Loma Linda University Medical Center v. Leavitt ( 2009 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
LOMA LINDA UNIVERSITY KIDNEY
CENTER,
Plaintiff, Civil Action No. 06-1926
Consolidated with 06-1927
v. TFH/DAR
CHARLES E. JOHNSON,
Acting Secretary, United States Department
of Health and Human Services,
Defendant.
LOMA LINDA UNIVERSITY MEDICAL
CENTER,
Plaintiff,
v.
CHARLES E. JOHNSON,
Acting Secretary, United States Department
of Health and Human Services,
Defendant.
REPORT AND RECOMMENDATION1
Plaintiffs, Loma Linda University Kidney Center (“LLKC”) and Loma Linda University
Medical Center (“LLMC”), collectively “Loma Linda,” are certified Medicare providers of
1
The Court has substituted the Acting Secretary as Defendant in place of his predecessor, Michael O.
Leavitt, who had been a party to this suit in his official capacity only. See Fed.R.Civ.P. 25(d)(1).
Loma Linda v. Johnson 2
service which render hemodialysis services to individuals with end stage renal disease
(“ESRD”).2 In this action, Plaintiffs challenge the final decision rendered by the Secretary of the
United States Department of Health and Human Services (“Secretary”) denying Plaintiffs’
requests for an exception to the method for determining the prospective Medicare payment rate
for dialysis treatments. Defendant maintains that his decision was proper pursuant to the terms
of the applicable statutes and regulations. Pending for consideration by the undersigned United
States Magistrate Judge are Plaintiffs’ Motion for Summary Judgment (Document No. 19), and
Defendant’s Motion for Summary Judgment (Document No. 22).
Upon consideration of the motions; the memorandum in support thereof and in opposition
thereto; the administrative record, and the entire record herein, the undersigned recommends that
Plaintiffs’ motion for summary judgment be granted in part, and that Defendant’s motion for
summary judgment be denied.
I. BACKGROUND
(A) Statutory and Regulatory Framework
This action arises under Title XVIII of the Social Security Act, more commonly known as
the Medicare Act, a statutory scheme by which Congress established a federally funded health
insurance program for the elderly and disabled. See 42 U.S.C. §§ 1395 et seq. At issue in this
action are provisions which govern the cost reimbursements to providers of service (“Providers”)
rendering outpatient dialysis treatment to qualified individuals for end stage renal disease
2
The court (Hogan, J.) consolidated for all purposes Loma Linda University Kidney Center v. Michael O.
Leavitt (Civil No. 06-1926), and Loma Linda University Medical Center v. Michael O. Leavitt (Civil No. 06-1927).
See April 20, 2007 Order (Document No. 12) at 1.
Loma Linda v. Johnson 3
(“ESRD”). See 42 U.S.C. § 1395rr(b)(7). Reimbursement is administered by the Centers for
Medicare and Medicaid Services (“CMS”), formerly the Health Care Financing Administration
(“HCFA”),3 under the direction of the Secretary of the United States Department of Health and
Human Services (“Secretary”). 42 C.F.R. § 413.170(a) (2000).4 Medicare reimbursement
payments are determined by
a method (or methods) for determining prospectively the amounts
of payments to be made for dialysis services furnished by providers
of services[.] . . . Such method (or methods) shall provide for the
prospective determination of a rate (or rates) for each mode of care
based on a single composite weighted formula (which takes into
account the mix of patients who receive dialysis services at a
facility . . . and the relative costs of providing such services in such
setting) for hospital-based facilities . . . or based on such other
method or combination of methods . . . which the Secretary
determines, after detailed analysis, will more effectively encourage
the more efficient delivery of dialysis services[.]
42 U.S.C. § 1395rr(b)(7).5 Providers are authorized by statute to obtain “exceptions to such
methods as may be warranted by unusual circumstances[.]” Id.; see also 42 C.F.R. § 413.180(2000).
The Secretary has promulgated regulations enumerating the circumstances warranting an
exception to the “method (or methods)” used for “the prospective determination of a rate (or
3
Any references to HCFA in cited regulations or the administrative record refers to the entity now known
as CM S.
4
The court cites, where appropriate, the 2000 version of the Regulations that were in effect at the time
Plaintiffs filed their requests for payment rate exception.
5
The reimbursement payments of the cost for services rendered by providers of service are made through
private entities, known as fiscal intermediaries. See U.S.C. § 1395h; see also 42 C.F.R. § 413.180 (2000).
Loma Linda v. Johnson 4
rates)” which determine the amounts of payment to be made for dialysis services.6 Id.; see also
42 C.F.R. §§ 413.182, 413.180 (2000). Providers seeking such a “payment rate exception” must
submit to CMS materials specified in the implementing regulations, and at the request of CMS,
which are necessary for CMS to “adjudicate each type of exception.” Id. § 413.180(f). In
pertinent part, Providers must request a payment rate exception “within 180 days of . . . the
effective date that CMS opens the exceptions process[.]” Id. § 413.180(d)(2). The statute
provides that “[e]ach application for such an exception shall be deemed to be approved unless the
Secretary disapproves it by not later than 60 working days after the date the application is filed.”
