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Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 11, 2005 Decided July 1, 2005

No. 04-5203

IN RE:MEDICARE REIMBURSEMENT LITIGATION

BAYSTATE HEALTH SYSTEMS, D/B/ABAYSTATE MEDICAL

CENTER, ET AL.,

APPELLEES

MICHAEL O. LEAVITT, SECRETARY, DEPARTMENT OF HEALTH

& HUMAN SERVICES,

APPELLANT

Appeal from the United States District Court

for the District of Columbia

(No. 02cv00601)

(No. 03mc00090)

Anne Murphy, Attorney, U.S. Department of Justice, argued

the cause for appellant. With her on the briefs were Peter D.

Keisler, Assistant Attorney General, Kenneth L. Wainstein, U.S.

Attorney, and Anthony J. Steinmeyer, Assistant Director.

Christopher L. Keough argued the cause for appellees.

With him on the brief were John M. Faust and Stephanie A.

Webster.

Before: SENTELLE, ROGERS, and TATEL, Circuit Judges.

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Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge: In this case, the district court

ordered the Secretary of Health and Human Services to make

statutorily mandated payments to hospitals serving high

percentages of low-income patients. Finding no error, we

affirm.

I. 

Pursuant to the Medicare Act, the Secretary of Health and

Human Services reimburses hospitals for the “operating costs of

inpatient . . . services” provided to Medicare and Medicaid

beneficiaries. See 42 U.S.C. § 1395ww. At the end of each

fiscal year, eligible hospitals file cost reports with their “fiscal

intermediaries,”see 42 C.F.R. § 413.20(b); Monmouth Med. Ctr.

v. Thompson, 257 F.3d 807, 809 (D.C. Cir. 2001)—usually

insurance companies that serve as the Secretary’s agents for

purposes of reimbursing health care providers, 42 C.F.R. §§

421.1, 421.3; see generally id. § 421.100-421.128. After

auditing the reports, intermediaries issue “Notice of Program

Reimbursements” (“NPRs”) in which they determine the amount

owed to the hospitals for the fiscal year at issue. See id. §

405.1803(a)(2). Hospitals unhappy with their fiscal

intermediary’s award have 180 days to appeal to the Provider

Reimbursement Review Board (“the Review Board”), 42 U.S.C.

§ 1395oo(a), which issues a decision that the Secretary may

“reverse[], affirm[], or modif[y]” within 60 days, id. §

1395oo(f)(1). Hospitals remaining dissatisfied after the Review

Board or Secretary issues a final decision may seek “judicial

review” by filing suit in the appropriate U.S. District Court. Id.

Known at the time of the events at issue here as the Health

Care Financing Administration (“HCFA”), the agency within

HHS responsible for administering Medicare and Medicaid

promulgated regulations that permit reopening of final NPRs.

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Two reopening provisions play central roles in this case. One,

42 C.F.R. § 405.1885(a) (1997), provides that an intermediary’s

payment determination or a decision by the Review Board or

Secretary “may be reopened” if its issuer or the affected hospital

moves to do so within three years of the date of the

determination or decision. The other, 42 C.F.R. § 405.1885(b)

(1997), provides (though it has been amended since the events

at issue here) that an intermediary’s determination “shall be

reopened and revised by the intermediary if, within the . . . 3-

year period, the Health Care Financing Administration notifies

the intermediary that such determination or decision is

inconsistent with the applicable law, regulations, or general

instructions.” 

The Medicare Act bases payments for “operating costs of

inpatient hospital services” on preset nationally applicable rates,

but those rates are subject to hospital-specific adjustments, 42

U.S.C. § 1395ww(d), one of which, the “Disproportionate Share

Hospital” (“DSH”) adjustment, increases payment rates for

hospitals serving disproportionately high percentages of lowincome patients, id. § 1395ww(d)(5)(F). Several years after

creating the DSH adjustment, Congress enacted legislation that

established detailed criteria for determining eligibility and the

extent of a hospital’s adjustment. Consolidated Omnibus

Budget Reconciliation Act of 1985, Pub. L. No. 99-272, § 9105,

100 Stat. 82, 158-60 (1986) (codified at 42 U.S.C. §

1395ww(d)(5)(F)). HCFA promulgated interpretive regulations

to implement these new statutory provisions, see 51 Fed. Reg.

