UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNIVERSITY OF COLORADO HEALTH : AT MEMORIAL HOSPITAL, f/k/a/ : MEMORIAL HOSPITAL OF COLORADO : SPRINGS, et al., : : Plaintiffs, : Civil Action No.: 14-1220 (RC) : v. : Re Document Nos.: 212, 213, 214 : XAVIER BECERRA, Secretary of Health : and Human Services, : : Defendant. :

MEMORANDUM OPINION

DENYING PLAINTIFFS’ MOTION FOR RULE 54(B) CERTIFICATION

I. INTRODUCTION

The Plaintiffs, who are a collection of hospitals, have filed a motion under Federal Rule

of Civil Procedure 54(b) asking this Court to enter a final judgment as to its June 17, 2022 order

granting partial summary judgment. See Mot. for Rule 54(b) Certification (“Rule 54(b) Mot.”),

ECF No. 212; see also Summ. J. Op., ECF No. 203. The Defendant, the Secretary of Health and

Human Services (“HHS”) opposes the motion. See Sec.’s Mem. of P. & A. in Opp’n to Pls.’

Mot. for Entry of Final J. (“HHS Opp’n”), ECF No. 213. For the reasons stated below, the

motion is DENIED. II. BACKGROUND

These consolidated cases concern an array of challenges to HHS’s 2007 to 2016 annual

rulemaking for reimbursements to hospitals under Medicare. 1 Summ. J. Op. at 7. HHS provides

hospitals with outlier payments to compensate for particularly costly cases, and the amount of

those reimbursements depends on a number known as the “fixed loss threshold.” Id. at 2–4; see

also Billings Clinic v. Azar,

(D.C. Cir. 2018). HHS sets the fixed loss

threshold for the coming federal fiscal year through an annual rulemaking process. Summ. J.

Op. at 2–3. The Plaintiff hospitals contest their reimbursements for numerous reimbursement

years spanning from 2007 to 2016, arguing the fixed loss threshold rules affecting their

reimbursements are improper due to lack of notice and comment as well as arbitrary and

capricious decision-making.

at 2–12.

Federal fiscal years and hospital fiscal years do not necessarily align, meaning that when

health care providers seek reimbursement for a hospital fiscal year through a Notice of Program

Reimbursement, those reimbursements may concern two different fixed loss threshold rules. See

42 U.S.C. § 1395h(a); 42 U.S.C. § 1395kk-1(a)(3)–(a)(4)(B);

(b);

(a). Hospitals can challenge a Notice of Program Reimbursement by appealing to the

Provider Reimbursement Review Board (“PRRB”), a specialized administrative body. 42 U.S.C.

§ 1395oo(a). Hospitals can seek judicial review of the PRRB’s final decision. Id. § 1395oo(f)(1).

The PRRB can also grant immediate expedited judicial review (“EJR”) of a “question of law or

regulations relevant to the matters in controversy” instead of issuing its own decision first. Id.

1 The Court assumes familiarity with the prior opinions in this matter and condenses this background section. For a more detailed description of the fixed loss threshold and reimbursement procedures, the Court directs the reader to the summary judgment opinion. See Summ. J. Op. at 2–7.

2 The many Plaintiff hospitals have claims against different sets of fixed loss threshold rule

years, and many of these hospitals have also engaged in prior litigation. See, e.g., Banner Health

v. Azar, No. 10-cv-1638. They previously challenged the fixed loss threshold rules for federal

fiscal years 1998 through 2006, ultimately ending in a stipulated dismissal. See id., Order, June

18, 2020, ECF No. 189. Another challenge, targeting certain 2003 rulemaking actions and the

fixed loss threshold rules for federal fiscal years 2008 through 2011 ended with the D.C. Circuit

affirming the district court’s grant of summary judgment for HHS on all claims. See Billings

Clinic, 901 F.3d at 302–03.

This consolidated case, Univ. of Colo. Health at Mem’l Hosp. v. Azar, No. 14-cv-1220,

comprises eight cases filed between July 2014 and March 2019. See Order at 1, Dec. 19, 2018,

ECF No. 108; Order at 1, Feb. 15, 2019, ECF No. 112; Order at 2, April 1, 2019, ECF No. 131.