42 U.S.C. § 1395rr(b)(7); see also 42 C.F.R § 413.180(h) (2000) (“An exception request is
deemed approved unless it is disapproved within 60 working days after it is filed with its
intermediary.”).7
In the event that CMS determines that a provider has failed to meet its burden of
demonstrating that a payment rate exception is warranted by “convincing objective evidence,”
the provider may seek administrative review of CMS’ decision. 42 C.F.R. § 413.182(b); see also
§§ 413.180, 413.194(b) (2000). “The [Provider Reimbursement Review Board (“Board”)] has
the authority to review the action taken by HCFA on the facility’s requests. However, the
[Board’s] decision is subject to review by the Administrator[.]” Id. § 413.194(b)(2); see also 42
C.F.R. § 405.1875 (2000). “A decision of the Board shall be final unless the Secretary, on its
6
The Secretary’s implementing regulations authorize “an exception to the prospective payment rate based
on atypical service intensity” to a facility that “demonstrates that a substantial proportion of the facility’s outpatient
maintenance dialysis treatments involve atypically intense dialysis services, special dialysis procedures, or supplies
that are medically necessary to meet special medical needs of the facility’s patients.” Id. § 413.184(a)(1) (2000).
7
70 Fed. Reg. 70116, 70331 (November 21, 2005) (redesignated this subsection, in full text, effective
January 1, 2006, to 42 C.F.R. § 413.180(g)).
Loma Linda v. Johnson 5
own motion, and within 60 days after the provider of services is notified of the Board’s decision,
reverses, affirms, or modifies the Board’s decision.” 42 U.S.C. § 1395oo(f)(1) (2000); see also
42 C.F.R. § 405.1875(a)(1) (“The Administrator, at his or her discretion, may review any final
decision of the Board[.] . . . on his or her own motion, in response to a request from a party to a
Board hearing or in response to a request from HCFA.”). Moreover, “the Administrator will
promptly notify the parties and HCFA whether he or she has decided to review a decision of the
Board and, if so, will indicate the particular issues that he or she will consider.” 42 C.F.R. §
405.1875(d)(1). Both CMS and the Provider are afforded an opportunity to submit written
materials, as identified by regulation, to the Administrator. See § 405.1875(e); see also id. §
405.1875(e)(2) (“These submissions shall be limited to issues the Administrator has decided to
review and confined to the record of the Board hearing.”). A provider of service has the “right to
obtain judicial review of any final decision of the Board, or of any reversal, affirmance, or
modification by the Secretary, by a civil action commenced within 60 days of the date on which
notice of any final decision by the Board or . . . by the Secretary is received.” 42 U.S.C. §
1395oo(f)(1) (2000).
(B) Factual and Procedural Background
Plaintiff Loma Linda University Kidney Center (“LLKC”) is a “non-profit free-standing
renal dialysis facility . . . [which] operates twenty . . . stations in its outpatient dialysis unit and
provides Hemodialysis to mostly adult patients and Peritoneal dialysis to both adult and pediatric
patients.” LLKC Administrative Record (“LLKC A.R.”) 236; see also Complaint for Judicial
Review of Final Adverse Agency Decision on Medicare Reimbursement (“LLKC Complaint”)
Loma Linda v. Johnson 6
(Document No. 1), ¶ 5. Plaintiff Loma Linda University Medical Center (“LLMC”) is a “non-
profit facility, which operates a hospital-based renal dialysis center . . . [which] operates twelve
stations in its outpatient dialysis unit and provides Hemodialysis to both adult and pediatric
patients.” LLMC Administrative Record (“LLMC A.R.”) 522; see also Complaint for Judicial
Review of Final Adverse Agency Decision on Medicare Reimbursement (“LLMC Complaint”)
(Document No. 1), ¶ 5.8 Both facilities, located in Loma Linda, California, are “certified as . . .
provider[s] of service[] under the federal Medicare program.” LLKC Complaint, ¶ 5; LLMC
Complaint, ¶ 6. On August 28, 2000, pursuant to 42 U.S.C. § 1395rr(b)(7), Plaintiffs LLKC and
LLMC submitted separate requests for a payment rate exception (see LLKC A.R. 235-52, LLMC
A.R. 517-44) to “United Government Services, LLC[,]” their fiscal intermediary
(“Intermediary”).9 LLKC Complaint, ¶ 16; LLMC Complaint, ¶ 16. Each facility’s request for a
payment rate exception was predicated upon its contention that it met the atypical service
intensity criteria developed by CMS.10 See LLKC A.R. 236, LLMC A.R. 522. According to
CMS, the sixtieth working day after August 28, 2000 was November 20, 2000. See LLKC A.R.
19, LLMC A.R. 19. Plaintiffs, however, assert that the sixtieth working day after August 28,
2000 was November 24, 2000. Id.
8
See Loma Linda Medical Center v. Michael O. Leavitt (Civil No. 06-1927); see also n.2, supra.
9
Despite representations made in their Complaints, Plaintiffs assert in their motion that their requests for
payment rate exception “were submitted to Blue Cross of California, which serves as the Secretary’s fiscal
intermediary.” [Plaintiffs’] Memorandum of Points and Authorities in Support of Plaintiff’s [sic] Motion for
Summary Judgment (“Plaintiffs’ Memorandum”) (Document No. 19) at 2-3.
10
LLKC, in its request for a payment rate exception, “sought an additional $51.64 for each outpatient
hemodialysis treatment, and an additional $49.43 for each peritoneal dialysis treatment.” LLKC Complaint, ¶ 17.
LLMC “sought an additional $243.02 for each outpatient hemodialysis treatment.” LLMC Complaint, ¶ 17. See
also n.6, supra.
Loma Linda v. Johnson 7
By letters dated November 15, 2000, CMS advised the Intermediary that it denied
Plaintiffs’ requests for payment rate exception.11 See LLKC A.R. 180-87,12 LLMC A.R. 192-
97.13 The Intermediary, by letter dated November 29, 2000, advised Plaintiff LLKC that its
request for payment rate exception was denied. See LLKC A.R. 198.14 Likewise, by letter dated
December 11, 2000, the Intermediary notified Plaintiff LLMC that “[b]ased on HCFA’s review
of our proposal and your documentation, they denied your request for an exception.” LLMC
A.R. 202.15 Plaintiffs appealed CMS’ decisions to the Board. See LLKC A.R. 874, LLMC A.R.
