the honorable the judges of the united states court of appeals for the fourth circuit oh yeah oh yeah oh yeah all persons having any manner or form of business before the honorable united states court of appeals or the fourth circuit are admonished to draw nigh and give their attention good morning samantha hayes it's the united states the case here on appeal in the district court that district court set aside the c m s interpretation that's a issue in this litigation and on two independent bases the court concluded that it was procedurally invalid and while we cristis agree with that court's analysis there and think it's premised on certain misconceptions about how the scheme operates and the function and role of the interpretation at issue the court went on there was no disappears no dispute here that that would have been a sufficient basis for setting aside the challenge interpretation that portion of the district court's ruling but the court went further and it announced that this interpretation was unambiguous leaf were closed by the statue along with the regulatory taxed and now that's a really significant and troubling part of the court's ruling because it effectively prejudge is the two thousand and seventeen rule that was promulgated a legislative rule honor yes and that's why i'd like to start there because we think that that part of the district court's reasoning is is wrong and we are particularly eager to have this court address it in to correct the district court because of the effects focusing on the statute question  soaps well we would like you to do what the first circuit did in terms of its analysis of the substantive issue at a minimum i mean we think we could here go further and make clear that this is a permissible construction of the statute but at a minimum what the first circuited with regard to the statutory determination was for circuits were not going to get into the statutory now says we're just going with central but they're the district court hadn't reached the statutory issue that's the difference here the district court did go it so far as to say that this interpretation is foreclosed by the statute so yes please your honor so i'm looking there what else is there saying about well here's what there is to say the what the congress said was that we need to figure out what costs incurred by the hospital and treating medicaid patients and the uninsured are and then cost so we have explained that we think costs incurred has to take account of these third party payments because this is a statute in both g one and later in two thousand and three in creating subsection jag a congress made very clear that what we're interested in here is determining uncompensated costs but they also refer to is in the legislative history a office not sure that's what the statute says well i mean just wait a minute we have to go back to what congress said it's not what someone might think is the proper procedure that's up to congress and the executive branch so congress differentiated in the statute between cost incurred and net payments and it seems to me something of an alice in wonderland approach to  that congress differentiated between costs and payments what congress did was tell the secretary certain things about it how and war into a cost incurred that's not anywhere in the statute and we only have to look to the next subsection of the same statute under to see that when congress wanted to have third party payments included as a human they said so specifically so here we have the same there's this differentiation payment morphs into a cost it is that to determine what the costs incurred are we have to follow congress's instructions and congress said that what counts are incurred are is first to be determined by the secretary so there is a delegation of authority second we come to the language your honor has highlighted the language about payments is not some differentiated category it is part of the definition of cost incurred in that it's part of the instructions so we know from congress that to figure out what the costs incurred are at an absolute minimum we have to deduct it has to be net of to use congress's language costs incurred must be net of medicaid payments and payments on behalf of the uninsured that's just taken from the stash was so he would be secretary under your theory sure th congress's definition that's a statutory matter costs incurred it's not that the dollar becomes a cost it's that whatever the gross costs were have to be reduced  dollar to get us to net of payments that's just following the statutory language to determine costs incurred it must be net of certain payments congress said so it's not that the payments become cos it's that they're subtracted from whatever the gross cost category might be now what the secretary did pursuant to the language right before the net payments language which is the expressed delegation to the secretary as determined by the secretary the secretary determined that those payments the medicaid payments and the payments for the uninsured are not the only payments that need to be deducted if we are to determine consistent with the whole of this statute what the costs incurred are and the whole of this statute includes the fact that congress wrote this is supposed to be an amount of adjustment subject to uncompensated costs and then in subsection j later on when we get the auditing and reporting requirements that the two thousand eight regulation implements congress says that the states are going to be required to certify that the that only the uncompensated care costs of providing inpatient hospital and outpatient hospital services to medica patients and the uninsured are being included in this g one a calculation of costs incurred now i want to get to your site the second part of your question which was about two two in comparison with g one and they