Each Plaintiff hospital received a grant of expedited judicial review from the PRRB regarding

the fixed loss threshold rules governing their cost reports. See Summ. J. Op. at 2–7.

The Court has decided dispositive motions in this case. See, e.g., Mot. Dismiss Op., ECF

No. 155. In March 2020, the Court dismissed certain claims as voluntarily abandoned and others

as barred by claim preclusion. See id. at 14, 19. In that decision, the Court determined that a

hospital’s claim was measured by reference to whether a particular fixed loss threshold rule was

invalid, not by reference to a given Notice of Program Reimbursement. See id. Later on in the

litigation, the parties both moved for summary judgment on all remaining claims. See Pls.’ Mot.

for Summ. J., ECF No. 185; Sec.’s Cross Mot. for Summ. J., ECF No. 188. The Court granted

summary judgment for HHS on most claims, except for the Plaintiffs making a notice and

comment challenge to the federal fiscal year 2012 and 2013 rules. Summ. J. Op. at 1–2. The

Court remanded the 2012 and 2013 rules to HHS for additional explanation or action. Id. at 75–

3 76. Because the 2012 and 2013 rules were remanded without vacatur, the Court did not enter

final judgment on any of the claims, with the sole exception of the Cabell Huntington case that

challenged the 2010 and 2011 rules. 2 Id. at 72–75.

Originally, HHS appealed seven of the eight consolidated cases to the D.C. Circuit. 3 See

HHS’s Notice of Appeal, ECF No. 207. The Plaintiffs cross-appealed. See Pls.’ Notice of

Appeal, ECF No. 209. Meanwhile, the Cabell Huntington plaintiffs also filed a notice of appeal

as to their claims against the 2010 and 2011 rules. See id. at 2. In October 2022, HHS filed a

motion to voluntarily abandon its appeal, and moved to dismiss Plaintiffs’ cross-appeals. See

Gov’t’s Mot. to Voluntarily Dismiss Appeal, USCA Case No. 22-5218, Dkt. No. 1967218. The

Plaintiffs requested a stay of the case in order to seek Rule 54(b) certification from this Court.

See Hosps.’ Mot. for Temporary Stay, Dkt. No. 1968840. The D.C. Circuit granted the request,

and the case and HHS’s dismissal motion have been stayed until the resolution of the present

motion. See Order, Dec. 5, 2022, Dkt. No. 1976139.

The Plaintiffs have moved under Rule 54(b) for the Court to enter a final judgment for all

claims that do not concern the 2012 and 2013 rules. See Rule 54(b) Mot. Regardless of HHS’s

request to dismiss its appeal, the requested final judgment would allow Plaintiffs to appeal the

Court’s 2020 dismissals and much of the Court’s June 2022 grant of summary judgment. Id. at

5. HHS opposes the motion. See HHS Opp’n.

2 The Court does not enter final judgment when a challenged rule is on remand without vacatur. See, e.g., N.C. Fisheries Ass’n v. Gutierrez,

(D.C. Cir. 2008); see also Sierra Club v. U.S. Dep’t of Agric.,

(D.C. Cir. 2013). 3 D.C. Circuit precedent contains a “limited exception permitting a government agency to appeal immediately [from a remand order.]” Sierra Club,

-57 (quoting N.C. Fisheries Ass’n, F.3d 16 at 19–20). When an agency appeals, the other parties may cross-appeal. Cnty. of L.A. v. Shalala,

(D.C. Cir. 1999).

4 III. LEGAL STANDARD

Normally, appellate review of district court decisions awaits a “final” decision resolving

all claims of all parties. See Attias v. CareFirst, Inc.,

(D.C. Cir. 2020) (citing

); see also Ritzen Grp., Inc. v. Jackson Masonry, LLC,

(2020). Nonetheless, Rule 54(b) of the Federal Rules of Civil Procedure “offer[s] the chance for

earlier appellate review of some claims in a multi-claim or multi-party action.” Attias,

(citing Sears, Roebuck & Co. v. Mackey,

, 433–34 (1956)). While Rule

54(b) “does not relax the finality required of each decision” under

, it

“provide[s] a practical means of permitting an appeal to be taken from one or more final

decisions on individual claims, in multiple claims actions, without waiting for final decisions to

be rendered on all the claims in the case.” Attias,

(alteration in original). Thus,

Rule 54(b)’s exception permits courts to balance “the demonstrated need for flexibility in

providing for appellate review in complex cases” with the goal of avoiding “piecemeal appellate

review.” Blue v. D.C. Pub. Schs.,

, 15–16 (D.C. Cir. 2014) (citation and internal

quotation marks omitted).

