Russel - Murray Hospice, Inc. v. Sebelius ( 2010 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
RUSSELL-MURRAY HOSPICE, INC., :
:
Plaintiff, : Civil Action No.: 09-2033 (RMU)
:
v. : Re Document Nos.: 12, 17, 18, 19
:
KATHLEEN SEBELIUS, :
in her official capacity as Secretary of the :
U.S. Department of Health and :
Human Services, :
:
Defendant. :
MEMORANDUM OPINION
GRANTING THE PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT; DENYING THE
DEFENDANT’S MOTION FOR PARTIAL REMAND OR, IN THE ALTERNATIVE, FOR PARTIAL
SUMMARY JUDGMENT; GRANTING THE DEFENDANT’S MOTION FOR PARTIAL DISMISSAL
BASED ON A LACK OF SUBJECT MATTER JURISDICTION; DENYING THE DEFENDANT’S
MOTION TO STRIKE EXHIBITS IN THE PLAINTIFF’S “APPENDIX”
I. INTRODUCTION
The plaintiff is a hospice care provider participating in Medicare, a federal program
administered by the Department of Health and Human Services (“HHS”). It commenced this
action pursuant to the Administrative Procedure Act (“APA”), 5 U.S.C. §§ 701 et seq.,
challenging HHS’s demands for the repayment of funds distributed to the plaintiff in fiscal years
2006 and 2007 purportedly in excess of the lawful cap on such distributions. The plaintiff
contends that the regulation pursuant to which HHS calculated these repayment amounts
conflicts with the governing statute and must be set aside. The plaintiff has moved for summary
judgment on its challenge to the fiscal year 2007 repayment demand, seeking an order declaring
that the regulation is unlawful and enjoining HHS from enforcing it. In response, the defendant
has moved to remand the plaintiff’s claims regarding the fiscal year 2007 repayment to the
agency for additional fact-finding. In the alternative, the defendant moves for summary
judgment as to the plaintiff’s 2007 repayment demand. Furthermore, the defendant has moved to
dismiss the plaintiff’s claims regarding the 2006 repayment demand for lack of subject matter
jurisdiction.
For the reasons discussed below, the court grants the plaintiff’s motion for summary
judgment regarding the 2007 repayment demand and denies the defendant’s motion to remand
that claim or, in the alternative, for partial summary judgment. The court, however, grants the
defendant’s motion to dismiss the plaintiff’s claims regarding the 2006 repayment demand based
on the absence of subject matter jurisdiction.1
II. BACKGROUND
A. The Statutory and Regulatory Framework
Medicare provides health insurance to the elderly and disabled by entitling eligible
beneficiaries to have payment made on their behalf for the care and services rendered by health
care providers. See 42 U.S.C. §§ 1395 et seq. Providers, in turn, are reimbursed by insurance
companies, known as “fiscal intermediaries,” that have contracted with the Centers for Medicare
and Medicaid Services (“CMS”) to aid in administering the Medicare program. See id. § 1395h.
Fiscal intermediaries determine the amount of reimbursement due to providers under the
Medicare statute and applicable regulations. See id. § 1395kk-1. If the provider disagrees with a
fiscal intermediary’s determination, it may appeal that determination to the Provider
1
Finally, the defendant has also filed a motion to strike certain exhibits in the plaintiff’s exhibits
because they were not part of the administrative record. See generally Def.’s Mot. to Strike. As
discussed below, the court denies that motion.
2
Reimbursement Review Board (“PRRB”). Id. § 1395oo(a). A decision of the PRRB constitutes
a final agency ruling, unless appealed to the CMS Administrator. Id. § 1395oo(f)(1).
If the intermediary’s action involves a question of law that it lacks the authority to
address, the Medicare statute provides that the PRRB may grant expedited judicial review of that
question. See id. Specifically, the statute states that “[p]roviders shall . . . have the right to
obtain judicial review of any action of the fiscal intermediary which involves a question of law
or regulations relevant to the matters in controversy whenever the Board determines . . . that it is
without authority to decide the question, by a civil action commenced within sixty days of the
date on which notification of such determination is received.” Id.
Among other services, Medicare covers hospice care for individuals who are “terminally
ill,”2 reimbursing hospices for services such as nursing care, physical and occupational therapy,
home health aide services, medical supplies and counseling. Id. § 1395x(dd)(1). An individual
remains entitled to hospice care benefits so long as he or she is certified as being “terminally
ill.”3 See id. § 1395d(d)(1) (establishing that reimbursement for hospice care may be provided
“during two period of 90 days each and an unlimited number of subsequent period of 60 days
each during the individual’s lifetime”).
The Medicare statute, however, places a cap on the total amount that Medicare may
distribute to a hospice provider in a single fiscal year (November 1 through October 31). See id.
2
An individual is “terminally ill” if he or she has “a medical prognosis that the individual’s life
expectancy is 6 months or less.” 42 U.S.C. § 1395x(dd)(3).
3
An individual’s initial election of hospice care must be accompanied by a certification from the
attending physician and the medical director of the hospice program that the individual is
“terminally ill” as defined by the statute. Id. § 1395f(a)(7)(A)(i). At the expiration of this initial
election period, the attending physician or medical director may recertify the individual’s
eligibility for hospice care benefits for additional sixty- or ninety-day periods. Id. §
1395f(a)(7)(A)(ii).
3
§ 1395f(i)(2)(A). Payments made to a hospice care provider in excess of the statutory cap are
considered overpayments that the hospice care provider must refund to the government. Id.
More specifically, the statute provides that the total yearly payment to a hospice provider
may not exceed the product of the annual “cap amount”4 and the “the number of [M]edicare
beneficiaries in the hospice program in that year.” Id. For purposes of this calculation,
the “number of [M]edicare beneficiaries” in a hospice program in an accounting
year is equal to the number of individuals who have made an election under
subsection (d) of this section with respect to the hospice program and have been
provided hospice care by (or under arrangements made by) the hospice program
under this part in the accounting year, such number reduced to reflect the
proportion of hospice care that each such individual was provided in a previous
or subsequent accounting year or under a plan of care established by another
hospice program.
Id. § 1395f(i)(2)(C) (emphasis added). Thus, the Medicare statute directs HHS to account for the
fact that an individual may receive care in more than one fiscal year by requiring HHS to count
that individual as a beneficiary in each year in which he or she receives hospice care benefits,
with that number proportionally reduced to reflect care provided in previous or subsequent years.
See id.
To implement the statutory cap provision, HHS promulgated a reimbursement regulation
governing the calculation of the statutory cap amount. See 42 C.F.R. § 418.309. In pertinent
part, the regulation provides that the “number of beneficiaries” portion of the statutory cap
calculation includes
[t]hose Medicare beneficiaries who have not previously been included in the
calculation of any hospice cap and who have filed an election to receive hospice
care . . . from the hospice during the period beginning on September 28 (35 days
before the beginning of the cap period) and ending on September 27 (35 days
before the end of the cap period).
