UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA _________________________________________ ) EVANGELICAL COMMUNITY ) HOSPITAL, et al., ) ) Plaintiffs, ) ) v. ) ) Case No. 21-cv-01368 (APM) XAVIER BECERRA, ) ) Defendant. ) _________________________________________ )

MEMORANDUM OPINION

I.

Plaintiffs Evangelical Community Hospital (“Evangelical”) and Memorial Healthcare

Center (“Memorial”) are two acute-care hospitals that participate in the Medicare program.

Medicare funding is provided to Plaintiffs in the form of a reimbursement from the Centers for

Medicare and Medicaid Services (“CMS”). To obtain a reimbursement, providers such as

Plaintiffs submit a cost report to a Medicare contractor, who reviews the report and determines the

amount of reimbursement to which the provider is entitled.

Plaintiffs each received four separate reimbursement determinations from their Medicare

contractor covering the cost reporting periods ending in December 2008, 2009, 2010, and 2012

(for Memorial) and in June 2011, 2012, 2013, and 2014 (for Evangelical). Finding fault with the

reimbursement determinations, Plaintiffs initiated a formal hearing process by making a request

for a hearing (“RFH”) before the relevant administrative body tasked with adjudicating Medicare

reimbursement disputes, the Provider Reimbursement Review Board (“the Board”). Each of

Plaintiffs’ hearing requests raised four distinct issues, which were identical across all eight of the hearing requests they made. One of those issues, what the parties referred to as “Issue 4,” is the

subject of the instant action. 1 While the scope and specificity of Issue 4 is contested, Issue 4 raised

the specter of an “incorrect[] calculati[on]” made when determining Plaintiffs’ entitlement to a

Disproportionate Share Hospital payment—an additional reimbursement available to providers

who serve a high percentage of low-income patients.

Through the administrative hearing process, Plaintiffs sought expedited judicial review

(“EJR”) of their claims—an expedited pathway to federal court, through which Plaintiffs can

obtain review of questions of law over which the Board lacks authority. The Board denied

Plaintiffs’ EJR requests and dismissed Issue 4 from all eight appeals. The Board first determined

that Plaintiffs’ issue statements concerning Issue 4 in their RFH were overly vague, in violation of

the agency’s regulations and the Board’s rules. The Board found, in the alternative, that to the

extent Plaintiffs’ RFH could be interpreted to encompass the more granular set of issues discussed

in Plaintiffs’ final moving papers before the Board, Plaintiffs’ failure to raise those issues in their

preliminary moving papers rendered the issues abandoned.

Plaintiffs filed suit before this court, asserting that the Board violated the Administrative

Procedure Act (“APA”) by (1) improperly narrowing the Board’s jurisdiction, as determined by

Congress in the Medicare Act; and (2) arbitrarily and capriciously applying the agency’s

regulations and the Board’s rules to Plaintiffs’ claims. Plaintiffs also seek a writ of mandamus for

the same alleged violations. Defendant in this matter is Secretary of Health and Human Services

Xavier Becerra, in his official capacity.

1 In six of the eight appeals, Plaintiffs withdrew, transferred, or dismissed all other issues, aside from Issue 4, from the appeals. See Def.’s Cross-Mot. for Summ. J., ECF No. 18 [hereinafter Def.’s Cross-Mot.], at 8. In the other two appeals, Plaintiff Memorial transferred two issues from the appeals, leaving Issue 4 and one other issue active. Id.; see also Compl. for Jud. Review, ECF No. 1 [hereinafter Compl.], Ex. 1, ECF No. 1-1 [hereinafter Ex. 1], at 2 n.2. Plaintiff Memorial did not seek EJR on the other issue, and it is not before the court. Def.’s Cross-Mot. at 8–9; Ex. 1 at 2–5.

2 Before the court is Plaintiffs’ Motion for Summary Judgment and Defendant’s Cross-

Motion for Summary Judgment. See Pls.’ Mot. for Summ. J., ECF No. 16 [hereinafter Pls.’ Mot.];

Def.’s Cross-Mot. for Summ. J., ECF No. 18 [hereinafter Def.’s Cross-Mot.]. As discussed below,

Plaintiffs have failed to demonstrate that the Board acted in an arbitrary and capricious manner in

denying Plaintiffs’ EJR request. Accordingly, Defendant’s Cross-Motion for Summary Judgment

is granted, and Plaintiffs’ Motion for Summary Judgment is denied.