A court may “direct entry of final judgment as to one or more, but fewer than all, claims

or parties,” Fed. R. Civ. P. 54(b), if three conditions are satisfied: “(1) the order must resolve a

distinct ‘claim for relief’; (2) the order must be ‘final’ with respect to that claim; and (3) the

district court must permissibly determine that there is ‘no just reason for delay’ in entering

judgment,” Attias,

(citing Bldg. Indus. Ass’n of Superior Cal. v. Babbitt,

(D.C. Cir. 1998)). The court must “weigh[ ] both ‘justice to the litigants’ and ‘the

interests of sound judicial administration” when determining whether there is “no just reason for

delay.” Brooks v. Dist. Hosp. Partners,

(D.C. Cir. 2010). The party seeking

5 entry of final judgment has the burden of showing the three conditions are met. See MediNatura,

Inc. v. Food & Drug Admin., No. 20-cv-2066,

at *4 (D.D.C. Dec. 15, 2020).

Ultimately, “[i]t is left to the sound judicial discretion of the district court to determine the

‘appropriate time’ when each final decision in a multiple claims action is ready for appeal.”

Apprio, Inc. v. Zaccari, No. 18-cv-2180,

, at *2 (D.D.C. Dec. 7, 2021)

(quoting Curtiss-Wright Corp. v. Gen. Elec. Co.,

(1980)).

IV. ANALYSIS

This motion presents convoluted questions as to whether entry of final judgment is

possible, and if it is, whether the Court should exercise its discretion to do so. To maintain

consistency with its past decisions in this case and comporting with the best reading of the

relevant statute, the Court rejects HHS’s argument that entering final judgment is impermissible

because Plaintiffs’ claims went through the EJR process. Nevertheless, the claims for which

they seek final judgment are indeed closely intertwined with those relating to the 2012 and 2013

rules, making certification possible only for a subset. Even still, that subset is uncertain and

arbitrary, and the judicial economy interests advanced by Plaintiffs are weaker than asserted.

The Court will thus deny the motion.

A. The EJR Process Does Not Foreclose Entry of Final Judgment.

HHS’s main argument against Rule 54(b) certification is that because this litigation

includes claims that originated from the same grant of EJR by the PRRB, the principle against

claim-splitting forbids entry of final judgment. See HHS Opp’n at 3–7. This Circuit has no

general test for determining when claims are distinct enough to allow entry of final judgment

under Rule 54(b), but at a minimum, when “claims [are] so closely related that they would fall

afoul of the rule against splitting claims if brought separately, they do not qualify as ‘separate’

6 claims within the meaning of Rule 54(b).” Tolson v. United States,

(D.C.

Cir. 1984) (alteration in original) (citations omitted)); see also Attias,

.

Claim-splitting occurs when a plaintiff “bring[s] two suits ‘involving the same subject

matter at the same time in the same court and against the same defendant.’” Hudson v. Am.

Fed’n of Gov’t Emps.,

(D.D.C. 2018). To determine if a plaintiff is

claim-splitting, “[t]he proper question is whether, assuming the first suit was already final, the

second suit would be precluded under res judicata analysis.”

(alteration in original) (quoting

Clayton v. District of Columbia,

(D.D.C. 2014)). Res judicata “bars

further claims by parties . . . based on the same cause of action.”

(alteration in original)

(quoting Montana v. United States,

(1979)). And “[s]uits involve the same

claim (or ‘cause of action’) when they ‘aris[e] from the same transaction’ or involve a ‘common

nucleus of operative facts.’” Lucky Brand Dungarees, Inc. v. Marcel Fashions Grp., Inc.,

(2020) (alteration in original) (citations omitted). In other words, when claims

arise from the same transaction or share a common nucleus of operative facts, they are not

distinct enough for Rule 54(b) purposes.

