Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-12-05366/USCOURTS-caDC-12-05366-0/pdf.json

Nature of Suit Code: 151
Nature of Suit: Overpayments under the Medicare Act
Cause of Action: 

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United States Court of Appeals 

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 3, 2013 Decided January 24, 2014 

No. 12-5366 

ADIRONDACK MEDICAL CENTER, ET AL., 

APPELLANTS

CORNING HOSPITAL, ET AL., 

APPELLEES

v. 

KATHLEEN SEBELIUS, IN HER OFFICIAL CAPACITY AS 

SECRETARY OF THE UNITED STATES DEPARTMENT OF HEALTH 

AND HUMAN SERVICES, 

APPELLEE

Appeal from the United States District Court 

for the District of Columbia 

(No. 1:11-cv-01671) 

M. Miller Baker argued the cause for appellants. With 

him on the briefs were Ankur J. Goel and Johnny H. Walker. 

 Abby C. Wright, Attorney, U.S. Department of Justice, 

argued the cause for appellee. With her on the brief were 

Stuart F. Delery, Acting Assistant Attorney General, Ronald 

C. Machen Jr., U.S. Attorney, and Michael S. Raab, Attorney. 

USCA Case #12-5366 Document #1476522 Filed: 01/24/2014 Page 1 of 15
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Before: ROGERS and BROWN, Circuit Judges, and 

WILLIAMS, Senior Circuit Judge. 

Opinion for the Court filed by Circuit Judge BROWN. 

 BROWN, Circuit Judge. In 2007, the Secretary of Health 

and Human Services revamped Medicare’s Inpatient 

Prospective Payment System, updating the diagnostic 

weighting used to calculate reimbursements for hospitals 

treating the program’s beneficiaries. As with most changes to 

complex systems, there were unintended consequences—

namely in the form of overpayments to hospitals—but 

Congress had proactively attempted to counter unwarranted 

increases by adjusting the standardized base amount used to 

calculate reimbursement for the majority of hospitals. The 

Secretary thought, however, the fiscal pain should be shared 

and opted to temper Congress’ targeted response by mixing it 

with an adjustment for hospitals not affected by the 

congressional directive. She invoked her broad-spectrum 

grant of authority to ensure all hospitals—not just the ones 

relying on the standardized amount—would share the burden. 

 A number of hospitals—those serving rural and otherwise 

underserved communities—objected to being part of the cure. 

They insist Congress’ legislative prescription—to adjust 

standardized base amounts—was the only course available to 

the Secretary to offset overpayment. We disagree and affirm 

the decision of the district court. 

I 

 For our purposes today, the labyrinthine world of 

Medicare has two types of hospitals that enjoy different 

reimbursement schemes. The first group is reimbursed under 

the “federal rate”—a formula that takes a standardized base 

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amount (derived from national data) and multiplies it by a 

weight associated with a diagnosis-related group (DRG).1 See 

Methodist Hosp. of Sacramento v. Shalala, 38 F.3d 1225, 

1227 (D.C. Cir. 1994); see also 42 U.S.C. 

§ 1395ww(d)(3)(D). While these hospitals are certainly 

affected by the Secretary’s actions in the case at bar, they are 

not the focus of this appeal. 

 The second group of hospitals, which includes Appellants 

(“the Hospitals”), follows a different formula, the “hospitalspecific rate.” Their reimbursement is calculated with a base 

amount derived not from national data, but from historic 

operating costs at an individual hospital. See 42 U.S.C. 

§§ 1395ww(d)(5)(D), 1395ww(d)(5)(G). That hospitalspecific base is then multiplied by a DRG weight. 42 C.F.R. 

§ 412.73(e). Because these facilities typically serve 

underserved communities, they have the option of receiving 

the higher of either the federal rate or the hospital-specific 

rate.2

 

 

1

 In somewhat more relatable parlance, a DRG is a category of 

inpatient treatment. Each DRG weight reflects “the relative 

hospital resources used with respect to discharges classified within 

that group compared to discharges classified within other groups.” 

