may it please the court this is a statutory interpretation case and their medicare principal issue in this case is what does it mean to be a hospital under medicare four years ago carter regional medical center opened as a brand new acute care hospital in kearney nebraska after opening carney underwent an on site survey to become approved to build medicare the survey was conducted by the american osteopathic association which was a private a credentialing organization that was specifically vetted and approved by c m s the centers for medicare and medicaid services that survey took place over three days is it involved in inspection of the facility at staffing its licensure its policies and procedures the survey team reviewed charts and medical records and conducted telephone interview actually in the hospital when the surveys when when the team came to do the accreditation and inspection no i don't believe it's dispositive in any way your honor in fact there's nothing in the statutory definition of a hospital that in any way requires there to be in patients at the time of the survey so as you put it seems like the legal dispute in this case comes down to that phrase and the significance of it primarily just in patient care something to the nature of patient care and in not having patients at the time of the inspection seem to be consequential to the evaluation of your facility that's that's the reason that c m s gave initially for denying certification saying that we're denying certification not because there's any apparent problem with quality of service or capabilities of the facility just simply we have got a an automatic rejection policy we're going to reject an application when there were no in patients present at the time of a survey that automatic rejection policy was based on the arizona surgical hospital cases it no no your honor in fact there's nothing in the statute the supports adata manic rejection policy for lack of in patien there's no regulation on point that supports or suggests in any way that c m s has an automatic rejection policy the most that c m s can point to in this particular case is an operating  operations manager manual that was provided to state accrediting state government accrediting services but the government admits that that manual did not applied wasn't binding on private accreditation services such as the a o l a an organization that was specifically vetted and approved by c m s to conduct these surveys my understanding of the facts and you can correct me if i'm wrong that carney head provided these patients and their service that they had provided for the patients before they the inspection came they were inquired do we need to have in patients during this period of time and they were told by that entity which was sent to them by the government that they didn't have to do that is that right that that the facts that is correct and and so those would have still been on carney's dime had they had to do it but they were told that they didn't have to do that they would rely on the patient records that had been made by the fully staffed hospital before that and that that was the facts that were that is correct dealt dealing with here yes your honor and so the but but then the the said well you're ok you've been approved but we can't give you the medicare certifications and so forth because you weren't an operating hospital at that during this  believe it was december ninth and for about three weeks it continued to operate it it operated as a hospital it admitted in patients i think there were twenty one in patients admitted during those three weeks it treated out  performed outpatient procedures all on the hospital's dime then the survey was conducted carney was ready willing and able to admit in patients during the time of that survey they had a full staff on duty they had patients that could have been admitted but they specifically asked the survey team do we need to have in patients present and the survey team expressed they said no this is case turn on who has given difference in terms of the definition of what primarily engaged in mean and your honor i would submit that c m s is not entitled to any difference in this case under chevron  when there is no regulation on point and there is no regulation on point in this case the agency is not entitled to deference was is this a straight statutory interpretation case absolutely  then whether the surveyor told your people that you didn't need patients because that would have mean do with what the statute means when it i think what we have here is c m s is advocating an interpretation of the statute which the problem the appeals board in the district court gave deference to but c m s is advocating an interpretation of the statute that i believe is unreasonably narrow and flies in the face of common sense in the remedial pose of the surveyor and said yeah you probably should have been patients here and you didn't have in patients here we'd be dealing with the same factual situation other than that representation and you say you would still win even if you were told you need patience here and you didn't have if we had been told that we needed patients there we would have had patients there in which case we would have been granted certification as of january twenty eighth two thousand and fourteen and we wouldn't have about a three month period of time and you're not you're not really answering the question though and you're saying that it's a question of statutory interpretation and i'm saying suppose there were no patients there and there was no representation that you didn't need patients there is i understand your position you should still win because you say the statute doesn't allow them to deny you based on the fact that you didn't have patients there