1023.
The Board, on July 27, 2006 rendered substantially identical decisions on both appeals.
See LLKC A.R. 25-32 (Provider Reimbursement Review Board Decision); see also LLMC A.R.
25-29. In its decisions, the Board defined the issue for adjudication with respect to both
Plaintiffs as “[w]hether the denial of the Provider[s’] request[s] for an exception to the end stage
renal disease (ESRD) composite rate by the Centers for Medicare and Medicaid Services (CMS)
was proper.” LLKC A.R. 26, LLMC A.R. 26. The Board further explained that “[these] case[s]
11
Plaintiffs allege that “[t]he CMS letter[s] dated November 15, 2000 [were] not sent to the Intermediary
until after the expiration of the 60 working day [period] prescribed by 42 U.S.C. § 1395rr(b)(7).” LLKC Complaint,
¶ 23; LLMC Complaint, ¶ 22.
12
Letter from Joseph Logue, Health Insurance Specialist, Division of Chronic Care Management to
Michael S. Foxx, Manager, Provider Audit Department, Medicare Part A Intermediary (November 15, 2000).
13
Letter from Joseph Logue, Health Insurance Specialist, Division of Chronic Care Management to
Brenda Merriweather, Manager, Provider Audit Department, Medicare Part A Intermediary (November 15, 2000).
14
Letter from Michael S. Foxx, Manager, Provider Audit Department to Corinna Goron, Controller, Loma
Linda University Kidney Center (November 29, 2000).
15
Letter from Brenda Merriweather, Manager, Provider Audit Department to Teresa Day, Sr. V.P. /CFO,
Loma Linda University Medical Center (December 11, 2000).
Loma Linda v. Johnson 8
involve[] whether the denial was timely under [42 U.S.C. § 1395rr(b)(7) and 42 C.F.R. §
413.180(g)].” Id. The Board rejected CMS’ determination on Plaintiffs’ requests for a payment
rate exception. LLKC A.R. 28, LLMC A.R. 28. In support of its decision, the Board found that
(1) “Congressional intent is frustrated if CMS fails to timely send notice of its decision[]”; (2)
time limits created in the Medicare regulations should be strictly enforced against CMS, just as
they are against providers requesting a payment rate exception; (3) a literal reading or
interpretation of the applicable regulation “ignores the reality that notice is essential to the
exception process and to fundamental notions of due process.” LLKC A.R. 28-29, LLMC A.R.
28-29. Moreover, the Board indicated that “the substantive issue as to whether the exception
denial was otherwise proper is moot.” Id. (footnote omitted).
CMS, by letter dated August 7, 2006, requested the reversal of the Board’s decisions
contending that “CMS met the requirement of disapproving the Provider[s’] exception request in
a timely manner[.]” See LLKC A.R. 21, LLMC A.R. 21.16 On August 9, 2006, the
Administrator of CMS notified Plaintiffs and the Intermediary that the Board’s decision would be
reviewed “to determine whether to reverse, affirm, modify or remand the Board’s decision . . .
[and] whether the Board’s decision is in keeping with the pertinent laws, regulations and other
criteria cited by the Board and by the parties in their comments.” LLKC A.R. 18, LLMC A.R.
18. On September 12, 2006, the Administrator reversed the Board’s decisions upon an
examination of the “entire record furnished by the Board . . . including all correspondence,
position papers, exhibits, . . . subsequent submissions . . . [and] comments timely received[.]”
16
Letter from Janet P. Samen, Director, Division of Chronic Care Management, Chronic Care Policy
Group to Director, Office of Attorney Advisor (August 7, 2006). See LLKC A.R. 19-21, LLMC A.R. 19-21.
Loma Linda v. Johnson 9
See LLKC A.R. 2-8, LLMC A.R. 2-7 (Centers for Medicare and Medicaid Services Decision of
the Administrator, dated September 12, 2006). The Administrator found that “CMS’ November
15, 2000 disapproval of the Provider[s’] exception request satisfied the statutory and regulatory
requirements in that it was made within 60 working days after the request was filed with the
Provider[s’] Intermediary.” LLKC A.R. 8, LLMC A.R. 7. The Administrator further observed
that the applicable statute “does not state that the actual notice of the disapproval must be issued
by, or received by, the provider within 60 working days after the application is filed.”17 LLKC
A.R. 6, LLMC A.R. 6-7. This decision constituted final agency action from which Plaintiffs seek
judicial review. See 42 U.S.C. § 1395oo(f)(1).
II. CONTENTIONS OF THE PARTIES
Plaintiffs and Defendant cross-move for summary judgment pursuant to Rule 56 of the
Federal Rules of Civil Procedure, alleging that there are no genuine issues as to any material fact
and that each is entitled to summary judgment as a matter of law. Moreover, Plaintiffs claim that
the Secretary’s “denial of their requests for an exception to the Medicare prospectively
determined payment rate for dialysis treatments . . . constituted arbitrary and capricious agency
action in violation of the Administrative Procedure Act, 5 U.S.C. § 706(2)(A).” Plaintiffs’
Memorandum at 1. Plaintiffs, in support of their motion for summary judgment, characterize the
issues before the court as:
17
In its review of the Board’s decision, the Administrator did not make any findings concerning the
substantive determination by CMS that Plaintiffs failed to satisfy the criteria for an atypical service intensity
exception. See LLKC A.R. 2-8, LLMC A.R. 2-7. Indeed, the Administrator asserted that “[i]n this case . . . the
parties dispute not the merits of the denial of the Provider’s exception request, but rather the interpretation of the
pertinent statutory language governing the timing of CM S[’] determination on composite rate exception requests.”