II.

Under the Medicare Prospective Payment System, hospitals that provide inpatient services

to covered patients receive payment at a predetermined amount per discharged patient, irrespective

of the actual costs the hospital incurs. 42 U.S.C. § 1395ww(d). However, the statute also provides

for certain payment adjustments beyond the standard per patient payment.

The subject of Plaintiffs’ RFH is an adjustment known as the Disproportionate Share

Hospital adjustment. This additional reimbursement is available to hospitals that serve a

disproportionate number of low-income patients. See id. § 1395ww(d)(5)(F). A provider’s

Disproportionate Share Hospital adjustment is determined by calculating the hospital’s

Disproportionate Patient Percentage—the sum of two fractions commonly known as the Medicaid

Fraction and the Medicare-SSI Fraction. See id. § 1395ww(d)(5)(F)(vi). The Medicaid Fraction

reflects the number of inpatient hospital days attributable to patients eligible for medical assistance

under a state Medicaid plan but who are not entitled to Medicare Part A benefits. Id.

§ 1395ww(d)(5)(F)(vi)(II). The Medicare-SSI Fraction captures the number of inpatient hospital

days attributable to patients who are entitled to both Medicare Part A and Supplemental Social

Security Income (“SSI”) benefits. Id. § 1395ww(d)(5)(F)(vi)(I).

3 At the close of each fiscal year, a hospital submits to a Medicare contractor a cost report

that accounts for its costs during a particular reporting period. See

(b) (2022).

The Medicare contractor is responsible for issuing a Notice of Program Reimbursement, which

informs the provider of their final reimbursement payment for the fiscal year. See

§ 405.1803.

If a provider is dissatisfied with the payment amount, then the provider may ultimately appeal to

the Board via the administrative process set forth in the Medicare statute and attendant regulations.

See 42 U.S.C. § 1395oo(a);

(2022).

The Medicare statute lays out three jurisdictional prerequisites that must be met for the

Board to have authority to hear an appeal:

(1) [the] provider . . . is dissatisfied with a final determination of the Secretary as to the amount of the payment [they received];

...

(2) the amount in controversy is $10,000 or more; and

(3) [the] provider files a request for a hearing within 180 days after notice of the intermediary’s final determination.

42 U.S.C. § 1395oo(a).

Final decisions of the Board are subject to judicial review pursuant to the Medicare statute.

See 42 U.S.C. § 1395oo(f)(1);

(2022);

§ 405.1877 (2014). As relevant

here, the statute also provides for EJR of a legal question if the Board has jurisdiction over the

appeal but determines that it lacks the authority to decide the question of law. 42 U.S.C.

§ 1395oo(f)(1);

(2022). Importantly, the Secretary and the Board establish

the procedural rules governing appeals to the Board, which, as pertinent to this case, are discussed

in greater detail below. See generally

.1801–405.1873 (2022).

4 III.

Under the APA, final agency action can be set aside only if it is “arbitrary, capricious, an

abuse of discretion,” “otherwise not in accordance with law,” or “unsupported by substantial

evidence.”

(2)(A), (E); Citizens to Pres. Overton Park, Inc., v. Volpe,

,

413–14 (1971), abrogated on other grounds by Califano v. Sanders,

(1977). The

Secretary’s compliance with the Medicare statute and regulations is reviewable under the arbitrary

and capricious standard, and the adequacy of record support for the Board’s decision is reviewable

under the substantial evidence standard, both of which “involve the same level of scrutiny.” Mem’l

Hosp./Adair Cty. Health Ctr., Inc. v. Bowen,

(D.C. Cir. 1987); see 42 U.S.C.

§ 1395oo(f)(1). Under the arbitrary and capricious standard, final agency action may be

invalidated only if it is based on an unlawful interpretation of the statute or regulations or is “not

rational and based on consideration of the relevant factors.” FCC v. Nat’l Citizens Comm. for

Broad.,

(1978); see HCA Health Servs. of Okla., Inc. v. Shalala,

,

616–17 (D.C. Cir. 1994). Substantial evidence is “something less than the weight of the evidence,

and the possibility of drawing two inconsistent conclusions from the evidence does not prevent an

administrative agency’s finding from being supported by substantial evidence.” Consolo v. Fed.