i think that is right  honor i think i have that why would that be an unreasonable why is that why is that why is that if you had no patience for that substantial period of time why couldn't they say you weren't you didn't meet the definition of  hospital because in this particular case the agency was operating according to a secret policy that wasn't known the agency could have if the agency believed that that there was a reasonable construction of the statute that it wanted to advocate for it could have been gauged in normal rulemaking now but when they make you think they can't do it by judy cation they can't make  isn't that basic administrative law that's also an option well yes the chain or any case recognizes that ad hoc adjudication is appropriate in certain circumstances but the court in that case pacifically warns that that those circumstances should be limited to those instances where there is a risk of mischief or malfeasance oh isn't there some slight risk of that here you can have individuals representing that they're going to have patients representing they're going to do these various things and here are facilities and it's all intended to eventually conduct a scam and not actually function as a hospital no your honor because  this particular case we had three weeks of operations we had twenty eight patients that we had provided services to prior to the survey so then it seems when when you go there it seems to me that your argument is somewhat of a stop all argument that they should have been a stop from going against the recommendation that was made by in essence their agent telling you you don't we don't need patien so you trusted that and you relied on it to your detriment but when you when you say that you didn't have to get all that looks at the statute and they can look at the statute you look at the statute you look at into it well we don't need patience they look at and says oh yeah you do because in order for us to put our money out we're going to need to have verification that this is functioning in practice and in reality before before the date of the survey and the survey survey team conducted an inspection of those charts and medical records performed telephone interview among those patients so we're not talking about an extended period of time you know c m s tries to compare this case to arizona surgical am health home health services but this cas judge said you were primarily engaged in providing inpatient treatment as the basis for his turning down the application is that right yes and they he based that upon the arizona surgical hospital case that had been decided earlier isn't that right that's correct your honor and the facts of that case was that the  the hospital in this case had been under a state sanction carney was never under a state sanctioned here wouldn't know i mean this is if were interpreting what the statutes say is  this all has to be taken into account doesn't seem to have been by the department and the ministry of law a judge sent set time am i wrong on that or i suppose you're you're  not wrong and are always in council for me up on the you're not wrong at all judge graeme arizona surgical case was a very different circumstance than what we have here as you noted in that case the facility had been shut down it lost its license to operate for a period of time it was under sanction we don't have that here there's no evidence in the record that there was anything that  way there's nothing in the record to suggest that that survey was any different than the first survey so the citizens of carney who ponied up the money to  establish corney regional medical center are holding the bag for twenty one million dollars worth of funds that the people paying their social security  the government should have forked over to them is that the bottom line that you're arguing i don't believe it's twenty one million dollars your honor i don't know the exact why you're on the top of my head but it is north of a million million and a half dollars in terms of knowing reimbursements that the hospital would be entitled to if that application had been initially approved as of january twenty eighth two thousand you were talking about the equities of the situation why couldn't it be said that you made a tactical choice to try to forego caring for those patients until you got the certification and that ended up not making you qualified that part of the process here is you have to establish that you are gauge primarily in caring for in patients and that require some upfront costs before you get certified in the hospital heard that upfront collier incurred three weeks but the question is whether you have to continuing currying that until you get the certification or to show you're primarily engaged i don't view carney's decision is being a i don't believe it was a voluntary tactical decision because i don't think that that the government's standard had been publicized and had been made known to applicants to its own survey teams that had been approved to pro to to conduct the service so there are a lot of your argument to be based on either notice or this stoppel type theory just movement jeev judgment mention not really what the statute means that maybe there's something to that you didn't have proper notice or you didn't hear year or the side should be stopped but i didn't read your brief to be arguing that i thought you were just arguing straight up what the statute means yes we are your honor in we believe that the statute doesn't provide to require there to be in patients on the particular days of the survey to require that would  sentially impose a standard of we're going to evaluate a facility and whether or not it's primarily engaged looking at a very narrow specific snapshot in time i don't think you