42 U.S.C. § 1395ww(d)(4)(B). 

2

 Reimbursements for “sole community hospitals” are fairly 

straightforward—such hospitals are paid the higher of either the 

federal rate or the hospital-specific rate. See 42 U.S.C. 

§ 1395ww(d)(5)(D)(i). The payout for Medicare dependent 

hospitals, however, differs slightly—that number is calculated by 

taking the federal rate and adding 75% of the difference between 

the federal rate payment and the hospital-specific rate payment. 

See id. § 1395ww(d)(5)(G)(ii)(II). 

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 Congress eventually directed the Secretary of Health and 

Human Services to “adjust the classifications and weighting 

factors” associated with the DRGs “to reflect changes in 

treatment patterns, technology, . . . and other factors which 

may change the relative use of hospital resources.” 42 U.S.C. 

§ 1395ww(d)(4)(C)(i). But despite longstanding general 

authority to “provide by regulation for such other exceptions 

and adjustments to . . . payment amounts,” see, e.g., 42 U.S.C. 

§ 1395ww(d)(5)(C)(iii) (1982), the agency demurred because 

it was unsure how to address the effects of such adjustments. 

See Changes to the Hospital Inpatient Prospective Payment 

Systems and Fiscal Year 1996 Rates, 60 Fed. Reg. 29,202, 

29,247 (June 2, 1995). In response, Congress enacted 42 

U.S.C. § 1395ww(d)(3)(A)(vi), which reads: 

Insofar as the Secretary determines that the adjustments 

under paragraph (4)(C)(i) for a previous fiscal year (or 

estimates that such adjustments for a future fiscal year) 

did (or are likely to) result in a change in aggregate 

payments under this subsection during the fiscal year that 

are a result of changes in the coding or classification of 

discharges that do not reflect real changes in case mix, 

the Secretary may adjust the average standardized 

amounts computed under this paragraph for subsequent 

fiscal years so as to eliminate the effect of such coding or 

classification changes. 

 Armed with this new provision, the Secretary announced 

changes to the DRGs in 2007. See, e.g., Changes to the 

Hospital Outpatient Prospective Payment System and CY 

2008 Payment Rates, 72 Fed. Reg. 66,580, 66,886 (Nov. 27, 

2007). To combat the possibility of overpayments under the 

new system, the Secretary adjusted the standardized amount 

downward by 1.2% and 1.8% for fiscal years 2008 and 2009, 

respectively. See Changes to the Hospital Inpatient 

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Prospective Payment Systems and Fiscal Year 2008 Rates, 72 

Fed. Reg. 47,130, 47,186 (Aug. 22, 2007). But Congress 

intervened, halving the amount of adjustment by enacting the 

Transitional Medical Assistance, Abstinence Education, and 

QI Programs Extension Act of 2007, Pub. L. No. 110-90, 

§ 7(a), 121 Stat. 984, 984 (2007) (“TMA”). A greater 

adjustment would require a determination by the Secretary 

that the “changes in coding and classification . . . did not 

reflect real changes in case mix” prior to making prospective 

adjustments under § 1395ww(d)(3)(A)(vi) and recoupment 

adjustments under section 7(b)(1)(B) of the TMA. 

 The Secretary accordingly conducted retrospective 

analyses and proposed a downward prospective adjustment 

for hospital-specific rate payments. Citing a need to “avoid 

what could be widespread, disruptive effects of . . . 

adjustments on hospitals” that would occur by only adjusting 

the standardized amounts, the Secretary opted to temper the 

impact of reclassification by splitting the difference between 

“federal rate” and “hospital-specific rate” hospitals. Hospital 

Inpatient Prospective Payment Systems for Acute Care 

Hospitals and the Long-Term Care Hospital Prospective 

Payment System Changes and FY2011 Rates, 75 Fed. Reg. 