4
The statute defines the “cap amount” as “$6,500, increased or decreased . . . by the same
percentage as the percentage increase or decrease, respectively, in the medical care expenditure
category of the Consumer Price Index.” 42 U.S.C. § 1395f(i)(2)(B).
4
Id. § 418.309(b) (emphasis added). The regulation does not provide for the proportional
allocation of beneficiaries, providing instead that an individual is counted as a beneficiary only
in a single year, depending on when he or she first elects to receive hospice benefits. See id.
HHS’s justification for the regulation begins with the observation that the average length
of a hospice stay is seventy days. See Def.’s Mot. at 7 n.7. If a patient elects hospice care on or
before September 27 of a particular year (thirty-five days before the end of the fiscal year), the
hospice care provider will receive 100% of the statutory cap amount attributable to that
beneficiary in the current fiscal year because in the average case, the majority of the patient’s
hospice care will be provided in that fiscal year. See 42 C.F.R. § 418.309(b)(1). If, on the other
hand, the patient elects hospice care after September 27, the hospice care provider will receive
100% of the statutory allowance for that patient in the following fiscal year, because in the
average case, the majority of the patient’s hospice will be provided in the following year. Thus,
although the regulation does not provide for the proportional allocation of cap amounts, it
attempts to approximate the proportional allocation by setting up a system in which beneficiaries
are, on average, counted in the year in which they receive the majority of their hospice care. See
id.B. The Plaintiff’s Claims
The plaintiff is a Medicare-certified hospice care provider operating in El Reno,
Oklahoma. Compl. ¶ 1. In September 2008, the plaintiff received a demand for repayment of
$946,732 for funds distributed to it in fiscal year 2006 purportedly in excess of the statutory cap.
Id. ¶ 3. In April 2009, the plaintiff received a repayment demand of $398,630 for funds
distributed to it in fiscal year 2007 purportedly in excess of the statutory cap. Id. ¶ 9. The
5
plaintiff appealed both repayment demands to the PRRB in September 2009, challenging the
validity of 42 C.F.R. § 418.309(b)(1). Id. ¶¶ 7-9.
In an October 2009 ruling, the PRRB denied the plaintiff’s appeal of the fiscal year 2006
repayment demand, concluding that the appeal was untimely and that the plaintiff had not
demonstrated good cause for its failure to comply with the filing deadline. Id. ¶ 11; Pl.’s Mot.,
Ex. G. In a separate ruling, however, the PRRB granted the plaintiff’s request for expedited
judicial review of the fiscal year 2007 repayment demand. Compl. ¶ 10; Pl.’s Mot., Ex. H.
The plaintiff subsequently commenced this action challenging the validity of the
repayment demands for fiscal years 2006 and 2007 on the grounds that 42 C.F.R. §
418.309(b)(1), the regulation pursuant to which the demands were calculated, conflicts with 42
U.S.C. § 1395f(i)(2), the statutory provision the regulation purports to implement. Compl. ¶¶ 13,
28-37. Had HHS applied a lawful calculation of its cap liability, the plaintiff contends, its cap
liability for fiscal years 2006 and 2007 would have been materially reduced. Id. ¶ 42. The
plaintiff seeks an order declaring the regulation invalid, vacating the 2006 and 2007 repayment
demands issued to the plaintiff, enjoining HHS from using the regulation in calculating the
hospice cap liability of the plaintiff or any other hospice and directing HHS to compensate the
plaintiff for the amounts paid to HHS pursuant to the allegedly unlawful regulation. Id. ¶ 14.
In January 2010, the plaintiff filed a motion for summary judgment on its claim that the
fiscal year 2007 demand must be set aside because the reimbursement regulation violates the
Medicare statute. See generally Pl.’s Mot. for Partial Summ. J. (“Pl.’s Mot.”). The motion does
not seek adjudication of the plaintiff’s claim regarding the fiscal year 2006 repayment demand,
which, according to the plaintiff, “raises certain secondary issues (such as equitable tolling)
6
which may be more efficiently determined following a ruling on [the plaintiff’s] clean legal
challenge to the validity of the regulation.” Id. at 4.
The defendant has moved to dismiss the plaintiff’s claim regarding the fiscal year 2006
repayment demand for lack of subject matter jurisdiction, arguing that the plaintiff failed to
commence a timely administrative appeal. See Def.’s Mot. for Partial Dismissal & for Partial
Remand, or in the Alternative, for Partial Summ. J. (“Def.’s Mot.”) at 15-21. The defendant has
also moved to remand the plaintiff’s claim regarding the fiscal year 2007 repayment demand for
further administrative proceedings, arguing that the plaintiff failed to obtain necessary factual
determinations from the PRRB prior to commencing suit. Id. at 21-34. In the alternative, the
defendant seeks summary judgment on the plaintiff’s challenge to the fiscal year 2007 repayment
demand and the validity of the reimbursement regulation. Id. at 34-44.
The parties’ motions are now ripe for adjudication. The court therefore turns to the
applicable legal standards and the parties’ arguments.
III. ANALYSIS
A. The Court Grants the Defendant’s Motion to Dismiss the Plaintiff’s Claim Regarding
the Fiscal Year 2006 Repayment Demand
The defendant contends that the court lacks jurisdiction to review the plaintiff’s claim
regarding the fiscal year 2006 repayment demand because the plaintiff failed to commence a
timely administrative appeal of that demand. See Def.’s Mot. at 15-21. More specifically, the
defendant asserts that the plaintiff failed to appeal the fiscal year 2006 repayment demand to the
PRRB within 180 days of receiving notice of the demand, as required by the Medicare statute.
Id. at 17-18. The defendant argues that because the PRRB’s dismissal of an appeal on timeliness
7
grounds is not a final agency decision subject to judicial review, the court lacks jurisdiction to
review the plaintiff’s claim regarding the fiscal year 2006 repayment demand. Id. at 18-20.
The plaintiff concedes that it did not file its appeal within the 180-day deadline set forth
in the statute. Pl.’s Opp’n to Def.’s Partial Mot. to Dismiss at 6. The plaintiff maintains,
however, that the PRRB’s dismissal of the plaintiff’s administrative appeal on timeliness
grounds, stemming from its determination that no “good cause” existed for granting the plaintiff
leave to late file, constituted a final agency decision subject to judicial review.5 Id. at 6-8. The
plaintiff further asserts that the PRRB erred in dismissing the plaintiff’s administrative appeal on
timeliness grounds because principles of equitable tolling excuse the late-filing of the appeal. Id.
at 9-17.
To obtain judicial review for claims arising under the Medicare statute, a provider must
channel its complaints through the administrative review procedures set forth in the statute. See
42 U.S.C. § 1395ii (applying 42 U.S.C. § 405(h) to Medicare);6 see also Shalala v. Ill. Council
on Long Term Care, Inc., 529 U.S. 1, 13 (2000) (observing that the Medicare statute “demands
the ‘channeling’ of virtually all legal attacks through the agency”); Nat’l Hospice & Palliative
Care Org., Inc. v. Weems, 587 F. Supp. 2d 184, 194 (D.D.C. 2008) (noting that “[t]he Supreme
Court has . . . made clear that the process for administrative appeal under Medicare must be
followed, where available, even if it is time-consuming and even if the agency cannot grant the
5
Medicare regulations provide that an untimely appeal submitted to the PRRB “must be dismissed
by the Board, except that the Board may extend the time limit upon a good cause showing by the
provider.” 42 C.F.R. § 405.1836(a).