Mar. Comm’n,

, 619–20 (1966).

IV.

Plaintiffs advance two claims under the APA and also petition the court for a writ of

mandamus. First, Plaintiffs assert that the Board’s dismissal of Plaintiffs’ Issue 4 claims was

jurisdictional and improperly narrowed the Board’s mandatory jurisdiction as set forth in the

Medicare statute. In the alternative, Plaintiffs assert that the Board’s application of its rules to the

facts of their claims was arbitrary and capricious. Finally, Plaintiffs have petitioned the court for

5 a writ of mandamus stemming from the same facts upon which their APA claims are premised.

The court will address each claim in turn.

A.

The court begins with Plaintiffs’ APA challenge asserting that the Board’s decision

improperly narrowed the Board’s jurisdiction. Plaintiffs argue that the Board “characterized the

dismissals as jurisdictional,” and as such, “[t]he Board’s dismissals impermissibly constrict[ed]

Congress’s jurisdictional mandate.” Pls.’ Reply in Supp. of Pls.’ Mot., ECF No. 20 [hereinafter

Pls.’ Reply], at 1–2. Defendant counters that the Board’s decision was not jurisdictional, but

instead clearly rested on procedural grounds short of the merits. Def.’s Cross-Mot., Mem. of

P. & A. in Supp. of Def.’s Cross-Mot., ECF No. 18, [hereinafter Def.’s Mem.], at 15–19.

Defendant further argues that the Board’s procedural rules are proper under the Medicare statute’s

“broad [grant of] authority to establish procedural rules for purposes of managing its substantial

docket of appeals.” Def.’s Mem. at 13. The court agrees with Defendant that the Board’s dismissal

of Plaintiffs’ claims was on procedural, not jurisdictional, grounds and was appropriate under the

Secretary’s and Board’s authority to establish procedural rules governing the appeals process.

The Board may set procedural rules governing its appeals docket that are “not inconsistent

with the provisions” of the Medicare statute. 42 U.S.C. § 1395oo(e); see Bethesda Hosp. Ass’n v.

Bowen,

(1988). The Medicare statute vests the Board with “full power and

authority to make rules and establish procedures, not inconsistent with the [statute] or regulations

of the Secretary, which are necessary or appropriate to carry out the provisions of [the statute].”

42 U.S.C. § 1395oo(e). The Secretary’s regulations also reflect the Board’s authority to manage

its docket. They provide that “[i]f a provider fails to meet a . . . requirement established by the

6 Board in a rule or order,” the Board is empowered to “[d]ismiss the appeal with prejudice.”

(b) (2022).

At issue in this case are the Board’s rules regarding the form and substance of a provider’s

initial request to initiate the hearing process. The regulations require that this initial request for

hearing, or RFH, must provide an explanation of a provider’s dissatisfaction “[f]or each specific

item under appeal.”

§ 405.1835(b)(2). Furthermore, the explanation for each specific item

must address “[w]hy the provider believes [the] Medicare payment is incorrect” or why it “is

unable to determine whether [the] Medicare payment is correct,” as well as “[h]ow and why the

provider believes [the] Medicare payment must be determined differently.” Id.

§ 405.1835(b)(2)(i)–(ii).

In addition, the Board’s rules contain special content requirements for an RFH raising

issues that contain multiple subcomponents. In such cases, Board rules direct the provider to

appeal “each contested component . . . as a separate issue and describe[] [it] as narrowly as

possible.” Def.’s Mot., Ex. A, ECF No. 18-1 [hereinafter Board Rules], § 8.1. As an example, the

Board rules specifically list an appeal challenging a Disproportionate Share Hospital payment

adjustment—which was the subject of Plaintiffs’ RFH—as a “common example[]” of an appeal

involving issues with “multiple components.” Board Rules § 8.2.