LLKC A.R. 6, LLMC A.R. 6.
Loma Linda v. Johnson 10
(1) Should the exception request[s] have been deemed
approved pursuant to 42 U.S.C. § 1395rr(b)(7)?
(2) Did the Secretary’s failure to furnish a complete
administrative record require remand to the [Board]?
(3) Did the Secretary improperly conclude that [Plaintiffs]
abandoned the issue of whether [their] exception request
was meritorious?
(4) Was the Secretary’s failure to make a determination on the
merits of the exception request[s] a violation of the APA
and the requirements of procedural due process?
Id. at 6-7. Plaintiffs offer five grounds in support of their motion: (1) “[t]he exception request[s]
filed by Loma Linda should be deemed approved because the Secretary did not provide
notification to Loma Linda of its disapproval until after the 60 working day period[]” (id. at 8);
(2) the Administrator’s “rationale” that the statute does not require the Secretary to notify
Providers within the sixty-working day period of its decision on a request for payment rate
exception is “inconsistent with the underlying purpose of the statute[]” (id. at 10); (3) “[t]he
[CMS] denial letters [dated November 15, 2000] were subject to the indexing and disclosure
requirements of [the Freedom of Information Act (“FOIA”)][,] 5 U.S.C. § 552(a)(2)(A)[]” (id. at
14); (4) CMS’ letter of its decision on Plaintiffs requests for payment rate exception “could not
have been ‘relied on’ or ‘used’ against Loma Linda until such time as the latter received ‘actual’
notice thereof[]” (id. at 14) (citation omitted); and (5) remand to the agency is required “for
further fact finding as to the date upon which the denial letter was signed”18 (id. at 22), and “for a
18
Plaintiffs, before filing their motion for summary judgment, moved for an order compelling the
production of documents. See [Plaintiffs’] Motion to Compel Production of Documents (Document No. 15)
(Plaintiffs sought “logs reflecting the dates upon which significant actions occur[red] in connection with the
processing of renal dialysis exception requests[,]” and any other “documents to establish that the November 15,
2000 denial letter[s] [were] mailed to the Intermediary after the expiration of the 60 working day period.” The
undersigned denied Plaintiffs’ motion to compel without prejudice. See October 30, 2008 Minute Entry.
On November 17, 2008, Plaintiffs again filed a motion to compel seeking “any portions of the logs which
reflect the date upon which the November 15, 2000 letter was actually signed, and the date upon which the letter was
Loma Linda v. Johnson 11
determination on the substantive merits of the exception request.” Id. at 20. Plaintiffs assert that
a “remand back to the [Board] for a decision on the merits of the exception request[]” is the
“appropriate remedy” as “neither the [Board] nor the Administrator rendered any conclusions on
the merits of the exception request.” Id. at 21.
Defendant, in his motion for summary judgment and opposition to Plaintiffs’ motion for
summary judgment, submits that “the Secretary acted in full compliance with all statutory and
regulatory requirements . . . and his interpretation of the Medicare statute was reasonable and
should be upheld.” See Defendant’s Memorandum of Points and Authorities in Support of
Defendant’s Motion for Summary Judgment and in Opposition to Plaintiffs’ Motion for
Summary Judgment (“Defendant’s Memorandum”) (Document Nos. 22, 23) at 11. In support of
his contention, Defendant asserts that (1) the applicable statute and implementing regulation, by
their terms, “requires only that a request [for a payment rate exception] be disapproved, not
transmitted and/or delivered to either the intermediary or the provider within the sixty working
day limit” (see id. at 11-12); (2) CMS notified the Intermediary, by letters dated November 15,
2000 of its decisions to deny Plaintiffs’ requests for a payment rate exception (see id. at 5); (3)
the Secretary’s interpretation of 42 U.S.C. § 1395rr(b)(7) is deferential, reasonable and does not
undermine the purpose of the Medicare statute (see id. at 9-14); (4) Plaintiffs do not, and could
not, claim to have been prejudiced by the Intermediary’s notification of CMS’ decision with
actually mailed to the fiscal intermediary.” [Plaintiffs’] Motion to Compel Production of Documents (Plaintiffs’
Motion to Compel”) (Document No. 39) at 8. Plaintiffs contended that such discovery was relevant to their claims
that “the exception request was not timely processed because it was not mailed to the intermediary within the 60
[working] day period.” Id; see also id. at 3 (“Plaintiffs are not seeking discovery to demonstrate the existence of a
genuine issue of material fact. Rather, [P]laintiffs are seeking to supplement the administrative record[.]”). The
undersigned denied Plaintiffs’ motion to compel. See January 9, 2009 Minute Order. Plaintiffs filed “objections”
to the undersigned’s order on January 13, 2009 (Document No. 42).
Loma Linda v. Johnson 12
respect to their requests for payment rate exception (see id. at 14); and (5) “FOIA is irrelevant to
the legal question before this Court[]” Id. at 15. Moreover, Defendant asserts that remand is not
warranted because Plaintiffs “waived their opportunity to seek a remand . . . [by] fail[ing] to seek
[such] alternative relief before the Administrator[]” (id. at 16), and that there is “no basis to
doubt that the [November 15, 2000] [denial] letters were signed on the date printed upon
them[.]” Id. at 18. Defendant contends that “there is not a genuine issue of material fact: as a
matter of law, the Secretary’s actions were not arbitrary or capricious or an abuse of discretion.”
