIE B. WALTON
United States District Judge
22
The Court will contemporaneously issue an Order consistent with this Memorandum Opinion.
50