can do that that's certainly not a commonsense understanding of the phrase primarily engaged in business that's certainly not what the people who receive those those services in december of two thousand and thirteen believe i believe i believe if you asked any of them they would have understood they were receiving services from a hospital that was primarily engaged as a hospital thank you  thank you your honor and may please the court judge sauls and on behalf of h h s while i don't think we need it to win here this case is in an instance where the agency's adjudication is entitled to substantial deference and the district court was right to conclude that agency that establishes the rights and obligations of the parties and the decision is designed to serve as a precedent in future cases the board here discussed its own prior decisions in this area and this decision likewise was in dot intended to contribute to that body of precedents and that in fact the gesture on the decision you're talking about required what now i'm referring to the final decision of the department of appeals board which is the decision actually under review here percent to thirteen ninety five eight c c so what i should imagine was oh go ahead and what that decision was was a determination by the department to appeals board that at the relevant time carney regional medical center did not meet the definition of a hospital as spelled out in thirteen ninety five accept part d because because it was in the operating hospital because it was not primarily engaged in providing services  statutory or regulatory authority sets the timeframe for which you describe is the relevant period so i don't think the statute answers the question that's why there was a gap here for the board to fail which is precisely why chevron deference is appropriate here now there was a lot of precedent that gave notice i and i do want to get into the notice issues including the board's own precedents in cases like arizona surgical there was also a statement in the state operating manual that if you want to conduct a survey there need to be enough in patients there to make a reliable assessment about whether that facility is operating properly so how would how would an into to know that that period includes not only the time prior to the inspection but the inspection it's no so a few ways your honor one is the plain language of the statute itself is phrased in the present tense you need to be primary is primarily engaged so that's one factor that the board pointed to second the board noted that its own preceden had consistently construed the statute as requiring ongoing provision of services that pointed to three cases all of which were issued prior to the board's decision in this case that's the arizona surgical case the united medical case and the am health case all of those were two thousand and three two thousand and eight two thousand and ten decisions of the board the survey the inspection here was in january of two thousand and fourteen so there was a body of precedent already there well how did the those carney made the choice to use a private ng private accrediting entity that there's that that's an alternative mechanism of getting this certification the primary method spelled out in the survey entity what you can do is reach out to a private accrediting entity which has as you said has has already received approval from c m s and they will come in and give you a private accreditation now that accreditation doesn't entitle you to participate in medicare c m s will then look over that accreditation and has the ability to say whether or not it was sufficient but c m s retains the power and or retains the responsibility for making the ultimate determination here in that you can giving its advice to carney i don't know what i can't speculate as to what what happened there i can tell you that there was a stab a body of precedent here that already said you need to be primarily engaged there was a state operating manual that noted that you need patients present and i want to note that all of this seems ultimately tie if we're going to say what's the legal relevance of this to be a stoppel notion that i believe chief judge smith averted to earlier and i want to be clear carney made in a stop all argument before the baby a l j rejected that a dent in page thirty eight the board affirmed that conclusion at a dent in page twenty five and i haven't seen in the in the district court court carney to have made that a state renewed it's a stop a challenge and express terms because i think if you look at the reasoning it was sound as as to the basis for rejecting that a stop argument so ultimate what we i think this court is did with though is a statutory term primarily engaged in providing services to patients we have an expert agency board issue a final decision construing that term it's a reasoned decision it's consistent with prior board precedents it gives meaning to the term and i think under those circumstances it is appropriate deference to that determination is there any problem with retroactivity absolutely not your honor  some retroactivity that it's permissible or is there some judgment i don't think there's a judgment i think if you look at ins versus acquire acquire which is a supreme court case relating to the board of immigration appeals the supreme court said that the agency gets deference as it gives content to a statute through a series of fact bound case by case adjudications which helps spell out and igs and embody the meaning of the state and help expound on the meaning of that statute there are as we know in our briefs ample circuit precedents suggesting that these board decisions receive chevron deference in the supreme court in the case suggested that the board would normally