50,042, 50,070 (Aug. 16, 2010). The latter group objected, 

asserting the Secretary’s action would “endanger their ability 

to provide the type of care that Congress specifically sought 

to protect by establishing their special Medicare payment 

systems.” Id. Relying on the once-obscure grant of authority 

in § 1395ww(d)(5)(I)(i), the Secretary implemented the 

adjustments anyway. See id.

 The Hospitals sought expedited judicial review of the 

Secretary’s decision from the Provider Reimbursement 

Review Board, which disclaimed jurisdiction but noted it 

would have otherwise expedited review. Once the Medicare 

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administrator reversed the Board’s jurisdictional finding, the 

Hospitals filed suit in district court, claiming the Secretary’s 

decision was arbitrary, capricious, and exceeded the scope of 

her statutory authority. The Secretary responded by filing a 

motion to dismiss. Finding the statutory scheme ambiguous 

and deferring to the Secretary’s reasonable interpretation of 

the adjustment provisions, the district court granted the 

motion. See Adirondack Med. Ctr. v. Sebelius, 891 F. Supp. 

2d 36, 48 (D.D.C. 2012). 

II 

 This case rests on Chevron deference. We review a 

district court’s deference decision de novo, “employing 

traditional tools of statutory construction.” Nat’l Ass’n of 

Clean Air Agencies v. EPA, 489 F.3d 1221, 1228 (D.C. Cir. 

2007) (internal quotation marks omitted). The first step of 

this familiar inquiry is considering “the text, structure, 

purpose, and history of an agency’s authorizing statute” to 

determine whether a provision reveals congressional intent 

about the precise question at issue. Hearth, Patio & Barbecue 

Ass’n v. U.S. Dep’t of Energy, 706 F.3d 499, 503 (D.C. Cir. 

2013) (internal quotation marks omitted). If we cannot 

readily divine Congress’ clear intent, we must defer to the 

agency’s interpretation of the statute so long as it is “based on 

a permissible construction of the statute.” See Chevron, 

U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 843 

(1984). 

A 

 The Hospitals begin their Chevron challenge relying on 

the canon of expressio unius est exclusio alterius (the 

expression of one is the exclusion of others). In their reply 

brief, the Hospitals assert they “invoke expressio unius only 

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to establish that subsection (d)(3)(A)(vi) on its own terms 

unambiguously authorizes adjustments solely to the 

standardized amount.” Reply Br. at 6 n.3. Had the Secretary 

attempted to promulgate the changes to the hospital-specific 

rates by invoking § 1395ww(d)(3)(A)(vi), the canon would 

have force in isolation. But the Secretary did no such thing. 

Instead, the manner in which the Appellants rely on the 

expressio unius canon suggests they are drawing on the 

canon’s preclusive power. In other words, the very 

invocation of the canon constitutes a challenge to the 

Secretary’s broad authority. The nature of their argument is 

in the very name of the canon—exclusio alterius, or the 

exclusion of the other. As § 1395ww(d)(3)(A)(vi) concerns 

the grant of authority, the invocation of the canon must 

naturally involve an attempt to exclude all other potential 

sources of authority when it comes to remedying a particular 

malady. And when one possible interpretation of a statutory 

provision has the potential to render another provision inert, 

we cannot simply say, as the Appellants suggest we do, that 

we are reviewing the former in isolation. Rather, the canon’s 

relevance and applicability must be assessed within the 

context of the entire statutory framework. See Am. Bankers 

Ass’n v. Nat’l Credit Union Admin., 271 F.3d 262, 267 (D.C. 

Cir. 2001) (“[W]e must not ‘confine [ourselves] to examining 

a particular statutory provision in isolation. The meaning—or 

ambiguity—of certain words or phrases may only become 

evident when placed in context.’” (quoting FDA v. Brown & 

Williamson Tobacco Corp., 529 U.S. 120, 132 (2000))). 

With that in mind, we turn to the Hospitals’ argument. 

