Bayshore Cmty. Hosp. v. Hargan
Bayshore Cmty. Hosp. v. Hargan
Opinion of the Court
Plaintiffs Bayshore Community Hospital, Ocean Medical Center, Riverview Medical Center, Southern Ocean Medical Center, and Jersey Shore University Medical Center appeal the decision of the United States Department of Health and Human Services' Provider Reimbursement Board to deny "expedited judicial review" of their procedural and substantive challenges under the Administrative Procedure Act to federal regulations regarding "outlier" Medicare reimbursements. Defendant Eric D. Hargan, Acting Secretary of the Department of Health and Human Services, asks the court to remand this matter to the Board for further proceedings consistent with this court's opinion in Banner Heart Hospital v. Burwell ,
For the reasons herein, the court denies Defendant's Motion for Voluntary Remand *13and Plaintiffs' Cross-Motion for Judgment on the Pleadings.
I
The federal Medicare program allows participating hospitals and other service providers to seek reimbursement for the cost of medical services they deliver to eligible patients. The Centers for Medicare and Medicaid Services ("CMS") is an agency housed within the United States Department of Health and Human Services ("HHS") that oversees the program.
Medicare reimbursements are based on a prospectively determined formula, with additional payments available under certain circumstances. Federal law specifically provides for additional payments, known as "outlier payments," when a patient's medical care is either particularly costly or lengthy. See 42 U.S.C. § 1395ww(d)(5)(A) ; Banner Health v. Price ,
The reimbursement process occurs in two stages, with an opportunity for administrative review and federal judicial review of an adverse determination. CMS makes reimbursements to participating providers through "fiscal intermediaries," which are often private insurance companies. The reimbursement process begins when a participating provider submits an annual cost report to the fiscal intermediary, which then audits the report, determines the amount owed to the provider for the year, and reimburses the provider. A provider has a statutory right to a hearing before the Provider Reimbursement Review Board if (1) it is "dissatisfied" with the fiscal intermediary's determination of the reimbursement amount or the Secretary's determination of the outlier payment amount; (2) the amount in controversy is at least $10,000; and (3) the provider files a request for a hearing within 180 days of receiving the fiscal intermediary's determination. 42 U.S.C. § 1395oo (a)(1). The Board can "affirm, modify, or reverse" the fiscal intermediary's decision regarding the cost report, as well as make any other revisions to matters covered by the cost report.
Plaintiffs, five acute care hospitals, believe they did not receive the full amount of outlier payments to which they were entitled for fiscal years 2008, 2009, and 2012, and filed an appeal to the Board. Their appeal challenged the amount of outlier payments they received on the ground that the federal regulations governing those payments are substantially and procedurally *14invalid, in violation of the Administrative Procedure Act ("APA"). See Bd. Decision at 1. Plaintiffs sought expedited judicial review of that APA challenge. See
The Board explained that Plaintiffs did not have a right to a hearing because they had not complied with the "self-disallowance regulation." The self-disallowance regulation, which was in effect for fiscal years 2008, 2009, and 2012, deprives a provider of its right to a hearing before the Board if the provider did not report to the fiscal intermediary a cost that it believed should be reimbursable, but which it knew was barred by Medicare regulations.
Plaintiffs now appeal the Board's denial of expedited judicial review to this court. Defendant responded with a Motion for Voluntary Remand, in which he requests that the court remand this matter to the Board for further proceedings consistent with Banner Heart , the application of which he "consent[s]" to in this case. Def.'s Mot. for Voluntary Remand, ECF No. 10 [hereinafter Def.'s Mot.], at 3. In other *15words, Defendant seeks a remand so the Board can grant Plaintiffs the expedited judicial review that the Board previously denied. Plaintiffs filed an Opposition to Defendant's Motion and Cross-Motion for Judgment on the Pleadings, in which they contend that remand would be frivolous and cause unnecessary delay because they are entitled to expedited judicial review and, once granted, this matter will bounce back to this court for consideration of their APA challenges to the outlier regulations. See Pls.' Opp'n at 3-9. Accordingly, Plaintiffs ask the court to avoid wasting judicial resources by denying Defendant's Motion, vacating or permanently enjoining the self-disallowance regulation, and allowing Plaintiffs to amend their Complaint so the court may reach their APA challenges to the outlier regulations. See
The court begins with Defendant's Motion for Voluntary Remand before turning to Plaintiffs' Cross-Motion for Judgment on the Pleadings.