6
“No findings of fact or decision of [HHS] shall be reviewed by any person, tribunal, or
governmental agency except as herein provided. No action against the United States, the
[Secretary of HHS], or any officer or employee thereof shall be brought under section 1331 or
1346 of Title 28 to recover on any claim arising under this subchapter.” 42 U.S.C. § 405(h).
8
relief sought” (citing Three Lower Counties Cmty. Health Servs., Inc. v. U.S. Dep’t of Health &
Human Servs., 517 F. Supp. 2d 431, 435 (D.D.C. 2007))).
The procedures for obtaining administrative and judicial review of a fiscal intermediary’s
determination are set forth in 42 U.S.C. § 1395oo. The statute states that a provider dissatisfied
with a determination of a fiscal intermediary may pursue an administrative appeal before the
PRRB by filing a request for a hearing within 180 days after receiving notice of the
determination. 42 U.S.C. § 1395oo(a).7 It further provides that “[p]roviders shall have the right
to obtain judicial review of any final decision of the Board . . . within 60 days of the date on
which notice of any final decision by the Board . . . is received.” Id. § 1395oo(f)(1) (emphasis
added).
This Circuit has stated that “a decision by the PRRB not to hear a case” based on the
provider’s failure to file a timely appeal “is, by definition, not a ‘final decision’” for purposes of
42 U.S.C. § 1395oo. Athens Cmty. Hosp., Inc. v. Schweiker, 686 F.2d 989, 994 n.4 (D.C. Cir.
1982) (citing John Muir Mem’l Hosp., Inc. v. Califano, 457 F. Supp. 848, 853 (N.D. Cal. 1978)),
modified on other grounds on reh’g, 743 F.2d 1 (D.C. Cir. 1984). In Athens, a provider who had
filed a timely administrative appeal challenging an intermediary’s determination sought to
amend its appeal to have the PRRB consider additional claims. Id. at 992. After the PRRB
concluded that it lacked jurisdiction to review the new claims, the plaintiff sought judicial review
of that determination. Id. The Circuit concluded that the district court had jurisdiction to
consider the PRRB’s rejection of jurisdiction over the new claim. Id. at 994. Yet in reaching
that conclusion, the Circuit expressly distinguished those cases in which the provider has failed
7
The statute further provides that to obtain PRRB review, the amount in controversy must exceed
$10,000. 42 U.S.C. § 1395oo(a)(2).
9
to file a timely administrative appeal,8 concluding that “if the threshold requirements of 42
U.S.C. § 1395oo(f)(1) are met, a court has jurisdiction to review a decision by the PRRB that it
lacks jurisdiction to review a determination of the fiscal intermediary.” Id. at 994 (emphasis
added).
As another court in this district recently noted in a thoughtful and thorough discussion of
Athens,
[i]n light of Athens’ express reference to satisfaction of “the threshold
requirements of 42 U.S.C. § 1395oo(f)(1),” and its statement in footnote 4 that,
with respect to a “provider [who] failed to timely file its appeal . . . a decision by
the PRRB not to hear a case on this basis is, by definition, not a ‘final decision,’”
Athens is properly understood as holding that a plaintiff may obtain judicial
review of a PRRB refusal to exercise jurisdiction only if an administrative appeal
has been filed within the 180-day limitations period.
Auburn Reg’l Med. Ctr. v. Sebelius, 686 F. Supp. 2d 55, 64-65 (D.D.C. 2010) (Bates, J.) (holding
that because there was no dispute that the plaintiffs’ appeals to the PRRB were untimely, “under
Athens, the Board decision dismissing their appeals as untimely [was] not a ‘final decision’
within the meaning of § 1395oo (f), and [was] accordingly not subject to judicial review”).
Judge Bates’s reading of Athens is in keeping with the conclusions reached by the majority of
courts that have addressed the issue. See Saline Cmty. Hosp. Ass’n v. Sec’y of Health & Human
Servs., 744 F.2d 517, 520 n.4 (6th Cir. 1984) (observing that “[u]nder the statute, a P.R.R.B.
refusal to hear a case because it was not timely is not a ‘final decision’”); Lenox Hill Hosp. v.
Shalala, 131 F. Supp. 2d 136, 141 n.5 (D.D.C. 2000) (noting that a majority of courts that have
addressed the issue have concluded that the PRRB’s denial of a good cause extension does not
8
In reaching its holding, the Circuit analyzed John Muir Memorial Hospital, Inc. v. Califano, 457
F. Supp. 848 (N.D. Cal. 1978), a district court decision holding that the court lacked jurisdiction
to review the PRRB’s dismissal of an appeal from an intermediary’s decision. Athens Cmty.
Hosp., Inc. v. Schweiker, 686 F.2d 989, 993-94 (D.C. Cir. 1982). John Muir, the Circuit
observed, was “easily distinguished from . . . th[e] case [before the Circuit] because 42 U.S.C. §
1395oo(f)(1) jurisdiction was not available to the court” given that “the provider [had] failed to
timely file its appeal.” Id. at 993-94 & n.4 (citing John Muir, 457 F. Supp. at 853).
10
constitute a “final decision” under 42 U.S.C. § 1395oo); S. Miami Hosp. v. Bowen, 658 F. Supp.
544, 546-47 (S.D. Fla. 1987) (concluding that because the plaintiff failed to request a hearing
before the PRRB within the 180-day time limit, “no final Board decision issued and this Court
lacks jurisdiction to review the claims”); Miami Gen’l Hosp. v. Bowen, 652 F. Supp. 812, 814
(S.D. Fla. 1986) (concurring “with the majority of courts which have taken up this question” and
concluding that it was “without jurisdiction to consider the plaintiff’s appeal of the Board’s
refusal to exercise its discretion on the plaintiff’s behalf, as such an action [was] not a ‘final
decision’ of the Board”); Arcadia Valley Hosp. v. Bowen, 641 F. Supp. 190, 192 (E.D. Mo.
1986) (noting that “[w]ithout meeting the 180 day time period of the statute, the Board has no
authority to address a provider’s claim and cannot issue a judicially reviewable final decision”);
Cambridge Hosp. Ass’n, Inc. v. Bowen, 629 F. Supp. 612, 615-16 (D. Minn. 1986) (noting that
“[v]irtually every court which has considered the question has held that a PRRB decision to
dismiss a provider’s appeal on timeliness grounds is not a ‘final decision’ subject to judicial
review”); see also Alacare Home Health Servs., Inc. v. Sullivan, 891 F.2d 850, 856 (11th Cir.