Id. at 11.
In the reply to Defendant’s opposition, and opposition to Defendant’s motion for
summary judgment, Plaintiffs assert that (1) they did not seek a remand of the Board’s decision
that their requests for a payment rate exception be deemed approved because they were pleased
with its decision (see [Plaintiffs’] Reply Memorandum in Support of Plaintiffs’ Motion for
Summary Judgment and in Opposition to Defendant’s Cross-Motion for Summary Judgment
(“Plaintiffs’ Response”) (Document Nos. 25, 26) at 2); (2) Plaintiffs do not have the “new,
substantial” evidence required as a prerequisite to a remand (see id.); (3) remand is warranted to
learn the date upon which CMS’ denial letters were actually signed (id. at 5-7); and (4)
arguments and written submissions were limited to issues the Administrator decided to review.
See id. at 4. Plaintiffs maintain that the Secretary’s November 15, 2000 denial of their request
for payment rate exception was not final because “the agency did not provide notification of its
disapproval until after the 60 working day period.” Id. at 7; see also id. at 11 (“[T]he denial
letter(s) [were] still tentative as of November 15, 2000 because the deciding official did not
communicate that action to anyone.”); see also id. at 8 (“The issue to be decided by this Court is
Loma Linda v. Johnson 13
whether a disapproval which has not been communicated can be final.”). Plaintiffs also
maintained that “[u]nder FOIA, a ‘final opinion’ or ‘order’ cannot be ‘used’ or ‘relied on’ until
the agency has either (a) placed a copy of the denial letter in the agency’s electronic reading
room, or (b) provided a copy of the denial letter to [Plaintiffs].” Id. at 14. Plaintiffs maintain
that “the [CMS] November 15, 2000 denial[] [letters] were ‘final opinions’ or ‘orders’ within the
context of the FOIA[.]”19 Id.
Defendant, in his reply, maintains that his interpretation of 42 U.S.C. § 1395rr(b)(7) is
entitled to deference by the court and is within the bounds of reasonable interpretation. See
Defendant’s Reply to Plaintiffs’ Opposition to Defendant’s Motion for Summary Judgment
(“Defendant’s Reply”) (Document No. 30) at 2-7. Defendant further maintains that consideration
of notice requirements under FOIA is irrelevant to the issue before the court because “Plaintiffs
have brought a claim pursuant to the Medicare statute, 42 U.S.C. § 1395oo(f)(1), not FOIA[,]”
and the “relief which Plaintiffs seek is in no way connected to the relief which may be afforded
under FOIA.” See id. at 8-9. Moreover, remand is unnecessary because Plaintiffs’ can not
support the assertion that CMS’ denial letters were signed on a date other than November 15,
2000, and Plaintiffs “ought to have foreseen the need to notify the Administrator of their intent to
pursue the merits of their request[.]” Id. at 10-11.
Plaintiffs, in their surreply, argue that “the Administrator’s decisions dated September 12,
2006 [also] do not warrant deference under Chevron because they were not published as required
19
Plaintiffs “acknowledge[] . . . [the] inconsistency between its assertion that the denial letters dated
November 15, 2000 were not final, and its assertion that the denial letters constituted a ‘final opinion’ or ‘order’
within the context of FOIA.” Plaintiffs’ Response at 14, n.2. Plaintiffs contend that its alternative arguments will
lead to the same conclusion. See id. (“[U]nder either legal theory, the denial letters were not effective as of
November 15[, 2000].”
Loma Linda v. Johnson 14
by the provisions of [FOIA].”20 Plaintiff[s’] Surreply (Document No. 37) at 2 (citations omitted).
III. STANDARD OF REVIEW
(A) Motions for summary judgment
Pursuant to Rule 56 of the Federal Rules of Civil Procedure, summary judgment shall be
granted if the pleadings on file, together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled to judgment as a matter of law.
Fed.R.Civ.P. 56©. Material facts are those that “might affect the outcome of the suit under the
governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). There is a genuine
issue of material fact “if the evidence is such that a reasonable jury could return a verdict for the
non-moving party.” Id. In considering a motion for summary judgment, all evidence and
inferences to be drawn from the underlying facts must be viewed in the light most favorable to
the party opposing the motion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
587 (1986). “Additionally, ‘in ruling on cross-motions for summary judgment, the court shall
grant summary judgment only if one of the moving parties is entitled to judgment as a matter of
law upon material facts that are not genuinely disputed.’” American Cargo Transport, Inc. v.
Natsios, 429 F. Supp. 2d 139, 145 (D.D.C. 2006) (quoting Petchem, Inc. v. United States, 99 F.
Supp. 2d 50, 54 (D.D.C. 2000)) (citations omitted). “In a case involving review of a final agency
action under the Administrative Procedure Act, 5 U.S.C. § 706, however, the standard set forth in
Rule 56© does not apply because of the limited role of a court in reviewing the administrative
20
Plaintiffs, on February 27, 2008, moved for leave to file a surreply. See Plaintiff’s [sic] Motion for
Leave to File Surreply (Document No. 31). The undersigned granted Plaintiffs’ motion. See September 19, 2008
Minute Order.
Loma Linda v. Johnson 15
record.” Baystate Med. Ctr. v. Leavitt, 545 F. Supp. 2d 20, 34-35 (D.D.C. 2008) (citations
omitted).
(B) Judicial Review of Secretary’s decision pursuant to the Administrative Procedure
Act
Judicial review of Medicare reimbursement disputes is governed by the standards set
forth in the Administrative Procedure Act (“APA”). 42 U.S.C. § 1395oo(f)(1); see also 5 U.S.C.