16,772, 16,776-78 (May 6, 1986), but between 1994 and 1996

four circuits found the regulations inconsistent with one of these

provisions, ruling that HCFA had improperly restricted DSH

eligibility and reduced payments to eligible hospitals. Cabell

Huntington Hosp., Inc. v. Shalala, 101 F.3d 984 (4thCir. 1996);

Legacy Emanuel Hosp. & HealthCtr. v. Shalala, 97 F.3d 1261

(9th Cir. 1996); Deaconess Health Servs. Corp. v. Shalala, 83

F.3d 1041 (8th Cir. 1996) (per curiam); Jewish Hosp., Inc. v.

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Sec’y of Health & Human Servs., 19 F.3d 270 (6th Cir. 1994).

Responding to these decisions, HCFA issued Ruling 97-2,

in which it announced it had “chang[ed] its interpretation of [the

statutory provision at issue] to follow the holdings of the United

States Courts of Appeals for the Fourth, Sixth, Eighth, and Ninth

Circuits.” Health Care Financing Administration Ruling 97-2,

at 1 (Feb. 27, 1997) (“HCFAR 97-2” or “Ruling 97-2”).

Significantly, however, HCFA’s new interpretation would have

prospective effect only. As the ruling explained, HCFA would

“not reopen settled cost reports,” and would instead apply its

new interpretation only to cost reports settled thereafter, or to

cost reports for which the hospital had a “jurisdictionally proper

appeal pending on this issue.” Id. at 2.

After HCFA issued Ruling 97-2, two DSH eligible

hospitals, Monmouth Medical Center and Staten Island

University Hospital, filed motions with their intermediaries

pursuant to section 405.1885, seeking to reopen NPRs issued to

them during the three years prior to the ruling. Monmouth, 257

F.3d at 808, 810. When the intermediaries denied these motions

and the Review Board declined to order the proceedings

reopened, the two hospitals sued in the U.S. District Court for

the District of Columbia, which dismissed for lack of

jurisdiction. Id. Reversing, we held in Monmouth Medical

Center v. Thompson, 257 F.3d 807, that the district court had

jurisdiction under the Mandamus Act, 28 U.S.C. § 1361, to order

reopening of the hospitals’ NPRs. Id. at 813-815. We explained

that Ruling 97-2 amounted to a finding that HCFA’s old method

of calculating DSH entitlement was “inconsistent with the

applicable law” for the purposes of section 405.1885(b). Id.

(quoting 42 C.F.R. § 405.1885(b)). Pointing out that the

regulation speaks in mandatory terms—intermediaries “shall”

reopen payment determinations when they receive notice the

determinations are “inconsistent with the applicable law”—we

held that Ruling 97-2 gave intermediaries a clear duty to reopen

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the NPRs even though the ruling said it had only prospective

effect. Id.

Eight months later, plaintiffs in this case, twenty-six

hospitals serving Medicare and Medicaid beneficiaries, filed suit

under the Mandamus Act, seeking to compel reopening of NPRs

issued to them in the three years preceding Ruling 97-2. Over

250 other hospitals filed similar suits, which (with some

exceptions) the district court stayed pending resolution of the

“core issue” in this case, In re Medicare Reimbursement Litig.,

No. 03-0090 (D.D.C. July 1, 2003) (adopting case management

plan staying actions other than this action). The court then

denied the Secretary’s motion to dismiss and granted plaintiffs’

motion for summary judgment, relying on Monmouth’s holding

that Ruling 97-2 triggered a duty to reopen NPRs pursuant to

section405.1885(b). In re Medicare Reimbursement Litig., No.

03-0090, slip op. at 8, 11 (D.D.C. Mar. 26, 2004). 

The Secretary now appeals.

II.

Under the Mandamus Act, “[t]he district courts shall have

original jurisdiction of any action in the nature of mandamus to

compel an officer or employee of the United States or any

agency thereof to perform a duty owed to the plaintiff.” 28

U.S.C. § 1361. Pursuant to this act, a district court may grant

mandamus relief if “(1) the plaintiff has a clear right to relief;

(2) the defendant has a clear duty to act; and (3) there is no other

adequate remedy available to the plaintiff.” Power v. Barnhart,

292 F.3d 781, 784 (D.C. Cir. 2002) (quoting Northern States

Power Co. v. U.S. Dep’t of Energy, 128F.3d 754, 758 (D.C. Cir.

1997)). A district court’s determination that a plaintiff has met

these standards is reviewed de novo. See Am. Cetacean Soc’y

v. Baldrige, 768 F.2d 426, 432 (D.C. Cir. 1985) (reviewing de

novo district court’s conclusion that claim passed three-prong

test for mandamus jurisdiction), rev’d on other grounds sub

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nom. Japan Whaling Ass’n v. Am. Cetacean Soc’y,478 U.S. 221

(1986). Even when the legal requirements for mandamus

jurisdiction have been satisfied, however, a court may grant

relief only when it finds “compelling . . . equitable grounds.”