1990) (concluding that the PRRB’s refusal to apply a good cause exemption was not a judicially
reviewable final decision because the PRRB lacked the authority to promulgate the “good cause”
regulation) (citing St. Joseph’s Hosp. of Kan. City v. Heckler, 786 F.2d 848, 852-53 (8th Cir.
1986)).9
In this case, there is no dispute that the plaintiff failed to file a timely administrative
appeal of the fiscal year 2006 repayment demand. See Compl. ¶¶ 8-9. It is equally undisputed
that this failure resulted in the PRRB’s dismissal of the plaintiff’s appeal. See Pl.’s Mot., Ex. G.
9
But see W. Med. Enters. v. Heckler, 783 F.2d 1376, 1380 (9th Cir. 1986) (concluding that denial
of a good cause extension constitutes a reviewable final decision); IHG Healthcare v. Sebelius,
2010 WL 2380743, at *5-6 (S.D. Tex. June 13, 2010) (concluding that the court had subject
matter jurisdiction to review the PRRB’s denial of leave to file a late appeal); Ozark Mountain
Reg’l Rehab. Ctr., Inc. v. Dep’t of Health & Human Servs., 798 F. Supp. 16, 20 (D.D.C. 1992).
11
Athens compels the conclusion that the PRRB’s decision to dismiss the plaintiff’s appeal, rather
than excuse the plaintiff’s untimeliness for “good cause,” is not a final decision subject to
judicial review.10 Accordingly, the court grants the defendant’s motion to dismiss the plaintiff’s
claim concerning the fiscal year 2006 repayment demand.11
B. The Court Denies the Defendant’s Motion to Remand the Plaintiff’s Claims Regarding
the Fiscal Year 2007 Repayment Demand to the PRRB
The court now turns to the claim concerning the fiscal year 2007 repayment demand.
Before considering the merits of this claim, the court addresses the defendant’s contention that
this claim should be remanded to HHS for a determination regarding the extent to which the
plaintiff’s 2007 cap liability has been overstated due to the challenged reimbursement regulation.
Def.’s Mot. at 21-34. The defendant asserts that without such a determination, the plaintiff
cannot demonstrate that it has been injured by the application of the challenged regulation, as
necessary to satisfy the requirements of Article III standing. Id. Furthermore, the defendant
10
The plaintiff points out that the notice advising the plaintiff of the dismissal of its appeal as
untimely stated that “[r]eview of this determination is available under the provision of 42 U.S.C.
§ 1395oo(a).” Pl.’s Mot., Ex. G. For the reasons discussed, however, this statement is clearly
erroneous under Athens and is, therefore, without force. See 42 C.F.R. § 405.1867 (stating that
the PRRB’s authority is constrained by the provisions of the Medicare statute and the regulations
issued thereunder). It should also be noted that although the complaint challenges the validity of
the fiscal year 2006 repayment demand, at no point does the complaint indicate that the plaintiff
is seeking judicial review of the PRRB’s dismissal of the plaintiff’s appeal, refusal to apply a
“good cause” exemption or failure to equitably toll the plaintiff’s filing deadline. See generally
Compl.
11
The defendant has moved to strike three of the exhibits in the appendix to the plaintiff’s motion
for summary judgment on the grounds that they were not part of the administrative record. See
generally Def.’s Mot. to Strike. The plaintiff contends, and the defendant does not dispute, that
the challenged exhibits address two issues: (i) equitable tolling of the plaintiff’s deadline to
appeal the 2006 repayment demand and (ii) the plaintiff’s standing. See Pl.’s Opp’n to Def.’s
Mot. to Strike at 1; see generally Def.’s Mot. to Strike; Def.’s Reply in Support of Mot. to Strike.
Because the court grants the defendant’s motion to dismiss the claim regarding the 2006
repayment demand, the defendant’s motion to strike is moot insofar as it seeks to exclude any
exhibits concerning the equitable tolling issue. Furthermore, for reasons discussed in the court’s
analysis of the plaintiff’s standing, see infra Part III.B., the defendant’s motion to strike those
materials addressing the plaintiff’s standing is without merit.
12
argues that without such a determination, there is no basis from which to conclude that the
amount in controversy exceeds the $10,000 threshold necessary to trigger the PRRB’s
jurisdiction. Id. at 24-34. Because this factual issue remains unresolved and affects the
availability of judicial review, the defendant argues, the court should remand the matter to HHS
for further development of the factual record. Id. at 21-34.
The plaintiff responds that the fact that it is subject to an unlawful regulation is sufficient
to establish its standing to challenge that regulation. Pl.’s Opp’n to Def.’s Mot. & Reply in
Support of Pl.’s Mot. (“Pl.’s Reply”) at 6-9; Pl.’s Mot. at 11-13. The plaintiff further notes that
there is substantial evidence, such as the PRRB’s determination that the amount in controversy
exceeded the $10,000 threshold, demonstrating that the challenged regulation has resulted in the
overstatement of its 2007 cap liability. Pl.’s Reply at 9-10; Pl.’s Mot. at 13. The plaintiff also
contends that it would be inappropriate to remand the matter for a determination regarding
whether the $10,000 threshold was satisfied, arguing that because the fiscal year 2007 repayment
demand was calculated pursuant to an unlawful regulation, the entirety of that demand is in
dispute. Pl.’s Reply at 3-5.
1. Remand is Not Needed to Establish the Plaintiff’s Standing
The court first considers whether remand is necessary to establish the plaintiff’s standing.
As the party invoking federal jurisdiction, the plaintiff bears the burden of establishing its
standing. Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 104 (1998); Lujan v. Defenders of
Wildlife, 504 U.S. 555, 561 (1992); City of Waukesha v. Envtl. Prot. Agency, 320 F.3d 228, 233
(D.C. Cir. 2003) (per curiam). The extent of the plaintiff’s burden varies according to the
procedural posture of the case. Sierra Club v. Envtl. Prot. Agency, 292 F.3d 895, 898-99 (D.C.
Cir. 2002). At the pleading stage, general factual allegations of injury resulting from the
13
defendant’s conduct will suffice. Id. On a motion for summary judgment, however, the
“plaintiff can no longer rest on such mere allegations, but must set forth by affidavit or other
evidence specific facts which for purposes of the summary judgment motion will be taken to be
true.” Id. at 899 (citing FED. R. CIV. P. 56); accord Fla. Audubon, 94 F.3d 658, 666 (D.C. Cir.
1996).
To demonstrate standing, a plaintiff must satisfy a three-pronged test. Sierra Club, 292
F.3d at 898 (citing Lujan, 504 U.S. at 560). First, the plaintiff must have suffered an injury in
fact, defined as a harm that is concrete and actual or imminent, not conjectural or hypothetical.