II
Defendant argues that remand is warranted because he consents to the only remedy the court has to offer Plaintiffs at this stage-a finding that the Board should have applied Banner Heart when determining whether expedited judicial review of Plaintiffs' case was warranted. Defendant asserts that the best result Plaintiffs could hope for here is that the court will determine the Board erred by applying the self-disallowance regulation to Plaintiffs and, as in Banner Heart , remand the case for further proceedings. See Def.'s Mot. at 5-6 (citing
A few considerations guide the court's review of a motion for voluntary remand. As a general matter, the district court has broad discretion in considering whether to grant an agency's motion for voluntary remand. Limnia, Inc. v. U.S. Dep't of Energy ,
*16Sierra Club ,
The court finds that remand is inappropriate in this case. First, although Defendant has asserted that the Board will modify its original decision by applying Banner Heart to this case, Defendant has not provided any "substantial and legitimate" reason warranting remand and, indeed, the course of conduct here leaves the court questioning whether the agency has acted in good faith. Second, Plaintiff has clearly articulated that remand would cause it undue prejudice because returning the case for further proceedings before the Board will cause extensive delay. Third, the court concludes that remand is futile because the law unambiguously requires the Board to grant expedited judicial review.
A
The court finds Defendant's procedural choices in and related to this case to be puzzling. Though Defendant presently contends that he disagrees with the court's ruling in Banner Heart , he never filed a motion for reconsideration with the court in that case and voluntarily dismissed his appeal of that decision one week after filing it. See Order, Banner Heart ,
The court might be less concerned with Defendant's approach if the Board had provided a reasonable explanation for why it did not apply Banner Heart 's reasoning to Plaintiffs' appeal or if Defendant did so now in his Motion, but the court is left wanting for further explanation on both fronts. The court plainly held in Banner Heart that "the Secretary's self-disallowance regulation, as applied to Plaintiffs' specific regulatory challenge, conflicts with the plain text of section 1395oo . The Board therefore erred in ruling that it lacked jurisdiction to hear plaintiffs' challenge to the outlier regulations."
In light of the foregoing, the court concludes Defendant has not put forward any "substantial and legitimate" reason justifying remand of this matter to the Board.
B
Plaintiffs have properly opposed Defendant's Motion by clearly articulating that remand will prejudice them in this case. Plaintiffs note that it is unclear how long it will take the Board to rule on their request for expedited judicial review. Pl.'s Opp'n at 8. In particular, they point to the fact that nearly eight months passed between when the court issued its decision in Banner Heart and when CMS actually vacated the Board's prior decision and remanded the case to the Board for further proceedings. Id. Plaintiffs fear that this case will be subjected to the same amount of time lost before the Board even reconsiders their request for expedited judicial review. Already, Plaintiffs have lost the months it has taken to litigate and resolve the voluntary remand request. Accordingly, the court finds that Plaintiffs have clearly opposed remand on the ground that it would result in prejudicial delay in reaching the merits of their challenge to the outlier regulations. See FBME Bank Ltd. ,
C
The court further determines that remand is not warranted because the law unambiguously dictates the Board's only proper course of action on remand: grant expedited judicial review. Consequently, *18remanding this matter to the Board would be futile.
A petitioner has a right to expedited judicial review if the Board has jurisdiction to conduct a hearing but lacks authority to decide a specific legal question.
The court has little trouble concluding that expedited judicial review is required in this case. Plaintiffs have a statutory right to a hearing before the Board because they dispute the fiscal intermediary's determination of the number and amount of outlier payments they received for fiscal years 2008, 2009, and 2012; the controversy exceeds $10,000; and they filed their request for a hearing within 180 days of receiving the fiscal intermediary's determination. See 42 U.S.C. § 1395oo (a)(1) ; Compl. ¶¶ 4, 41-42; Bd. Decision (attach.) (identifying the amount in controversy for each cost report at issue, the date of the final determination of each cost report, and the date each Plaintiff requested a hearing before the Board to review that cost report). Their complaint regarding the amount and number of outlier payments they received rests on a broader challenge to the validity of the regulations governing those payments. See Bd. Decision at 1; Compl. ¶¶ 10-11. Plaintiffs did not need to self-disallow prior to filing their appeal to the Board because they are providers who have asserted a legal challenge to a regulation, which a fiscal intermediary cannot address. See Bethesda Hosp. Ass'n ,
Remanding this matter to the Board would be futile. When the law is so clear as to dictate the outcome of the agency's proceeding on remand, the court need not put the parties through the formality of a remand to the agency. See Berge v. United States ,
Defendant correctly points out that retaining jurisdiction over this case leads the court to a different result than it reached in Banner Heart , but those disparate results are both appropriate and easily explained. In Banner Heart , after determining that the Board had jurisdiction over the plaintiffs' appeal, the court remanded the case to allow the Board to determine in the first instance whether granting expedited judicial review was warranted. In the interim between when the court's decision in Banner Heart and the court's opinion today, the D.C. Circuit decided Allina Health Services , in which the Circuit clarified that the Board lacks authority to act and, accordingly, "must grant expedited judicial review[,] if the legal question raised is a challenge either to the constitutionality of a provision of a statute[ ] or to the substantive or procedural validity of a regulation."