13thReg’l Corp. v. U.S. Dep’t of the Interior, 654 F.2d 758, 760

(D.C. Cir. 1980). As to the equities, we review for abuse of

discretion. See Am. Cetacean Soc’y, 768 F.2d at 444 (reviewing

for abuse of discretion district court’s determination that

granting mandamus relief comports with equity).

We begin with Monmouth. There, we held that two

hospitals, similar in all significant respects to the hospitals in

this case, had satisfied the requirements for mandamus relief.

The Secretary had a clear duty to require the intermediaries to

reopen the hospitals’ NPRs, we held, because Ruling 97-2

amounted to a notice of inconsistency and because section

405.1885(b) mandates reopening when HCFA issues such a

notice. Monmouth, 257 F.3d at 813-15. In finding mandamus

jurisdiction, we held implicitly that the hospitals had a clear

right to relief, and we explained that they had no other adequate

means of obtaining relief. Id. at 811-13, 815. To prevail in this

case, then, the Secretary must identify some reason why the

district court should have denied mandamus relief

notwithstanding our decision in Monmouth. The Secretary

suggests five such reasons.

First, the Secretary devotes over half the argument section

of his opening brief to a direct attack on Monmouth, arguing that

contrary to Monmouth’s holding, Ruling 97-2 did not really

constitute a notice of inconsistency. As “one three-judge panel

. . . does not have the authority to overrule another . . . panel of

the court,” LaShawn A. v. Barry, 87 F.3d 1389, 1395 (D.C. Cir.

1996), we have no authority to consider this argument. 

Second, the Secretary argues that the hospitals here failed

to exhaust all avenues for administrative relief, as they never

appealed to the Review Board when their NPRs first issued.

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This argument, too, is barred by Monmouth. Plaintiffs there

likewise failed to bring such appeals, yet we found that the

district court had mandamus jurisdiction. See 257 F.3d at 815.

Third, the Secretary argues that the hospitals cannot show

an absence of alternate avenues for relief because, unlike the

Monmouth plaintiffs, they never sought reopening pursuant to

section 405.1885(a). Yet neither when we decided Monmouth

nor when HCFA issued Ruling 97-2 did a motion for reopening

offer any chance for the hospitals to obtain relief. Section

405.1885(a) provides that “[a]ny . . . request to reopen must be

made within 3 years of the date of the notice of the

intermediary,” and by the time we decided Monmouth, the threeyear period had long since passed for the NPRs at issue here.

Hence, had the hospitals sought reopening following Monmouth,

their intermediaries would have dismissed their motions as

untimely. True, a motion filed in 1997—when HCFA issued

Ruling 97-2—would have been timely with respect to these

NPRs. Ruling 97-2, however, purported to be prospective only:

it barred intermediaries from reopening closed NPRs to

recalculate DSH entitlement in accordance with the new

interpretation of the statute. See HCFAR 97-2 at 2. As counsel

for the Secretary conceded at oral argument, intermediaries were

not at liberty to ignore this bar even if they believed the ruling

amounted to a notice of inconsistency. Tr. of Oral Arg. at 4-5;

see also Bethesda Hosp. Ass’n v. Bowen, 485 U.S. 399, 406

(1988) (noting that “[n]either the fiscal intermediary nor the

[Review] Board has the authority to declare regulations

invalid”). Moreover, hospitals may not seek judicial review of

an intermediary’s denial of a motion to reopen a payment

determination. Your Home Visiting Nurse Servs., Inc. v.

Shalala, 525 U.S. 449, 456-57 (1999). Consequently, the

hospitals could not have obtained relief by seeking reopening in

1997. 

The Secretary’s fourth argument, like the second and third,

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focuses on the hospitals’ failure to appeal or move for

reopening. Conceding that section 405.1885(b) creates a duty

to reopen NPRs of all affected hospitals when HCFA issues a

notice of inconsistency, the Secretary argues that only those

hospitals which either appealed to the Review Board or sought

section 405.1885(a) reopening, as did the Monmouth hospitals,

have a legally cognizable interest in the reopening of their

NPRs. But given that section 405.1885(b) does not require

hospitals to file anything at all to obtain relief, we see no basis

for holding that only those hospitals that appealed or sought

section 405.1885(a) reopening have a personal right to the

reopening required by section 405.1885(b). Indeed, the fact that

section 405.1885(b) contains no prerequisite for relief beyond a

notice of inconsistency suggests that all hospitals

undercompensated due to an erroneous interpretation of the law

have a personal right to section 405.1885(b) reopening.