Byrd v. Envtl. Prot. Agency, 174 F.3d 239, 243 (D.C. Cir. 1999) (citing Steel Co., 523 U.S. at
103). Second, the injury must be fairly traceable to the governmental conduct alleged. Id.Finally, it must be likely that the requested relief will redress the alleged injury. Id.The defendant contends that without a determination that the plaintiff’s cap liability for
2007 would be reduced under a lawful regulation, the plaintiff cannot establish that it has
suffered an injury in fact due to the application of the challenged regulation. This contention is
flawed in a number of respects. First, the Supreme Court has stated that plaintiffs are typically
presumed to have constitutional standing when they are directly regulated by a challenged
governmental action:
When the suit is one challenging the legality of government action or inaction, the
nature and extent of facts that must be averred (at the summary judgment stage) or
proved (at the trial stage) in order to establish standing depends considerably upon
whether the plaintiff is himself an object of the action (or forgone action) at issue.
If he is, there is ordinarily little question that the action or inaction has caused
him injury, and that a judgment preventing or requiring the action will redress it.
Lujan, 504 U.S. at 561-62 (emphasis added); see also Fund for Animals, Inc. v. Norton, 322 F.3d
728, 733-34 (D.C. Cir. 2003) (observing that a party’s standing to seek review of administrative
action is typically “self-evident” when the party is the object of the action (citing Sierra Club v.
14
Envtl. Prot. Agency, 292 F.3d 895, 899-900 (D.C. Cir. 2002))); cf. Simon v. E. Ky. Welfare
Rights Org., 426 U.S. 26, 38 (1976) (noting that the purpose of the Article III standing
requirement is to ensure that a litigant has a sufficient personal stake in the outcome of the
controversy). In this case, the plaintiff clearly was the object of the governmental action at issue
– the challenged regulation and the resulting 2007 repayment demand. Regardless of the extent
to which the challenged regulation ultimately affected the plaintiff’s fiscal year 2007 repayment
obligation, the fact that the challenged regulation was directly applied to the plaintiff strongly
supports the conclusion that it has standing to challenge that regulation.
Furthermore, the defendant’s argument presupposes that the plaintiff must establish
economic injury to demonstrate injury in fact. Yet, it is well-established that less tangible forms
of injury, such as the deprivation of statutory rights, may be sufficiently particularized and
concrete to demonstrate injury in fact. See Zivotofsky ex rel. Ari Z. v. Sec’y of State, 444 F.3d
614, 619 (D.C. Cir. 2006) (stating that “[a]lthough it is natural to think of an injury in terms of
some economic, physical, or psychological damage, a concrete and particular injury for standing
purposes can also consist of the violation of an individual right conferred on a person by
statute”); Byrd v. Envtl. Prot. Agency, 174 F.3d 239, 243 (D.C. Cir. 1999) (concluding that the
plaintiff established injury in fact by showing that he was denied access to information to which
he was entitled under federal statute).
In bringing this action before the court, the plaintiff is exercising its express statutory
right to seek administrative review of a fiscal intermediary’s determination involving a question
of law that the PRRB lacks the authority to resolve. See 42 U.S.C. § 1395oo(f)(1). Accordingly,
the court concurs with those courts that have held that apart from any economic harm caused by
the application of the challenged regulation, “[t]he use of [42 C.F.R.] § 418.309(b)(1) constitutes
15
an injury-in-fact because the amounts plaintiff must refund were calculated using a method other
than the method specified by Congress.” Lion Health Servs., Inc. v. Sebelius, 689 F. Supp. 2d
849, 855 (N.D. Tex. 2010) (holding that the plaintiff was not required to prove that its cap
repayment would “certainly be less if calculated under lawful regulations” because “[t]he legal
right asserted by plaintiff . . . [was] the right to have its cap and cap overpayments calculated
according to the method specified by law, not the right to the return of a certain amount of
money”); accord Autumn Light Hospice v. Sebelius, 2010 WL 988470, at *3 (W.D. Okla. Mar.
12, 2010) (concluding that the plaintiff “satisfie[d] the injury in fact requirement because the
demand repayment amount of $250,723.00, based on the allegedly invalid calculations of 42
C.F.R. § 418.309(b), is not conjectural or hypothetical, but rather is the concrete and
particularized actual amount Plaintiff is currently repaying to Defendant”); Tri-County Hospice,
Inc. v. Sebelius, 2010 WL 784836, at *3 (E.D. Okla. Mar. 8, 2010) (concurring “with those
district courts which have found the existence of standing apart from any asserted monetary
injury”); L.A. Haven Hospice, Inc. v. Leavitt, 2009 WL 5868513, at *3-4 (C.D. Cal. Jul. 13,
2009) (concluding that “[t]he injury in fact in this context (if Plaintiff’s statutory argument has
merit) is the fact that HHS is operating an invalid regulation, leading to accounting and payment
inaccuracies”); Compassionate Care Hospice v. Sebelius, 2009 WL 2163503, at *2 (W.D. Okla.
Jul. 10, 2009) (observing that “the injury is [the] application of the allegedly invalid regulation”).
Lastly, the plaintiff has established a substantial probability that the application of the
challenged regulation resulted in an increase in the plaintiff’s 2007 cap liability. See Sierra Club
v. Envtl. Prot. Agency, 292 F.3d 895, 899 (D.C. Cir. 2002) (noting that at the summary judgment
stage, the plaintiff must demonstrate a “substantial probability” that it has suffered injury in
fact); see also S. Coast Air Quality Mgmt. Dist. v. Envtl. Prot. Agency, 472 F.3d 882, 895 (D.C.
16
Cir. 2006) (concluding that the plaintiff had demonstrated a substantial probability of injury
because it was “inconceivable that EPA’s comprehensive reworking of an Act that specifically
controls the requirements for industrial pollution would fail to affect the requirements of even a
single NPRA member”), modified on other grounds, 489 F.3d 1245 (D.C. cir. 2007). The
plaintiff has offered evidence that if HHS had calculated the cap figure using a proportional
allocation, as specified in the Medicare statute, rather than applying the methodology set forth in
the challenged regulation, the plaintiff’s cap liability would have been reduced by over $300,000.
See Pl.’s Mot., Ex. A (“Myers Decl.”) ¶¶ 14-17; Ex. I (spreadsheet documenting the plaintiff’s
calculation).12 These calculations are, of course, hypothetical and speculative in nature, as
neither the court nor the parties can predict the precise contours of the regulation that will be
fashioned to replace the challenged regulation, should it be set aside. Pl.’s Mot. at 15 n.3; Myers
Decl. ¶ 15. Nonetheless, given the specificity with which the statute outlines the method for
12
The defendant argues that because the Myers Declaration and the spreadsheet containing the
plaintiff’s proportional allocation calculation were not part of the administrative record, the court
should not consider them in assessing the plaintiff’s standing. See Def.’s Mot. at 33-34. Indeed,
as previously noted, the defendant has filed a motion to strike these materials because they were
not part of the administrative record. See generally Def.’s Mot. to Strike. The Circuit, however,
has clearly stated that when a party’s standing to challenge an administrative action is not “self-
evident” from the administrative record, “the petitioner must supplement the record to the extent
necessary to explain and substantiate its entitlement to judicial relief.” Sierra Club v. Envtl. Prot.