Nothing in the rules or regulations at issue modifies or supplements the jurisdictional

requirements for Board appeals that Congress established in the Medicare statute. The court notes

its agreement with Plaintiffs that if the Board’s decisions in these appeals were in fact

jurisdictional, then they would plainly violate the APA. And, to be fair, Plaintiffs are not without

reason for thinking that the Board dismissed Issue 4 on jurisdictional grounds. The Board did

identify as one of the reasons for dismissal that it “lack[ed] the requisite jurisdiction under

7

(f)(2).” Compl., Ex. 1, ECF No. 1-1 [hereinafter Ex. 1], at 11. But the court

finds that, when its decision is read as a whole, the Board’s references to the term “jurisdiction”

are merely the “result of sloppy drafting” rather than an actual narrowing of the Board’s

jurisdiction. Akron Gen. Med. Ctr. v. Azar,

, 80 (D.D.C. 2019), aff’d,

(D.C. Cir. 2021) (citation omitted) (finding that the Board’s jurisdictional references

were best understood as a “loose[] and imprecise[] . . . kind of shorthand meaning ‘disposing of

an issue short of deciding its merits’”).

The Board’s decision states, in pertinent part, that the Board “dismisses the Issue 4—SSI

Percentage issue . . . as the issue statement in the RFHs for these cases does not comply with the

specificity requirements under

(b) and Board Rule 8.” Ex. 1 at 11. Elsewhere

in the decision, the Board explains that § 405.1835(a)—the provision which lays out the Medicare

statute’s jurisdictional requirements—“describes the right to a Board hearing.” Id. at 6. The Board

explained that, by contrast, § 405.1835(b) describes “the content requirements of a hearing

request.” Id. In determining that Plaintiffs failed to satisfy one of the procedural requirements set

out in § 405.1835(b), rather than a jurisdictional requirement set out in § 405.1835(a), the Board

recognized its authority to dismiss the matters as a proper exercise of its discretion to dismiss an

action on a procedural ground short of deciding its merits. See, e.g., Akron, 414 F. Supp. 3d at 80.

Courts in this District and several Circuits have affirmed various procedural rules by the

Board as a proper exercise of the Board’s authority under the Medicare statute, even when such

rules result in the Board’s dismissal of a provider’s appeal. See, e.g., id. at 83–84 (upholding the

Board’s authority to dismiss issues that were not presented in accordance with the Board’s

procedural rules); Inova Alexandria Hosp. v. Shalala,

(4th Cir. 2001); Kaiser Found.

8 Hosps. v. Sebelius,

(9th Cir. 2011); High Country Home Health Inc., v. Thompson,

(10th Cir. 2004).

Plaintiffs’ comparison of the rules at bar to those found by the Supreme Court to be ultra

vires in Bethesda Hospital Association v. Bowen is unavailing.

(1988); see also

Banner Heart Hosp. v. Burwell,

(D.D.C. 2016). In Bethesda, the plaintiff

hospitals challenged a regulation that disallowed coverage for certain malpractice insurance costs.

. Based on the regulation, only certain malpractice insurance costs were

reimbursable; as a result, the plaintiff hospitals purposely omitted from their cost reports the costs

that were not covered under the regulation.

The plaintiffs later made a timely request for a

hearing before the Board in order to challenge the malpractice regulation and seek reimbursement

for the costs that were not covered under it.

at 401–02. The Board in Bethesda, however,

determined that it lacked jurisdiction to hear the plaintiffs’ claims because the plaintiff hospitals

had not included the contested figures on their annual cost reports.

. The Board therefore

found that the hospitals could not be “dissatisfied” with the contractor’s determination, as required

for jurisdiction under 42 U.S.C. § 1395oo(a). Id. The Supreme Court held that this reading of an

exhaustion requirement into Congress’s jurisdictional grant was unlawful, as it narrowed the

Board’s jurisdiction, in conflict with the statute. Id. at 408.

Unlike Bethesda, however, the rules that the Board relied on to dismiss Plaintiffs’ Issue 4

claims here do not seek to condition or narrow the three jurisdictional requirements set forth in

42 U.S.C. § 1395oo(a). The relevant regulations and rules at issue are instead best understood as

“claims processing” rules rather than rules that modify the scope of the Board’s jurisdiction. The

Board’s delegated authority includes the power to manage its “substantial backlog of cases” by

“crafting . . . procedural rules” like those at issue here. Rapid City Reg’l Hosp. v. Sebelius, 681

(D.D.C. 2010). Because dismissal of a claim or appeal for failure to meet the

procedural rules at issue is not inconsistent with the text or purpose of the Medicare Act, the Board

did not violate the APA by narrowing the scope of its jurisdiction.