just want to be clear that all of the reasons why the rules of construction that your honor alludes to are not a political here to is very different from g one is again about determining uncompensated costs and let's just keep in mind that plaintiff's position is that costs that have been compensated that have been reimbursed covered by payments received from private insured privately insured medicaid patients that those should nonetheless be considered uncompensated costs that's what she wanted about  determining the amount of the cost burden that a hospital is bearing that has not been reimbursed or compensated to was not about uncompensated costs she too was there was a transition period when congress promulgated the statute and they created a period of time when they first created the hospital specifically limit and during that transition they allowed for hospitals to receive well over up to two hundred percent of the costs of caring for medicaid patients and the uninsured so it wasn't about uncompensated costs whatsoever it's a very different provision and it looks at the amount of money that hospitals are using for health services it's not even limited to hospital services which is what she wants about and it's not limited in the part that talks about third payers third party payers it's not talking about medicaid and the uninsured or the uninsured it's talking about all patients so when you think of all patients third party payers is the appropriate terminology to speak specifically to  insured individuals in the world so these are very different provisions in the fact that third party pairs shows up in g two for all of the reasons this court has explained about the rules of construction and it would not make sense to impute anything about what congress was trying to achieve and she won or n j in talking about uncompensated costs i hope that addresses that question and i think this context that we've hit upon is really important the  work that the interpretation at issue here is doing this is all about making sure that costs that have been reimbursed that have been compensated are and then the basis for this supplemental funding that that states have to distribute there's a limited pool of funding in each state that has to go out to all of the hospitals so if one hospital is able to claim funds that have already been compensated to that hospital that's coming out of another hospital pocket and that's the concern that animates this case from the perspective of the government of the agency if there are no further questions i'll reserve the time for rebuttal i appreciate thirty three is a subset of rule that amended the regulations that was promulgated not in accordance with the a p a which is exactly what the first circuit do you can assume everything the secretaries say the government is saying and you can still reach the a decision but to the extent that the government does want to focus on the statute itself there's two important things that the court needs to keep in mind first purpose of the statute as a whole and you have to construe this  articulate the payments that are to be deducted and as your honor mentioned you can't transform a cost into a payment and what the district court based it her decision on was very clearly she understood that there's two very different groups of  what authority would there be to issue that interpretation church statute and the authority comes from the top of the operative provisions of the program you have to look at sections a b and c section a establishes a mandate to the states to provide for an appropriate increase in the rate and or mount the met to dish hospitals like c h k d that treat inordinate numbers of medicaid patients here c h k d has the largest medicaid population in the entire state of virginia are you are you saying see ministry  and reads out of the statute the very operative provisions again i would call your the court's attention to sections a b and c a is a mandate provide for appropriate increase recognizing congress clearly recognizes that hospitals like c h katie who who have inordinate numbers of medicaid patients suffer financially this is supplemental program intended to try to stabilize these hospitals section b defines what constitutes payments it just it prescribes the methodology that the states are to use in order to calculate a minimum payment that would satisfy the mandate under a all she does is establish the ca and somewhere between the minimum under ca and the maximum under g the states have a great deal of discretion in terms of determining what the appropriate noun of the supplemental payment is to these hospitals and the whole purpose of this is to stabilize these hospitals the facts here have that as determined by the district court clearly shown that c h k d with a medicaid population seventy percent is basically threatened to go out of business that is not what this program is about the program is about making sure that a hospital like c h katie can keep its doors open so that the poor and the medically needy have access to quality care you have a population of the majority of the patients medicaid is the only payer you have a very small percentage of patients that are eligible to receive medicaid but their private insurance pays for their for all of their costs i mean this court recognized in the could bill case that there's this clear distinction between being eligible for medicaid and being entitled to receive medica what we're talking about is a very small percentage of medicaid eligible patients that have private insurance and medicaid is never built medicaid never pays for any of those costs private insurance covers all of it but now what the government wants to do is they want to now include those revenues from a totally different population to offset all the significant losses that c h katie incurs treating over  hundred eighty