Agency, 292 F.3d 895, 900 (D.C. Cir. 2002); see also Amfac Resorts, LLC v. U.S. Dep’t of the
Interior, 282 F.3d 818, 830 (D.C. Cir. 2002) (noting that parties “are not confined to the
administrative record” when demonstrating that agency action resulted in injury in fact), vacated
on other grounds sub nom. Nat’l Park Hospitality Ass’n v. Dep’t of Interior, 538 U.S. 803 (2003).
Given that the plaintiff’s Article III standing was not a matter before the PRRB, it is appropriate
for the plaintiff to supplement the record here for the limited purpose of addressing that issue.
See Sierra Club, 292 F.3d at 900 (stating that “a petitioner whose standing is not [self-evident]
should establish its standing by the submission of its arguments and any affidavits or other
evidence appurtenant thereto at the first appropriate point in the review proceeding”); Am.
Hospice, Inc. v. Sebelius, Civ. Action No. 08-1879 (N.D. Ala. Jan. 26, 2010) (Mem. Op.) at 54-55
& n.24 (noting that “it [was] not necessary for the PRRB or HHS to even concern itself with
whether a plaintiff can establish Article III standing, even in proceedings before the agency, never
mind in a yet-to-be filed court proceeding” and observing that “adherence to the principle that
judicial review is limited to the administrative record does not imply that a district court loses its
ability to take evidence or make determinations in limited circumstances as relating to
jurisdictional facts”). Accordingly, the court denies the defendant’s motion to strike these
materials insofar as the materials have been submitted to demonstrate the plaintiff’s standing.
17
determining “number of beneficiaries,” and the fact that the plaintiff’s calculation appears to
comply with that methodology,13 the court is persuaded that the plaintiff has demonstrated a
substantial probability that it has suffered economic harm through the application of the
challenged regulation. See, e.g., Hospice of N.M., LLC v. Sebelius, 691 F. Supp. 2d 1275, 1287-
88 (D.N.M. 2010) (concluding that the plaintiff had established injury in fact by submitting a
declaration and spreadsheet indicating that HHS had overstated the plaintiff’s cap liability).
The remaining elements of standing – traceability and redressability – receive scant
attention from the parties and, indeed, merit little discussion here. However one conceives of the
injury suffered by the plaintiff, it is fairly traceable to the government conduct challenged – the
application of the challenged regulation to assess the plaintiff’s cap liability. And even if the
court cannot directly award damages to the plaintiff, it can direct HHS to calculate and refund to
the plaintiff any amounts overpaid. See Compassionate Care Hospice, 2010 WL 2326216, at *5
(invalidating the reimbursement regulation and ordering HHS to calculate and refund any
amounts overpaid by the plaintiff hospice); see also Hospice of N.M., LLC v. Sebelius, 691 F.
Supp. 2d 1275, 1295 (D.N.M. 2010) (concluding that “HHS’ application of the allegedly invalid
regulation is an integral part of the injury suffered by Plaintiff, and if the Court were to find that
the regulation is invalid, this would at least partially redress Plaintiff’s injury”); cf. Larson v.
Valente, 456 U.S. 228, 243 n.15 (1982) (noting that a plaintiff “need not show that a favorable
decision will relieve his every injury” to establish redressability).
13
The defendant offers no specific objection to the methodology employed by the plaintiff to
calculate its estimated cap overpayment, stating only that the calculation is hypothetical and
speculative. See generally Def.’s Mot.; Def.’s Reply. Furthermore, the defendant fails to explain
why a calculation performed by the PRRB following remand would be any less hypothetical or
speculative than the calculation offered by the plaintiff, given the absence of a substitute
regulation. See Def.’s Mot. at 33.
18
Thus, the plaintiff has established that it has Article III standing to maintain this action.
Accordingly, the court declines to remand this matter for additional administrative fact-finding
on the plaintiff’s standing.
2. Remand is Not Needed to Determine Whether the PRRB Properly Determined
that the Amount in Controversy Was Satisfied
In granting the plaintiff’s request for expedited judicial review of the 2007 repayment
demand, the PRRB determined that “[t]he documentation shows that the estimated amount in
controversy exceeds $10,000.” Pl.’s Mot., Ex. H. The defendant argues that this determination
was based on the plaintiff’s erroneous representation that the amount in controversy was the total
amount of the 2007 repayment demand ($398,630), rather than the amount by which the
plaintiff’s cap liability for 2007 would be reduced under a “permissible” calculation. Def.’s Mot.
at 27. The defendant contends that the court should therefore remand the matter so that the
PRRB may determine whether the amount in controversy truly exceeds the $10,000 threshold by
calculating the extent to which the challenged regulation resulted in an overstatement of the
plaintiff’s cap liability for 2007. Id. at 24-28.
The “amount in controversy” requirement set forth § 1395oo(a)(2) “is nothing more than
a jurisdictional provision, comparable to the $75,000 amount-in-controversy provision applicable
to diversity cases under 28 U.S.C. § 1332.” Baystate Med. Ctr. v. Leavitt, 545 F. Supp. 2d 20, 40
n.26 (D.D.C. 2008), amended on other grounds, 587 F. Supp. 2d 37 (D.D.C. 2008). The Circuit
has made clear, in the comparable context of diversity jurisdiction, that no extensive fact-finding
is necessary to determine that the amount in controversy exceeds the jurisdictional threshold.
See Rosenboro v. Kim, 994 F.2d 13, 16-17 (D.C. Cir. 1993) (stating that dismissal for failure to
satisfy the jurisdictional amount is justified only if “from the face of the pleadings, it is apparent,
to a legal certainty, that the plaintiff cannot recover the amount claimed” and that the sum
19
claimed by the plaintiff controls so long as the claim is made in good faith (quoting St. Paul
Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89 (1938))). To require the PRRB to
gather data and perform a detailed calculation of the specific amount in controversy simply to
establish its jurisdiction to hear an appeal would represent a significant departure from the
established scope of jurisdictional fact-finding, a departure for which the defendant has offered
no authority. See IHG Healthcare v. Sebelius, 2010 WL 2380743, at *8 (S.D. Tex. June 13,
2010) (rejecting the defendant’s request for remand and noting that “the court can find no reason,
or authority, for requiring the PRRB to undertake more arduous fact-finding in evaluating its
jurisdiction than this court does when evaluating its own subject matter jurisdiction”).
The PRRB stated that it reviewed the documentation submitted by the plaintiff, which
contained the fiscal year 2007 cap calculation performed by the fiscal intermediary, as well as an
explanation of the plaintiff’s challenge to that calculation. Pl.’s Mot., Exs. F, H. Based on that
documentation, the PRRB “estimated” that the amount in controversy exceeded the statutory
threshold. Pl.’s Mot., Ex. H. The defendant did not challenge this determination at the
administrative level14 and offers nothing to call it into question now, beyond its unsubstantiated
assertion that the PRRB uncritically accepted the totality of the 2007 repayment demand as the
amount in controversy, an assertion at odds with the PRRB’s statement that the estimated the
amount in controversy exceeded $10,000 based on the documentation submitted by the plaintiff.