receive deference though in that case it found that the board's decision was that the deference was overcome but i think it is hornbook law as your honor said earlier that adjudications can is a form of agency interpretation that can and does receive chevron deference this this determination here bears all the hallmarks of one of those determinations it reasonably construe as the statute it's not in conflict with prior board press and indeed it's the best reading of the board's prior precedents so i think even if we weren't getting the deference the outcome here was right when an entity stops altogether for tactical reasons makes a voluntary choice and i would say that the board's decision is expressed on this point there is a factual finding supported by substantial evidence that this was a voluntary choice to stop providing services if you only have three weeks of provision of services and then you stop altogether that that is not primarily engaged i do want to talk about the arizona surgical cent comparison of the facts there because you're on a judge being brought that up earlier the board noted that the facts here were not exactly the same as arizona surgical but found that those factual differences actually cut against carney what the board said and i think this is it a dent in page twenty four is that a facility that has a history of providing services to me more reasonably show that a brief interruption doesn't mean that you've given up the provision of those services but that if you don't have an established record if you've never even got demonstrated to c m at h h s at the outset that you're primarily engaged in providing services that if anything the threshold should be higher it certainly shouldn't be lower so this is a reasoned decision of the board that considered all of these factors and it reached a reasonable conclusion that supported by statutory taxed and it's supported by the board's own precedents on the retroactivity point you know the reply brief has this section about chen or your call decided there there's an ample body of precedent that has evolved that in precisely circumstances like these when the departmental appeals board issues decisions that that it is going to receive deference in deciding that because that's what court record any difference in a straight statutory interpretation in the court is amply qualified to make a determination as to what a statute means without giving any difference i think that there is an ambiguity and at that point there is a gap to be failed which the board did fail with its decision but we consistently had a gated this case as a as a step to case that's how the that's how we argued in district court that's how the district court decided it and that's the argument we've made in this court so what did you mean that you don't need chevron when the case all i was trying to say there your honor is this isn't one of those cases where maybe the agency's reading isn't really that great but  where we're just sort of appealing to deference is a way to overcome that what i'm saying is there's an ambiguity here there's a gap to be failed the agencies answer here is a reasonable one and indeed i think the best one but you don't even need to decide whether it's the best we we probably don't have that to to look at now chevron has been challenged at various points but it has been consistently reaffirmed and it's still certainly the law of this circuit and the in the the supreme court case right even further why do you say if why do you say you would win without chevron because your interpretation is the better what makes it better  think the board's decision here is quite sound in light of the the present tense phrasing of the statute in light of the legitimate concerns in wanting to see a facility in operation and to have it up and running before the were eligible to participate in medicare keep in mind congress made a decision and this is embodied even further in in the in the agency regs that before a facility is eligible to participate in medicare it needs to already be a hospital th they made but there was a judgment made here that we don't want facilities joining the medicare program and getting be entitlement to start receiving the payments from the federal government until they really establish that they are qualified providers so does that entail some amount of start up cost does that mean that they have to begin servicing in patients before they're able to get reimbursement from that yes but that's a judgment baked into the statute into thirteen ninety five c c some part b that says you have to already meet the definition of the hospital of being a hospital before you're eligible to get a provider agreement and that's further embodied in forty two c f r four eighty eight point it's either point three point four that says if you are not already meeting the definition of a hospital you are not eligible to be a provider and part of what that means is you have to already be providing services to patients did the agency refer this to this dispute to administrative law judge so that there is a multi step review process here that's spelled out and forty two c f r for ninety eight point five and the way that works is first you go to c m s and c m s that here said you don't get it then you're supposed to ask for reconsideration from law judge and then after that they took it up to the departmental appeals board that's the final decision of the agency that's what this court has jurisdiction to review if the administrative law judge had hild for carney the agency still was in a position to say no we don't thank you counsel we appreciate your presence this morning in the arguments you provided to the court a fascinating case an interesting issue and we'll do the best we can with thank you