§ 706. To the extent necessary, “the reviewing court shall decide all relevant questions of law,
interpret constitutional and statutory provisions, and determine the meaning or applicability of
the terms of an agency action.” 5 U.S.C. § 706. Further, “[t]he reviewing court shall . . . hold
unlawful and set aside agency action, findings, and conclusions found to be without observance
of procedure required by law, unsupported by substantial evidence, arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with the law.” 5 U.S.C. § 706(2)(A). “Generally,
an agency's decision is arbitrary and capricious ‘if the agency . . . entirely failed to consider an
important aspect of the problem, offered an explanation for its decision that runs counter to
evidence before the agency, or is so implausible that it could not be ascribed to a difference in
view or the product of agency expertise.’” Johnson v. U.S. Dep’t of Educ., 580 F. Supp. 2d 154,
157 (D.D.C. 2008) (quoting Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463
U.S. 29, 43 (1983)) (internal citations omitted). “As long as an agency has examined the relevant
data and articulated a satisfactory explanation for its action[,] including a rational connection
between the facts found and the choice made, courts will not disturb the agency's action.”
Heartland Reg’l Med. Ctr. v. Leavitt, 511 F. Supp. 2d 46, 51 (D.D.C. 2007) (citing Motor Veh.
Loma Linda v. Johnson 16
Mfrs. Ass’n, 463 U.S. at 43). The scope of review of an agency decision accordingly is narrow,
and a federal court is not to substitute its judgment for that of the agency. See Orion Reserves
Ltd. P’ship v. Salazar, 553 F.3d 697, 706 (D.C. Cir. 2009) (citations omitted). When reviewing
an administrative decision, “the burden of showing that the agency action violates the APA
standards falls on the provider.” Heartland, 511 F. Supp. 2d at 51(citing Diplomat Lakewood
Inc. v. Harris, 613 F.2d 1009, 1018 (D.C. Cir. 1979)) (citation omitted).
“The Supreme Court set forth a two-step approach to determine whether an agency's
interpretation of a statute is valid under the APA. Quantum Entertainment, Ltd v. U.S. Dep’t of
the Interior, No. CIV.A.07-1295, 2009 WL 401871, at *4 (D.D.C. Feb. 19, 2009) (citing
Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984)). Application of
the “Chevron deference” standard “requires the court to first look to ‘whether Congress has
spoken to the precise question at issue.’ If so, the court ends its inquiry. But, if the statute is
ambiguous or silent, the second step requires the court to defer to the agency's position, as long
as it is ‘based on a permissible construction of the statute.’” Id. (internal citation omitted). The
Secretary’s interpretation of his own regulations is entitled to “substantial deference[,]” and
“must be given controlling weight unless it is plainly erroneous or inconsistent with the
regulation.” Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994) (citation omitted).
“Where the regulations involve a complex, highly technical regulatory program such as
Medicare, broad deference is ‘all the more warranted.’” St. Anthony's Health Ctr. v. Leavitt, 579
F. Supp. 2d 115, 119 (D.D.C. 2008) (quoting Thomas Jefferson Univ., 512 U.S. at 512) (internal
quotations omitted).
Loma Linda v. Johnson 17
IV. DISCUSSION
(A) Remand is warranted for the Administrator’s consideration of whether Plaintiffs
requests for payment rate exception were deemed approved pursuant to 42 U.S.C.
§ 1395rr(b)(7).
Plaintiffs, in the memorandum in support of their motion for summary judgment, state
that they “challenge[] the denial of their requests for an exception to the Medicare prospectively
determined payment rate for dialysis treatments[,]” and maintain that such denial “constituted
arbitrary and capricious agency action in violation of the [APA].” Plaintiffs’ Memorandum at 1.
Plaintiffs submit that the first issue presented is “[s]hould the exception request have been
deemed approved pursuant to 42 U.S.C. § 1395rr(b)(7)?” Id. at 6; see also LLKC Complaint, ¶
34, LLMC Complaint, ¶ 33 (“Defendant incorrectly held that 42 U.S.C. § 1395rr(b)(7) requires
only that the exception request be denied with [sic] the 60 working day period without regard to
when CMS provided notice of said denial to the Intermediary, and without regard to when the
Intermediary provided notice of said denial to the Plaintiff.”). Plaintiffs contend that “the
Secretary’s disapproval [should] be given effect . . . [at] such time as the provider has been
notified.” Id. at 12.
Defendant contends that “Plaintiffs’ requests were timely disapproved by the November
15, 2000 letters.” Defendant’s Memorandum at 12. Additionally, Defendant asserts that “there
is not a genuine issue of material fact: as a matter of law, the Secretary’s actions were not
arbitrary or capricious or an abuse of discretion[,]” and that “his interpretation of the Medicare
statute was reasonable and should be upheld.” Id. at 11.
In pertinent part, the Medicare Act provides that
[e]ach application for . . . an exception shall be deemed to be
Loma Linda v. Johnson 18
approved unless the Secretary disapproves it by not later than 60
working days after the date the application is filed.
42 U.S.C. § 1395rr(b)(7). The implementing regulation is markedly similar. See 42 C.F.R §
413.180(h) (“An exception request is deemed approved unless it is disapproved within 60
working days after it is filed with its intermediary.”).
It is undisputed that Plaintiffs, pursuant to 42 U.S.C. § 1395rr(b)(7), submitted requests
for a payment rate exception to their Intermediary on August 28, 2000 (see LLKC A.R. 235-52,
LLMC A.R. 517-44); CMS, by letters dated November 15, 2000, advised the Intermediary that it
denied Plaintiffs’ requests for a payment rate exception (see LLKC A.R. 180-87, LLMC A.R.