Finally, the Secretary contends that the equities require

denial of mandamus relief. Reviewing the district court’s

balancing of the equities for abuse of discretion, Am. Cetacean

Soc’y, 768 F.2d at 444, we find none. 

According to the Secretary, granting relief would be

inequitable because the hospitals waited so long to file suit. The

district court rejected this argument, reasoning that the hospitals

had sued “just eight months [after Monmouth], hardly an

inordinate time lag.” In re Medicare Reimbursement Litig., No.

03-0090, slip op. at 14 (D.D.C. Mar. 26, 2004). While eight

months would not constitute “an inordinate time lag” under the

circumstances of this case, the hospitals slept on their rights far

longer: like the Monmouth plaintiffs, they could have sued after

HCFA issued Ruling 97-2. Asked at oral argument to explain

why the hospitals had not done so, counsel claimed that Ruling

97-2 failed to give them “fair notice of their right to reopening.”

Tr. of Oral Arg. at 20. But the Monmouth plaintiffs had

sufficient notice to sue, and when pressed, counsel admitted that

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his clients “could have” done so as well. Id. at 22. That said,

we see no basis for concluding that the district court abused its

discretion by rejecting the Secretary’s timeliness argument, for

the Secretary has failed to demonstrate that he suffered any

prejudice due to the hospitals’ unexplained delay. Cf. Natural

Res. Def.Council v. Pena, 147 F.3d 1012, 1026 (D.C. Cir. 1998)

(finding prejudice necessary for delay to warrant denial of

injunctive relief).

The Secretary claims that reopening the NPRs “would be a

very difficult and uncertain process, as well as being

extraordinarily time-consuming to audit and verify.”

Appellant’s Br. at 33 (quoting Decl. of Stephen Phillips). Yet

the Secretary explains neither why reopening would be more

burdensome now than it would have been five years ago nor

why reopening would create more uncertainty now than it would

have then. In fact, the hospitals assure us that they, not the

Secretary, will “have to shoulder the burden of locating and

presenting . . . data from prior years for the fiscal

intermediaries” to use in recalculating DSH entitlement “upon

reopening.” Appellee’s Br. at 32. Elaborating at oral argument,

hospital counsel explained that under the terms of a ruling issued

by the Secretary, in any reopening the “burden [rests] on the

hospital to produce the data” needed to recalculate its DSH

entitlement, and “the hospital takes nothing if it can’t produce

the information.” Tr. of Oral Arg. at 29. Neither in his brief nor

at oral argument did the Secretary challenge either of these

assertions. On the record before us, then, we think it obvious

that if the delay has increased the risk of lost evidence or the

administrative burdens associated with reopening, only the

hospitals will suffer. As the district court noted, moreover, even

if the delay increased HCFA’s administrative burden, the

additional “burden [would] not outweigh the public’s substantial

interest in the Secretary’s following the law.” In re Medicare

Reimbursement Litig., No. 03-0090, slip op. at 15 (D.D.C. Mar.

26, 2004).

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The Secretary also invokes “important principles of finality

and repose,” asserting that they “would be greatly undermined”

were we to uphold the district court. Appellant’s Br. at 33. The

Secretary adds that “a substantial and unanimous body of law

protect[s] the integrity of decisions that are closed and final,

regardless of whether the rule of decision upon which they are

based is invalidated . . . later.” Id. at 33-34. Yet the Secretary’s

own regulations provide for reopening when HCFA “notifies an

intermediary that [a] determination or decision is inconsistent

with the applicable law.” 42 C.F.R. § 405.1885(b) (1997). To

show that the interest in finality warrants denying mandamus

relief, then, the Secretary must explain why this interest became

more important between 1997, when Ruling 97-2 triggered the

hospitals’ right to section 405.1885(b) reopening, and 2002,

when the hospitals sued to enforce that right. The Secretary,

however, has failed to do so. See supra at 9.

In his opening brief, the Secretary takes pains to point out

the extraordinary sums at stake in the hundreds of cases now

pending in the district court—more than $1 billion, according to

the Secretary. Yet as his counsel rightly conceded at oral

argument, Congress imposed on the Secretary a clear statutory

duty to pay the hospitals these funds. Having to pay a sum one

owes can hardly amount to an equitable reason for not requiring

payment. 

 The judgment of the district court is affirmed.

So ordered.

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