To proceed, the Court looks backward. Earlier in this litigation, when rebutting HHS’s

argument that some of their claims were subject to preclusion, Plaintiffs argued that the claim at

issue is a “claim to additional reimbursement under a given cost report, which under HHS

regulations is based on the hospital’s accounting year which is not always the same time period

as the [federal fiscal year] rule.” See Rule 54(b) Mot. at 3. HHS asserted that a claim relates to a

challenge to a particular federal fiscal year threshold rule, regardless of whether that rule affects

reimbursement for multiple cost reports. Mot. Dismiss Op. at 19. The Court sided with HHS,

and dismissed several claims based on preclusion.

7 The Court’s prior ruling is important. As Plaintiffs now put it, “HHS posits an

accordion-like concept of claims” where the nature of a claim adjusts depending on the

procedural circumstance. Reply Supp. Rule 54(b) Mot. (“Reply”) at 2, ECF No. 214. HHS is

essentially reversing its prior position about the nature of the claim—that this Court has already

endorsed—but attempts to obscure that shift by reference to the EJR process. As an initial

matter, this maneuver raises estoppel concerns. See New Hampshire v. Maine,

(2001) (party estopped from deriving an unfair advantage from a new position that is “clearly

inconsistent” with prior position that “succeeded in persuading a court”). What’s more is that

HHS’s new stance lacks any support from the statute or caselaw.

The EJR process is not a transaction or a claim itself, but a way to speed up the review of

already existing claims. When a hospital is unsatisfied with a final decision about Medicare

reimbursements, “it may appeal the decision to the Provider Reimbursement Review Board.”

Billings Clinic,

(citing 42 U.S.C. §§ 1395kk-1, 1395oo(a)). While “[i]n the

normal course, the Board would review the claim,” id. (emphasis added), in situations where “the

hospital’s claim ‘involves a question of law or regulations relevant to the matters in controversy

[that the Board] is without authority to decide,’ the hospital can ask the Board to allow it to go

directly to district court,” id. (alteration in original) (emphasis added) (quoting 42 U.S.C.

§ 1395oo(f)(1);

). The Board, if it agrees, will then certify the question for

immediate judicial review.

This process, thus, serves to accelerate resolution of pre-existing

claims. The Board is reviewing nothing other than a hospital’s objection to its “total program

reimbursement,” 42 U.S.C. § 1395oo(a)(1)(A)(i), and so when it passes that review onward to a

judicial body, it changes nothing about the substance of the claim. And as this Court has held,

8 while the reimbursements trigger the ability to seek review, the claim itself is against a given

fixed loss threshold cost rule. See Mot. Dismiss Op. at 19.

HHS does not identify any support for its argument that claims included in a single grant

of EJR are thereafter joined in the same “transaction” and “nucleus of operative facts” for the

purpose of claim-splitting, regardless of what originally gave rise to the claims. See HHS Opp’n

at 5. The Plaintiffs aptly analogize consolidation into EJR to “joinder of claims or parties or

consolidation of cases,” Reply at 5, and note that such consolidation does not merge cases into a

single claim. Hall v. Hall,

(2018). For example, a single EJR grant may

include distinct challenges to different fixed loss threshold rules and for different reasons. To be

sure, HHS is correct that it would be strange for a hospital to obtain EJR only to bring those

claims separately, but this Court does not find that approach to be categorically forbidden as

claim-splitting. And as the Plaintiffs note, given the sixty-day window to proceed from an EJR

grant into court, it is generally unlikely that any hospital would follow that path. See Reply at 3

n.1. The Court therefore rejects HHS’s argument that Rule 54(b) certification is always

impermissible for claims that originate from the same grant of EJR.

B. Entry of Final Judgment Is Not Warranted Here.

The Court must still consider whether entering a final judgment is permissible under

these circumstances, and whether it makes sense as a matter of sound judicial administration.

Looking beyond the EJR process, the Court finds the claims here remain so closely intertwined

that it makes certification inappropriate.

A significant concern is that the nature of a claim itself will be put on appeal. As

discussed above, the Court has previously adjudicated the dispute over the definition of a claim.