192-97); the Intermediary, by letters dated November 29, 2000 and December 11, 2000, advised
Plaintiff LLKC and LLMC, respectively, of CMS’ decision (see LLKC A.R. 198, LLMC A.R.
202), and Plaintiffs appealed CMS’ decisions to the Board (see LLKC A.R. 874, LLMC A.R.
1023). In adjudicating Plaintiffs’ appeal, the Board initially defined the issue as “[w]hether the
denial of the Provider[s’] request[s] for an exception to the end stage renal disease (ESRD)
composite rate by the [CMS] was proper.” LLKC A.R. 26, LLMC A.R. 26. However, without
explanation, the Board later characterized the dispute as “case[s] involv[ing] whether the denial
was timely under [42 U.S.C. § 1395rr(b)(7) and 42 C.F.R. § 413.180(g)].” Id. On July 27, 2006,
the Board rendered its decisions reversing CMS’ determinations of Plaintiffs’ requests for a
payment rate exception.
The undersigned finds that the Board’s decision is ambiguous. Specifically, in the
“Findings of Fact, Conclusions of Law and Discussion” section of its decisions, the Board
“[found] . . . pursuant to 42 U.S.C. § 1395rr(b)(7) and 42 C.F.R. § 413.180(h), [that] the
Loma Linda v. Johnson 19
[Plaintiffs’] exception request[s] [were] automatically deemed approved as CMS’
determination[s] [were] sent to the Intermediary after the 60 working day deadline.” LLKC A.R.
28, LLMC A.R. 28 (emphasis added). Notwithstanding this finding, the Board in the “Decision
and Order” section of its decision, concluded that “[a]s a result of the failure of CMS to notify
the Provider of the determination within 60 working days as required by 42 U.S.C. §
1395rr(b)(7), the Provider’s exception request is deemed approved.” LLKC A.R. 29, LLMC
A.R. 29 (emphasis added).
Additionally, the undersigned finds that the Administrator made no findings with respect
to the ambiguity in the Board’s decision or provided a rationale for the Administrator’s sole
review of the Board’s finding regarding notification to the Provider. See LLKC A.R. 2-8, LLMC
A.R. 2-7. Instead, the Administrator reversed the Board’s decisions and concluded that a proper
interpretation of 42 U.S.C. § 1395rr(b)(7) is that by its terms “[t]he statute does not require that
the Provider receive the disapproval, or have notice of the disapproval, within [the] statutory
time period.” Id. at 6. Moreover, the administrative record reveals that Plaintiffs argued–in
written submissions before the Administrator–that
“[p]er the Board’s decision, CMS did not send its notification to
the intermediary until after the 60 day deadline expired. As such,
even assuming arguendo that notification of the Provider is not
subject to the 60-day time limit, CMS has not satisfied its
requirement to provide notification to the Intermediary within the
60 day period.”
[LLKC’s] Provider Comment, A.R. 12; see also [LLMC’s] Provider Comment, A.R. 12. The
Administrator’s decision is notably silent with respect to the Board’s finding that “the
[Plaintiffs’] exception request[s] [were] automatically deemed approved as CMS’
Loma Linda v. Johnson 20
determination[s] [were] sent to the Intermediary after the 60 working day deadline.” LLKC A.R.
28, LLMC A.R. 28 (emphasis added).
The court does not have the authority, consistent with Chevron deference, to make a
determination of what the Board meant by the use of the conflicting language in its decision, or
to resolve the conflict. Thus, the undersigned’s narrow judicial review is thwarted by the
ambiguity of the administrative record, and the court cannot substitute its own judgment for that
of the agency. See Orion Reserves Ltd. P’ship v. Salazar, 553 F.3d 697, 706 (D.C. Cir. 2009)
(citations omitted). Additionally, the undersigned observes that “‘[t]he focal point for judicial
review under the [APA] should be the administrative record already in existence[.]’” Colorado
Wild Horse & Burro Coalition, Inc. v. Kempthorne, 527 F. Supp. 2d 3, 7 (D.D.C. 2007) (citation
omitted). Further, “[i]f the record is too scant for a decision to be made, courts will, ‘except in
rare circumstances,’ remand to the agency for additional investigation or explanation.’” Id.(citations omitted). Thus, the undersigned recommends that the matter be remanded for
resolution of the ambiguity.21
(B) Remand is also warranted for consideration of the merits of Plaintiffs’ request for
payment rate exception.
Plaintiffs contend that “this matter should be remanded “for a determination on the
substantive merits of the exception request.” Plaintiffs’ Memorandum at 20. Plaintiffs assert
21
To the extent that Plaintiffs request remand “for further fact finding as to the date upon which the denial
letter was signed” (Plaintiffs’ Memorandum at 22), the undersigned does not so recommend. Plaintiffs, in their
motion to compel, conceded that “[r]emand is especially inappropriate in the present case, as there are no longer any
fact finding procedures available at the administrative level to determine the date upon which the November 15,
2000 letter was either signed or mailed.” Plaintiffs’ Motion to Compel at 11; see also n.18, supra.
Loma Linda v. Johnson 21
that a “remand back to the [Board] for a decision on the merits of the exception request[]” is the
“appropriate remedy” as “neither the [Board] nor the Administrator rendered any conclusions on
the merits of the exception request[s].” Id. at 21. Defendant maintains that a remand is not
warranted because Plaintiffs “waived their opportunity to seek a remand . . . [by] fail[ing] to seek
[such] alternative relief before the Administrator[]” (Defendant’s Memorandum at 16); and
Plaintiffs “ought to have foreseen the need to notify the Administrator of their intent to pursue
the merits of their request[.]” Defendant’s Reply at 10-11. However, Defendant’s arguments do
not withstand scrutiny; indeed, the undersigned finds that no findings were articulated with
respect to Defendant’s review of the substantive merits of Plaintiffs requests for a payment rate
exception.