See Def.’s Mot. at 26-27; Pl.’s Mot., Ex. H. Accordingly, the defendant has not persuaded the
14
Indeed, HHS had the authority to review the PRRB’s determination that it had jurisdiction over
the plaintiff’s appeal, but did not exercise that authority. See 42 C.F.R. § 405.1875(a) (providing
that HHS may review the PRRB’s jurisdiction over a specific matter upon the PRRB’s granting
of expedited judicial review).
20
court that remand is necessary for additional jurisdictional fact-finding.15 See IHG Healthcare,
2010 WL 2380743, at *8 (noting that “[t]he bare ‘possibility’ that the PRRB may have made a
mistake is no warrant for this court to reverse [its] decision” that the statutory threshold was
satisfied).
C. The Court Grants the Plaintiff’s Motion for Partial Summary Judgment and Denies the
Defendant’s Cross-Motion for Summary Judgment
1. The Challenged Regulation Fails the First Prong of the Chevron Analysis
The court turns at last to the merits of the plaintiff’s claim regarding the 2007 repayment
demand. The plaintiff contends that that repayment demand must be set aside because the
regulation on which it was based, 42 C.F.R. § 418.309(b)(1), impermissibly conflicts with 42
U.S.C. § 1395f(i)(C)(2), the statutory provision it purports to implement. See Pl.’s Mot. at 5-9,
16-21. The plaintiff argues that whereas the Medicare statute requires HHS to allocate the cap
amount across years of service by proportionally adjusting the “number of beneficiaries” in any
given year to reflect hospice services provided to an individual in previous and subsequent years,
the regulation provides that an individual is counted as a beneficiary only in a single year,
depending on when he or she first elects hospice benefits. Id. The plaintiff notes that every
court to have addressed the issue has concluded that the regulation is invalid because it conflicts
with the statute. Id. at 2; see generally Pl.’s Notice of Status of Related Cases. The defendant
maintains that the regulation does not conflict with the statute and that its promulgation and
15
Furthermore, it bears repeating that the court’s role in this matter is limited to resolving a
question of law underlying the action of a fiscal intermediary. See 42 U.S.C. § 1395oo(f)(1).
Given the limited scope of the court’s inquiry, it would be incongruous for the court to embark on
an exploration of the factual underpinnings of the PRRB’s jurisdiction. See id.; Am. Hospice Inc.
v. Sebelius, Civ. Action No. 08-1879 (N.D. Ala. Jan. 26, 2010) (Mem. Op.) at 53 (noting that the
court “is not being asked to review the decision of the PRRB” as the “PRRB made no substantive
decision and took no substantive action at all”).
21
application falls within the agency’s considerable discretion to administer the Medicare program.
Def.’s Mot. at 36-44.
The Supreme Court set forth a two-step approach to determine whether an agency’s
interpretation of a statute is valid under the APA. Chevron, U.S.A., Inc. v. Natural Res. Def.
Council, Inc., 467 U.S. 837 (1984). This approach, commonly referred to as the “Chevron
analysis,” requires the court to first look to “whether Congress has spoken to the precise question
at issue.” Id. at 842. If so, the court ends its inquiry. Id. But, if the statute is ambiguous or
silent, the second step requires the court to defer to the agency’s position, so long as it is
reasonable. Id. at 843; Sea-Land Servs., Inc. v. Dep’t of Transp., 137 F.3d 640, 645 (D.C. Cir.
1998) (holding that “[Chevron] deference comes into play of course, only as a consequence of
statutory ambiguity, and then only if the reviewing court finds an implicit delegation of authority
to the agency”).
Like every court to have addressed the issue to date, this court need not advance beyond
the first step of the Chevron analysis. The Medicare statute plainly states that in determining the
“number of beneficiaries,” the fiscal intermediary and HHS are required to count every
individual who receives care in that fiscal year, with “such number reduced to reflect the
proportion of hospice care that each such individual was provided in a previous or subsequent
accounting year.” 42 U.S.C. § 1395f(i)(2)(C). Under the challenged regulation, however, an
individual is counted as a beneficiary only in a single year, depending on when he or she elects
hospice benefits, regardless of whether he or she receives hospice care in multiple years. See 42
C.F.R. § 418.309(b)(1) (providing that the number of beneficiaries shall include “[t]hose
Medicare beneficiaries who have not previously been included in the calculation of any hospice
cap and who have filed an election to receive hospice care . . . during the period beginning on
22
September 28 (35 days before the beginning of the cap period) and ending on September 27 (35
days before the end of the cap period”)). The regulation is at odds with the plain language of the
statute in that it omits and replaces the proportional allocation calculation expressly called for in
the statute. Compare 42 U.S.C. § 1395f(i)(2)(C) with 42 C.F.R. § 418.309(b)(1).
Indeed, at the time HHS proposed the challenged regulation, it acknowledged that it was
not implementing the statute’s proportional allocation provision:
The statute specifies that the number of Medicare patients used in the calculation
is to be adjusted to reflect the portion of care provided in a previous or subsequent
reporting year or in another hospice. With respect to the adjustment necessary to
account for situations in which a beneficiary’s election overlaps two accounting
periods, we are proposing to count each beneficiary only in the reporting year in
which the preponderance of the hospice care would be expected to be furnished
rather than attempting to perform a proportional adjustment. Although [42
U.S.C. § 1395f(i)(2)(C)] specifies that the cap amount is to be adjusted “to reflect
the proportion of hospice care that each such individual was provided in a
previous or subsequent accounting year . . .”, such an adjustment would be
difficult in that the proportion of the hospice stay occurring in any given year
would not be known until the patient died or exhausted his or her hospice
benefits. We believe that the proposed alternative of counting the beneficiary in
the reporting period where the beneficiary used most of the days of covered
hospice care will achieve the intent of the statute without being burdensome.