The Plaintiffs continue to believe that the proper measure of a claim is the hospital cost report,

9 and they intend “to raise that argument on appeal.” Reply at 2. That is a problem for any order

that would enter a final judgment.

To be “final,” the certified claims must be on “distinct claims for relief” from the

unresolved and uncertified claims. Attias,

. Because hospital cost reports and

federal fiscal years do not neatly overlap, the Court cannot enter a final judgment for any fixed

loss rule that would touch upon the same hospital cost report as the fiscal year 2012 or 2013

rules. Plaintiffs’ position asks the Court to cleave off the 2012 and 2013 rules from the rest of

the litigation so that it may ask the D.C. Circuit to alter the definition of a claim, which would

then integrate these rules with rules for the surrounding years. This uncertainty is untenable for

entering a final judgment, and the Court cannot grant the full certification that Plaintiffs seek.

Perhaps recognizing this problem, Plaintiffs ask in their Reply for the Court “to consider

separately and additionally certifying only particular claims that are undisputedly complete

regardless whether the claim is the rulemaking challenge (as the Court previously determined) or

is the cost-report dispute (as the Hospitals have maintained).” Reply at 5–6. That proposal still

has problems. For one, Plaintiffs do not seem to have a firm grasp on what claims meet the

criteria. While they present “a list [of claims] that the Court could certainly certify as final under

Rule 54(b),” this list is “not exhaustive.” See

at 6 & n.2. They add that “there are probably

other hospital cost reports” that satisfy the same criteria.

The Court is wary of moving

forward on such shaky grounds.

Indeed, as HHS identifies and Plaintiffs concede on Reply, the initial Rule 54(b) motion

inaccurately claims that Floyd Hospital did not challenge payments connected to the 2013 fixed

loss threshold rules. See HHS Opp’n at 7 n.1. Plaintiffs have only provided the smaller list for

certification in their Reply, meaning that HHS did not receive an opportunity to spot inaccuracies

10 in the Plaintiffs’ position, as it did previously. 4 The Court wonders about other possible errors;

for instance, the Reply deviates as to whether it is “Banner Heart Hospital” or “Baywood Heart

Hospital” that has a claim regarding fiscal year 2007 that should be certified for appeal. 5 See

Reply at 6, 8. The Court does not seek to penalize Plaintiffs for small mistakes in briefing, but it

must emphasize that only “exceptional cases qualify[] for Rule 54(b) certification.” Bldg. Indus.

Ass’n of Superior Cal.,

. Accordingly, Plaintiffs should be confident and clear in

their request, lest the Court inadvertently certify the wrong claim and fall short in its role as a

“dispatcher” of Rule 54(b) certification to the Circuit. See

(quoting Sears, Roebuck & Co.,

).

The larger problem is that Plaintiffs have picked apart this consolidated case to generate a

selective list of claims “that is sufficient to enable full appellate review, immediately, of all the

issues other than those specific to the FY 2012 and 2013 rules.” Reply at 6 n.2. The Plaintiffs

give no reason, other than allowing a speedier appellate review, for why these claims should be

separated from others. Differential treatment of similar claims is heavily frowned upon in the

Rule 54(b) context. Attias,

. It is true, as Plaintiffs say when attempting to

distinguish Attias, that “each hospital’s claims arise from completely distinct cost reports,

presented about different patient cases, and filed and resolved at different times.” Reply at 8.

Yet when any Plaintiffs have claims challenging the same loss threshold rules, those claims share

the same underlying math based on the numbers in any particular year’s rule. This similarity is

4 The fact that Plaintiffs raised their alternative certification request only on reply introduces waiver concerns. Nippon Shinyaku Co., Ltd. v. Iancu,

, 239 n.8 (D.D.C. 2019) (“Arguments raised for the first time in a reply brief are waived.”). 5 To underscore the ambiguity, Plaintiffs in this case include both “Banner Heart Hospital” and “Banner Baywood Medical Center,” both of which have claims regarding their payments for the fiscal year 2007. See Am. Compl. ¶ 6, ECF No. 127.

11 illustrated by the admitted fungibility between claims for the purposes of Plaintiffs’ requested

certification. See Reply at 6 n.2.