B.

Plaintiffs also assert that, “[e]ven under the regulations and rules the agency seeks to

invoke, the Board’s dismissals were improper.” Pls.’ Reply at 5. Plaintiffs argue that their RFH

was sufficient under the regulations because they identified the issue as “Medicare Fraction—SSI

Percentage,” and stated their belief that they were unable to determine the correct reimbursement

calculation.

at 5–6. Defendant asserts that Plaintiffs’ broad description of an issue topic that

contains multiple subcomponents clearly fails the specificity requirement. Def.’s Reply in Supp.

of Def.’s Cross-Mot., ECF No. 21 [hereinafter Def.’s Reply], at 8. Defendant posits that Plaintiffs

themselves “effectively concede that their initial description of [Issue 4] did not . . . comply with

Board Rule 8” by failing to address it.

The Board acts reasonably, and not arbitrarily and capriciously, when it applies its “claims-

processing rules faithfully to [a provider’s] appeal.” Akron, 414 F. Supp. 3d at 81. The regulations

require that a RFH provide “[a]n explanation []for each specific item under appeal.”

(b)(2). The Board rules further explain that “[s]ome issues may have multiple

components,” and that “[t]o comply with the regulatory requirement to specifically identify the

items in dispute, each contested component must be appealed as a separate issue and described as

narrowly as possible.” Board Rules § 8.1. The Board rules also specifically delineate how a

provider should address, as here, a challenge to a Disproportionate Share Hospital reimbursement.

Board Rule 8.2 explains that an appeal challenging a Disproportionate Share Hospital payment

adjustment is a “common example” of an appeal involving issues with “multiple components” that

10 must be appealed as “separate issue[s] and described as narrowly as possible.” Board Rules §§ 8.1,

8.2.

Plaintiffs did not follow these rules. In their RFH, Plaintiffs described Issue 4 simply as

follows: “The intermediary erred by incorrectly calculating the SSI percentage for inclusion in the

‘Medicare Fraction’ for purposes of the calculation of the provider’s [disproportionate share]

payment.” Ex. 1 at 3. This description does not specify which portion of the calculation was

incorrect nor how the fraction should have been calculated differently. Recall, a Disproportionate

Share Hospital reimbursement is determined by calculating a provider’s Medicare-SSI and

Medicaid fractions, which make up the provider’s Disproportionate Patient Percentage. The

Medicare-SSI Fraction alone has multiple component parts that a provider could challenge.

Plaintiffs did not specify which specific portion of the fraction they sought to challenge or what

would have constituted correct data for the Disproportionate Share Hospital calculation. This

provides sufficient basis to support the Board’s dismissal. The Board’s procedural rules empower

the body to dismiss a provider’s appeal when the provider’s RFH or Preliminary Position Paper is

deficient. See

(b); Board Rules § 41.2. Because Plaintiffs did not comply

with the specificity requirement, the Board acted reasonably in dismissing their Issue 4 claims.

Finding sufficient record support for the Board’s action, the court could end its inquiry

here. But, for completeness, the court also holds that the Board’s alternate ground for dismissal is

adequately supported by the record.

In addition to finding that Plaintiffs’ RFH lacked the requisite specificity, the Board also

found that “even if [Issue 4] had [met the specificity requirement], [Plaintiff Memorial] effectively

abandoned that issue in its entirety by filing perfunctory preliminary position papers that failed to

11 comply with” the rules governing Preliminary Position Papers. Ex. 1 at 11; Board Rules §§ 25,

25.1, 25.2.