48 Fed. Reg. 38146, 38158 (Aug. 22, 1983) (emphasis added). Thus, the regulation sought to
effectuate the intent of the statute by applying an “alternative” methodology to the one specified
in the statute. See id.The defendant maintains that its alternative methodology results from a reasonable
interpretation of ambiguities in the statute and that the regulation accomplishes the legislative
intent underlying the proportional allocation provision. See Def.’s Mot. at 37-42; Def.’s Reply at
1420. Yet, as every court to have addressed these issues has concluded, the plain and
unambiguous language of the statute clearly establishes a methodology for determining the
“number of beneficiaries,” one that is fundamentally different from the methodology set forth in
23
42 C.F.R. § 418.309(b)(1).16 See, e.g., Hospice of N.M., 691 F. Supp. 2d at 1292 (holding that
“Congress’ intent when it drafted 42 U.S.C. § 1395f(i)(2)(C) was clear and unambiguous, and 42
C.F.R. § 418.309(b)(1) does not comport with that intent”); Lion Health Servs., 689 F. Supp. 2d
at 856-57 (holding the regulation invalid because “Congress was clear in § 1395f(i)(2)(C) about
how the ‘number of beneficiaries’ should be calculated”); Compassionate Care Hospice, 2010
WL 2326216, at *4 (concluding that “[c]ontrary to th[e] [statute’s] clear language, the regulation
makes no attempt to determine an appropriate proportion of the amount of care provided in each
fiscal year; rather, it simply assigns the entire amount of a beneficiary’s allocation to a single
year based solely on the date of admission”); L.A. Haven Hospice, Inc., 2009 WL 5868513, at *5
(concluding that the regulation fails under the first step of the Chevron analysis because
“Congress unquestionably required that the number of medicare beneficiaries be reduced to
reflect ‘the proportion’ (not simply a proportion or an estimate, as Defendant would apparently
have ‘reflect’ mean in this context) of hospice care that ‘each such individual’ (not individuals in
16
Although the defendant largely replicates arguments raised (and rejected) in other cases, it does
cite decisions from this jurisdiction that, it argues, stand for the proposition that statutory terms
such as “reflect” and “proportion” are ambiguous terms that confer a certain amount of discretion
to the agency. See Def.’s Mot. at 39-40; Def.’s Reply at 16-17. These cases concerned statutes
that directed the agency to perform a proportional adjustment but did not specify the means for
accomplishing that adjustment. See Methodist Hosp. of Sacramento v. Shalala, 38 F.3d 1225,
1229-30 (D.C. Cir. 1994) (noting that a statutory provision requiring the Secretary of Labor to
“adjust the proportion” of hospital costs attributable to labor costs when calculating certain
payment rates did not specify whether the Secretary was required to retroactively apply
corrections to erroneous wage data); Cape Cod Hosp. v. Sebelius, 677 F. Supp. 2d 18, 30 (D.D.C.
2009) (observing that a statute requiring the agency to “adjust the area wage index . . . in a
manner which assures that the aggregate payments . . . are not greater or less than those which
would have been made in the year if this section did not apply” did not “specifically direct the
[agency] how to accomplish this task”). Thus, these courts concluded that the agency’s efforts to
implement that proportional adjustment did not fail under the first prong of Chevron because
Congress had not spoken to the precise issue. See Methodist Hosp., 38 F.3d at 1229-30; Cape
Cod Hosp., 677 F. Supp. 2d at 30. In this case, by contrast, the challenged regulation does not
clarify an ambiguity in the statute by offering a methodology for performing the proportional
adjustment required by the statute; it simply relieves the agency of the obligation of performing
the adjustment altogether and sets forth an alternative, less burdensome methodology designed to
approximate that statutory adjustment. See 42 C.F.R. § 418.309(b)(1). Accordingly, the
decisions cited by the defendant are inapposite.
24
the aggregate) ‘was provided in a previous or subsequent accounting year’”); see also Tri-County
Hospice, Inc., 2010 WL 784836, at *3 (noting that the question of the regulation’s invalidity was
“well-trod ground”); IHG Healthcare, 2010 WL 2380743, at *11 (observing that “[t]o date,
every district court that has addressed the issue has found the regulation facially invalid”).
Accordingly, the court concludes that 42 C.F.R. § 418.309(b)(1) fails the first prong of
the Chevron analysis and constitutes an abuse of agency discretion. The court, therefore, grants
the plaintiff’s motion for partial summary judgment and denies the defendant’s cross-motion for
partial summary judgment.
2. The Relief Requested
The plaintiff requests the following relief: a declaration that 42 C.F.R. § 418.309(b)(1) is
unlawful and set aside; a declaration that the repayment demand issued to the plaintiff for fiscal
year 2007 is unlawful and set aside; an order requiring HHS to return to the plaintiff, with
interest and within one year, all monies the plaintiff has paid towards the fiscal year 2007
demand or credit such payments, with interest, to a new cap repayment demand for fiscal year
2007; and an order enjoining HHS from prospective use of 42 C.F.R. § 418.309(b)(1) to
calculate the hospice cap liability of the plaintiff or any other hospice provider.17 Pl.’s Mot.,
Proposed Order; Pl.’s Reply at 18.
The APA plainly authorizes the court to grant the declaratory relief sought by the
plaintiff. See 5 U.S.C. § 706(2) (providing that a reviewing court shall hold unlawful and set
aside agency action, findings and conclusions found to be arbitrary, capricious, an abuse of
discretion or otherwise not in accordance with law). Accordingly, the court declares that 42
17
The plaintiff does not address its request for costs and attorney’s fees, see Compl. at 18, in its
motion papers. See generally Pl.’s Mot.; Pl.’s Reply. The court, therefore, declines to grant such
relief, but grants the plaintiff leave to make a supplemental application for such relief. See Lion
Health Servs. v. Sebelius, 689 F. Supp. 2d 849, 858 (N.D. Tex. 2010).
25
C.F.R. § 418.309(b)(1) and the fiscal year 2007 repayment demand issued to the plaintiff are
unlawful and hereby set aside.
The APA also authorizes the court to enjoin unlawful agency action and direct the agency
to remedy harm resulting from such action. See 5 U.S.C. § 702 (waiving the government’s
sovereign immunity to suits by individuals suffering a legal wrong because of agency action and
“seeking relief other than money damages”); Hospice of N.M., 691 F. Supp. 2d at 1295(enjoining the application of the challenged regulation against the plaintiff and remanding the
matter to the agency for a calculation of any amounts to be refunded to the plaintiff); accord
Lion Health Servs., 689 F. Supp. 2d at 858; Compassionate Care Hospice, 2010 WL 2326216, at
*5. The Supreme Court has, however, cautioned that “injunctive relief should be no more
burdensome to the defendant than necessary to provide complete relief to the plaintiffs.”
Califano v. Yamasaki, 442 U.S. 682, 702 (1979); see also State of Neb. Dep’t of Health &
Human Servs. v. Dep’t of Health & Human Servs., 435 F.3d 326, 330 (D.C. Cir. 2006) (noting
that injunctive relief “must be narrowly tailored to remedy the specific harm shown” (quoting
Aviation Consumer Action Project v. Washburn, 535 F.2d 101, 108-09 (D.C. Cir. 1976)));
Meinhold v. U.S. Dep’t of Defense, 34 F.3d 1469, 1480 (9th Cir. 1994) (concluding that the
district court erred in enjoining the defendant from applying the invalid regulation to all military
personnel (citing Califano, 442 U.S. at 702)). Accordingly, the court prospectively enjoins HHS
from applying the challenged regulation to the plaintiff and remands this case to the HHS for a
recalculation of the plaintiff’s cap liability for fiscal year 2007. The court, however, declines the
plaintiff’s request for a nationwide injunction of the challenged regulation.
26
IV. CONCLUSION
For the foregoing reasons, the court grants the plaintiff’s motion for partial summary
judgment, denies the defendant’s motion for partial remand or, in the alternative, cross-motion
for summary judgment, grants the defendant’s motion for partial dismissal and denies the
defendant’s motion to strike. An Order consistent with this Memorandum Opinion is separately
and contemporaneously issued this 20th day of July, 2010.
RICARDO M. URBINA
United States District Judge
27