To be sure, Plaintiffs have an understandable interest in allowing an appeal to move more

quickly. The 2012 and 2013 rules are still on remand and may be followed by additional activity

in this Court, further prolonging the time before any final judgment and appeal. 6 But that

interest remains insufficient to meet the high standard for certification. Even assuming the Court

can sufficiently identify a set of claims for which finality is not in question, Plaintiffs still have

not shown “no just reason for delay.” Fed. R. Civ. P. 54(b). The reason for delay is obvious: the

claims they seek to certify are closely intertwined with claims that will not be certified. There

are legal issues shared across every challenged fiscal year rule and many of the Plaintiffs bring

essentially parallel claims. The Court sees little reason to select an arbitrary set of claims for

entry of final judgment. That is especially so when the judicial administration interests are

weaker than Plaintiffs assert.

In this situation, “[w]hich path forward best promotes judicial economy is a thorny

question.” MediNatura, Inc.,

, at *3. As discussed above, there is one final

judgment from these consolidated cases—the Cabell Huntington challenge to the 2010 and 2011

threshold rules—that has been appealed and is stayed pending the resolution of this motion. 7

The Plaintiffs observe that if final judgment is not entered, the D.C. Circuit may consider many

6 Over a year has passed since the Court’s remand, a fact that Plaintiffs may argue supports entering final judgment. But that timeframe also means that HHS has had considerable time to review the 2012 and 2013 rules on remand. While the timeline for resolution of those rules is uncertain, entering final judgment at this point may be jumping the gun. See MediNatura, Inc.,

, at *3 (declining to enter final judgment because of impending agency action on challenged rule). 7 The D.C. Circuit is waiting for the resolution of this motion to decide whether to grant HHS’s voluntary dismissal of its appeal in the other cases. The Plaintiffs have filed an opposition to this motion but appear to assume it will be granted. See Rule 54(b) Mot. at 11.

12 of the same issues twice. That outcome is possible. The challenges to the 2010 and 2011 rules

bear many similarities to the arguments against other threshold rules, and this Court has

previously considered the 2010 and 2011 rules as part of a broader grouping of the 2008 to 2011

rules. Denying certification now means that the D.C. Circuit will have to assess the record and

legal issues in Cabell Huntington only to later encounter the same issues in a broader appeal.

But avoiding this outcome does not avoid double appeals. If the Court granted

certification of a partial list of claims, every claim left out from that order would be poised to one

day return to the Circuit on appeal. So too would any claims relating to the 2012 and 2013 rules,

and while the remand of those rules to the agency involves a discrete issue applicable to those

years alone, an appeal would likely also raise issues that are common between the challenges to

the 2012 and 2013 rules and other fixed loss threshold rules. It is inaccurate, then, for Plaintiffs

to claim that their request neatly divides the broader legal issues from those that only affect the

2012 and 2013 rules. No matter what this Court does today, the D.C. Circuit may have repeat

encounters with the same factual and legal circumstances surrounding the threshold rules. See

McLane v. Haaland, No. 12-cv-1397,

, at *7 (D.D.C. Mar. 15, 2022) (noting

that certification is inappropriate when a “claim may not be truly ‘separable from the others

remaining to be adjudicated,’ and there is substantial risk that an ‘appellate court would have to

decide the same issues more than once,’ should there be ‘subsequent appeals.’”) (quoting Bldg.

Indus. Ass’n of Superior Cal.,

).

In summary, Plaintiffs have not met their burden of showing this case is the type of

extraordinary matter that warrants Rule 54(b) certification. Plaintiffs initially requested a

certification that the Court cannot grant; their later, smaller request is unpersuasive as a matter of

judicial administration. While the Court hopes for a speedy resolution to these sprawling claims,

13 Rule 54(b) certification will not attain that goal. See MediNatura, Inc.,

, at *3.

(“The Court understands Plaintiff[s]’ desire to expedite this litigation—both before this Court

and the D.C. Circuit. That goal, however, would not be furthered by prematurely entering final

judgment[.]”).

V. CONCLUSION

For the foregoing reasons, Plaintiffs’ Motion for Rule 54(b) Certification (ECF No. 212)

is DENIED. An order consistent with this Memorandum Opinion is separately and

contemporaneously issued.

Dated: August 4, 2023 RUDOLPH CONTRERAS United States District Judge

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