In their Preliminary Position Papers, for Issue 4, Plaintiffs argued that “the intermediary

and/or CMS erred in its calculation of the SSI percentage and its application to this Provider,” and

asserted that the Board had “ruled on this specific issue” in another (subsequently appealed) case,

Baystate Medical Center v. Leavitt,

(D.D.C. 2008). Ex. 1 at 3–4. In their Final

Position Papers, however, Plaintiffs delved into a detailed argument about (1) CMS’s

interpretation of the statutory term “entitled to benefits,” and (2) Plaintiffs’ entitlement to data

regarding which patients should count as entitled to both Medicare and SSI benefits for purposes

of the Medicare-SSI fraction. Ex. 1 at 4–5. Plaintiffs then sought EJR on these two issues. The

record supports the Board’s conclusion that—assuming the RFH for Issue 4 was written to

encompass these two arguments about “entitlement” and who should be counted—Plaintiffs

waived the issues in their Preliminary Position Papers for two simple reasons.

First, it is clear that Plaintiffs’ Preliminary Position Papers did not explicitly address the

arguments about the term “entitled to benefits” and about entitlement to data concerning which

individuals should be counted. See Ex. 1 at 4–10. Board Rule 25.1 requires that a provider’s

Preliminary Position Paper “state the material facts that support” each issue raised, “[i]dentify the

controlling authority (e.g., statutes, regulations, policy, or case law) supporting your position,” and

“[p]rovide a conclusion applying the material facts to the controlling authorities.” See Ex. 1 at 8;

Board Rules § 25.1. It is undisputed that nowhere within the Preliminary Position Papers did

Plaintiffs expressly discuss either of these two arguments—nor the material facts which underpin

them, the controlling statutory authority, or a conclusion applying those facts to the statutory

12 authority—despite the Preliminary Position Papers presenting a longer format in which Plaintiffs

are tasked with fleshing out their arguments from the RFH. See Board Rules §§ 25, 25.1.

Second, the only “authority” that Plaintiffs did identify in their Preliminary Position

Papers, Baystate, did not deal with either contested issue. Baystate instead dealt with whether

CMS used the best available data in calculating the Medicare-SSI fractions and did not address the

statutory interpretation or SSI entitlement data issues as to which Plaintiffs sought EJR.

(D.D.C. 2008). The Board therefore reasonably found in the alternative that

Plaintiffs had waived the contested issues by failing to address them in their Preliminary Position

Papers.

C.

Plaintiffs also seek mandamus relief, alleging that the Board owed them a “non-

discretionary, ministerial duty to hear [their] properly filed and pending appeals” but “improperly

avoided its duty when it acted contrary to facts and law and unilaterally dismissed [their] properly

filed and pending appeals.” Compl. ¶¶ 67–68.

To obtain mandamus relief, Plaintiffs must show: “(1) a clear and indisputable right to

relief, (2) that the government agency or official is violating a clear duty to act, and (3) that no

adequate alternative remedy exists.” Am. Hosp. Ass’n v. Burwell,

(D.C. Cir.

2016). Plaintiffs did not move for summary judgment on this claim, see generally Pls.’ Mot., but

Defendant’s cross-motion seeks resolution of the issue in its favor, Def.’s Mem. at 30–31.

Plaintiffs’ request for a writ of mandamus clearly fails on the merits. An adequate

alternative remedy plainly exists: Under the APA, the court is entitled to “compel agency action

unlawfully withheld or unreasonably delayed” or to “hold unlawful and set aside agency action,

findings, and conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise

13 not in accordance with law.”

(1), (2)(a); see Vietnam Veterans of Am. v. Shinseki,

, 659 n.6 (D.C. Cir. 2010) (“[T]he standards for obtaining relief” under § 706(1) of

the APA and the Mandamus Act are “essentially the same.”); Navajo Nation v. Azar,

, 436 n.4 (D.D.C. 2018) (“An adequate alternative remedy is available to the [plaintiff]

because the Administrative Procedure Act empowers district courts to ‘compel agency action

unlawfully withheld or unreasonably delayed.’

(1).”). Because Plaintiffs can

seek—and, indeed, have in this very lawsuit sought—relief under the APA, Plaintiffs’ request for

mandamus relief clearly falls away.

IV.

For the foregoing reasons, the court grants Defendant’s Cross-Motion for Summary

Judgment, ECF No. 18, and denies Plaintiffs’ Motion for Summary Judgment, ECF No. 16.

A final, appealable order accompanies this Memorandum Opinion.

Dated: September 30, 2022 Amit P. Mehta United States District Court Judge

14