The administrative record is clear that before the Board, the parties disputed whether the
Plaintiffs met the criteria for atypical service intensity. See LLKC A.R. 91-152 (June 10, 2004
Transcript of Proceedings, Provider Reimbursement Review Board); see also LLMC A.R. 99-
160 (June 10, 2004 Transcript of Proceedings, Provider Reimbursement Review Board).
However, the Board, in making its determination that Plaintiffs’ requests for payment rate
exception were “deemed approved[,]” also held that “the substantive issue as to whether the
exception denial was otherwise proper is moot.” See LLKC A.R. 29, LLMC A.R. 29 (footnote
omitted). In its September 12, 2006 decisions, the Administrator summarily stated that “the
parties dispute not the merits of the denial of the Provider’s exception request, but rather the
interpretation of the pertinent statutory language governing the timing of CMS[’] determination
on composite rate exception requests.” LLKC A.R. 6, LLMC A.R. 6. However, the
Administrator neither made any findings, nor provided an explanation regarding this conclusion
Loma Linda v. Johnson 22
which disregarded the arguments made by the Plaintiffs before the Board. Moreover, the
Administrator made no findings regarding its consideration of the Board’s decision to find as
moot the merits of Plaintiffs’ requests for payment rate exception. Consequently, the Plaintiffs
lack a final decision regarding the merits of their requests for payment rate exception.
The undersigned finds that the Administrator’s decision is devoid of any findings with
respect to whether Plaintiffs’ requests for a payment rate exception were meritorious. “In cases
where a reviewing court is unable to make a determination because of the agency’s failure to
explain the grounds for its decision, the proper remedy is a remand for further proceedings.”
Merck & Co., Inc. v. Food & Drug Admin., 148 F. Supp. 2d 27, 31 (D.D.C. 2001) (citation
omitted). Thus, a remand to the Administrator is warranted for consideration consistent with the
applicable statutes and regulations.
© The requirements of the Freedom of Information Act are immaterial to the issues
before the court
Plaintiffs contend that the November 15, 2000 denial letters “were subject to the indexing
and disclosure requirements of 5 U.S.C. § 552(a)(2)(A) [of the Freedom of Information Act
(“FOIA”)][,]” but “were not indexed or published in the publication known as CMS Rulings[.]”
See Plaintiffs’ Memorandum at 14. Further, Plaintiffs contend that because CMS failed to index
or publish its November 15, 2000 denial letters in the publication known as CMS Rulings, the
denial letters “could not have been ‘relied on’ or ‘used’ against Loma Linda until such time as
the latter received ‘actual’ notice thereof.” Id. Defendant maintains that “FOIA is irrelevant to
the legal question before this Court[,]” and that “the timeliness of ESRD exception request
Loma Linda v. Johnson 23
denials is to be determined pursuant to the Medicare statute, not FOIA.” Defendant’s
Memorandum at 15. Defendant further maintains that “[t]he Secretary complied with the
Medicare statute because he disapproved the exception request within sixty working days[,]” and
“FOIA cannot be read to . . . impose a stricter deadline for agency action than the Medicare
statute itself.” Id.The undersigned finds that Plaintiffs’ invocation of FOIA is entirely misplaced. FOIA is
an enactment which “requires agencies of the federal government to release records to the public
upon request, unless one of nine statutory exemptions applies.” Moore v. Bush, No. CIV.A.07-
107, 2009 WL 504623, at *7 (D.D.C. Feb. 23, 2009); see also Ubunger v. U.S. Citizenship and
Immigration Services, No. CIV.A.08-673, 2009 WL 504680, at *3 (D.D.C. Mar. 2, 2009)
(“FOIA provides public access to government records as a means for exposing and examining
government conduct[.]”). No authority supports the proposition that an agency’s compliance–or
lack thereof–with any “indexing and disclosure requirements of [FOIA]” (see Plaintiffs’
Memorandum at 14) is either relevant or material to a request for APA review of a final agency
decision.
V. CONCLUSION
For the foregoing reasons, the undersigned finds that (1) the administrative record is
ambiguous with respect to the decision rendered by the Board and subsequently by the
Administrator; (2) the Administrator’s decision is devoid of any findings with respect to whether
Plaintiffs’ requests for a payment rate exception were meritorious; and (3) any “indexing and
disclosure requirements” of the Freedom of Information Act are neither relevant nor material to
Loma Linda v. Johnson 24
any of the issues presented in this action. It is, therefore, this 17th day of March, 2009,
RECOMMENDED that Plaintiffs’ Motion for Summary Judgment (Document No. 19)
be GRANTED IN PART, and that this matter is remanded for further consideration and findings
consistent with the instant Report and Recommendation; and it is
FURTHER RECOMMENDED that in all other respects, Plaintiffs’ Motion for
Summary Judgment be DENIED; and it is
FURTHER RECOMMENDED that Defendant’s Motion for Summary Judgment
(Document No. 22) be DENIED.
____________/s/__________________
DEBORAH A. ROBINSON
United States Magistrate Judge
Within ten days of the filing of the instant report and recommendation, either party may file
written objections. Such objections shall identify with specificity the portions of the findings and
recommendations to which objection is made, and the basis for the objection. In the absence of
timely objections, further review of issues addressed herein may be deemed waived.