Therefore, remanding this matter to the Board for further proceedings is futile.
* * *
In sum, the court concludes that remand is not warranted in this case. Defendant has not advanced any "substantial and legitimate" reason supporting remand; Plaintiffs have clearly articulated that they would be unduly prejudiced by a remand; and remand would be futile because the Board lacks discretion to deny Plaintiffs' request for expedited judicial review of their APA challenge to the outlier regulations.
Therefore, the court denies Defendant's Motion for Voluntary Remand.
III
Plaintiffs urge this court to take one step further and grant their motion under Rule 12(c) of the Federal Rules of Civil Procedure to invalidate the self-disallowance regulation in full. They submit that this is the proper course of action because the court already concluded in Banner Heart that the self-disallowance regulation is invalid as applied to regulatory challenges and the Board cannot be trusted to properly apply Banner Heart in either this case on remand or future cases. See Pl.'s Opp'n at 4-5.
A party may seek to resolve a case before trial by moving for judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure. For pretrial judgment to be appropriate under Rule 12(c), the pleadings must be "closed," meaning, both a complaint and an answer have been filed. FED. R. CIV. P . 7(a), 12(c) ; Tapp v. Wash. Metro. Area Transit Auth. , No. 15-768,
Plaintiffs' fears are understandable, but their Cross-Motion is in the wrong procedural posture. The court already has concluded that remand is not warranted, which means Plaintiffs need not be concerned about the Board's course of conduct on remand. See supra Section II. And, Plaintiffs' generalized worry about the Board's future action in other cases does not give the court power to act in this case. Cf. Wy.Outdoor Council v. Dombeck ,
Therefore, the court denies Plaintiffs' Cross-Motion for Judgment on the Pleadings.
IV
For all the reasons stated herein, the court concludes that neither remand nor an entry of judgment on the pleadings is warranted.
The court retains jurisdiction over this case, but is unable to grant any relief on the Complaint with this matter in its present posture. Although Plaintiffs' Complaint asks the court to invalidate the self-disallowance regulation as applied to them and all similarly situated plaintiffs, as well as allow them leave to file their substantive claims concerning the validity of the outlier regulations, see Compl. at 19, there is no motion before the court that would allow it to grant such relief. Before the court can grant any relief on Plaintiffs' Complaint, the court must have before it Defendant's Answer and a proper motion for judgment on the pleadings that seeks such relief. See FED. R. CIV. P . 7(a), 12(c).
The court offers the following thoughts for the parties' consideration in order to move these proceedings forward efficiently. In light of the reasons stated in this Memorandum Opinion and Order, once presented with an appropriate motion, the court is prepared to hold that Plaintiffs' appeal is properly before the court and that Plaintiffs may amend the Complaint to add their substantive claims concerning the outlier regulations. In other words, the court is prepared to grant Plaintiffs' relief on their Complaint insofar as Plaintiffs seek an affirmative judicial finding that the self-disallowance regulation does not bar their lawsuit and that leave to amend their Complaint is proper. See Banner Heart ,
A simple stipulation would save substantial time and effort in this matter. The court commends to Defendant that it stipulate to the lesser relief the court is prepared to grant-namely, for the reasons already stated, that Plaintiffs' appeal is jurisdictionally proper and Plaintiffs may amend their Complaint to advance their substantive challenges. That stipulation would allow the parties to avoid an unnecessary *21round of briefing. If Plaintiffs' Amended Complaint asks the court to invalidate not only the outlier regulations but also the self-disallowance rule as applied to all those similarly situated to them, then the parties can provide briefing on both issues on cross-motions for summary judgment.
The court will hold a status hearing on November 7, 2017, at 10:30 a.m., to address further proceedings in this matter.
Section 405.1835 of Title 42 of the Code of Federal Regulations no longer contains a self-disallowance requirement. Instead, effective January 1, 2016, the regulation only requires that "[i]f the provider self-disallows a specific item" in its cost report, then the provider must explain the nature and amount of the self-disallowed item, the amount of reimbursement sought, "and why the provider self-disallowed the item instead of claiming reimbursement for the item."
Reference
- Full Case Name
- BAYSHORE COMMUNITY HOSPITAL v. Eric D. HARGAN
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- 4 cases
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- Published