thousand just in one year one hundred eight thousand medicaid patients the district court was very correct in saying you cannot turn and compensated cost for medicaid patients into a room and then you can look at the substance of it but i would also note for the court that the agency has in fact tried to correct the procedural defects in the with the f off not at all but you're absolutely correct your honor that you can simply focus on the procedural defects here that that a policy that was simply posted on a website that is inconsistent with the plain language of the regulations nowhere is there mention is there a mention of private insurance payments in the regulation itself or in the preamble it's very prescriptive it it directs all the inputs that go into the calculation of this cap this hospital specific limit and there's no room for reading into that there's no ambiguity that whatsoever  believe the district court was trying to understand how the statute works and trying to understand how medicaid patients and medicaid eligible patients are treated under the statute and that's why i started my argument here trying to respond to the government trying to explain to the court that you have to look at the whole structure of the statute and realize that what we're talking about here is merely the cap on the on the payment that a hospital perceive but the way in which this policy is being interpreted by the government it's essentially limon it eliminating any dish payment to a hospital that is deemed a dish hospital and is entitled to a payment and some minimum level of payment under a and c and statu your honors and the reason that the dish payment is being eliminated here is because there were no  does sermons that the statute that the interpretation is procedurally invalid as long as the court makes clear that it is not a farming the district where it's vacant or decision i not probably all that yes let us do that but we think that the first circuit erred in quite a number of ways the first circuit proceeded from an understanding that the agency couldn't make a policy determination through an interpreter for all and that's clearly incorrect given that statements of policy are excluded from the notice and comment rule making requirements under the e p a here this i just right now well some judge e g has brought up the point you mean the the regulation the interpretive rule so long as it's the argument from the plaintiffs and the position of the district court was that it was inconsistent with the two thousand and eight regulation if you disagree if you agree with us and with the first circuit you're going to write better tools so just well they seem to think that it was inconsistent repeatedly the uncompensated care costs this is not about determining or stabilizing hospitals where as here they are unusually high percentage of privately insured medicaid patients this is not an abstract dish payments are not an abstract reward for having treated medicaid eligible patients this really is about stabilizing hospitals and keeping the doors open and so what we're interested in are hospitals like the potomac hospital another hospital in virginia that had forty three million uncompensated talked about and as in the context of the statute to figure out costs incurred we have to think about what that should be net of and here we're saying that costs incurred in c ten needs to be net of money that has come in such that those costs were not ultimately borne by the hospital as uncompensated costs right i mean it's the regulation is consistent with the statute and our interpretation of the regulation is consistent with both so see ten is the question here the argument from the plaintiffs the view of the district court was that our interpretation is inconsistent if it's consistent under our it should be upheld our position is it's consistent because we again saying that this falls under c ten cost incurred and it's consistent with the language of c eleven and sixteen with both direct us to be figuring out uncompensated costs it's also consistent with other parts of the two thousand and eight rule throughout the preamble there is discussion of the fact that we're trying to identify uncompensated and on reimburse costs there is discussion in the preamble over the fact that for dual eligibles medicaid patients who are also covered by medicare that those medicare costs and payments both need to be taken into account just a flat one so as a side note here plaintiffs have said they agree with the district court's analysis the district court got some things flatly wrong the district court was under the misimpression that plaintiffs don't want to count the cost of their privately insured medicaid patients so the district court in saying you can't count the money coming in from private insurance thought it was creating an even larger because it thought that the cost of those pediatricians wasn't going into the equation and therefore it was consistent to not deduct the payments from their private insurers but that is not how this statute works that is not how congress wrote the statute and that's not what plaintiffs are asking for they want to be able to count the costs of treating privately insured medicaid patients to inflate their dish limit but then they want to subtract they don't want to have to subtract from that the money that's coming in from those private insurers who as we explain in our brief is actually creates a situation where a hospital that has a high number of privately insured medicaid patients stands to get more money in supplemental dish funding then a hospital that treats only medicaid patients that is at peace and that only have medicaid and don't have other sources of  of coverage and your honor that there is a nother portion of the two thousand a rule that is consistent as a final point thank you for your time your hon