They read the grant of authority in § 1395ww(d)(3)(A)(vi) as 

impliedly precluding the Secretary from modifying hospitalspecific rates to offset increased payments resulting from the 

2008 and 2009 coding practice changes. It is clear, they say, 

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Congress intended to shield such rates from modification by 

directing the Secretary to adjust only the standardized 

amounts in an effort to compensate for the deleterious or 

unwanted effects of such changes. 

 This may be a reasonable reading of the statute, but our 

inquiry at Chevron step one is not satisfied by reasonableness 

alone. See Chevron, 467 U.S. at 842–43. The expressio unius 

canon is a “feeble helper in an administrative setting, where 

Congress is presumed to have left to reasonable agency 

discretion questions that it has not directly resolved.” Cheney 

R.R. Co. v. I.C.C., 902 F.2d 66, 68–69 (D.C. Cir. 1990) (citing 

Chevron, 467 U.S. at 843–44). It offers “too thin a reed to 

support the conclusion that Congress has clearly resolved an 

issue.” Mobile Commc’ns Corp. of Am. v. FCC, 77 F.3d 

1399, 1405 (D.C. Cir. 1996) (quoting Tex. Rural Legal Aid, 

Inc. v. Legal Servs. Corp., 940 F.2d 685, 694 (D.C. Cir. 1991) 

(internal brackets and quotation mark omitted). And when 

countervailed by a broad grant of authority contained within 

the same statutory scheme, the canon is a poor indicator of 

Congress’ intent. See Creekstone Farms Premium Beef, 

L.L.C. v. Dep’t of Agric., 539 F.3d 492, 500 (D.C. Cir. 2008); 

see also Cnty. of L.A. v. Shalala, 192 F.3d 1005, 1014 (D.C. 

Cir. 1999) (“Under Chevron step one we consider not only the 

language of the particular statutory provision under scrutiny, 

but also the structure and context of the statutory scheme of 

which it is a part.” (quoting Ill. Pub. Telecomms. Ass’n v. 

FCC, 117 F.3d 555, 568 (D.C. Cir. 1997) (internal quotation 

marks omitted))). 

 Even if the canon has some force here, nothing 

unambiguously suggests Congress intended to strip the 

Secretary of her broad grant of authority under 

§ 1395ww(d)(5)(I)(i). Consider, for example, the language of 

§ 1395ww(d)(3)(A)(vi): “the Secretary may adjust the 

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average standardized amounts.” The Hospitals understand 

this to mean the Secretary may only adjust the standardized 

amounts. See Reply Br. at 3. Momentarily setting aside our 

understanding that Congress generally knows how to use the 

word “only” when drafting laws, see Pub. Citizen, Inc. v. 

Rubber Mfrs. Ass’n, 533 F.3d 810, 817 (D.C. Cir. 2008), it 

seems more likely that § 1395ww(d)(3)(A)(vi) was Congress’ 

attempt “to clarify what might be doubtful.” See Shook v. 

D.C. Fin. Responsibility & Mgmt. Assistance Auth., 132 F.3d 

775, 782 (D.C. Cir. 1998). 

Prior to the enactment of § 1395ww(d)(3)(A)(vi), the 

Department expressed doubts about its ability to correct the 

potential for anomalously-high payments resulting from 

changes to how hospital cases were classified. See Changes 

to the Hospital Inpatient Prospective Payment Systems, 66 

Fed. Reg. 39,828, 39,862 (Aug. 1, 2001) (“We have stated 

that, prior to implementing severity-adjusted DRGs, we 

would need specific legislative authority to offset any 

significant anticipated increase in payments attributable to 

changes in coding practices caused by significant changes to 

the DRG classification system.”). Congress responded by 

enacting § 1395ww(d)(3)(A)(vi). See Consolidated 

Appropriations Act, 2001, Pub. L. No. 106-554, app. F, tit. 

III, § 301(e)(1), 114 Stat. 2763, 2763A493; see also Changes 

to the Hospital Inpatient Prospective Payment Systems, 66 

Fed. Reg. at 39,862. This sequence of events gives support to 

the idea that Congress intended to clarify and complement the 

Secretary’s existing authority—i.e., to “make assurance 

double sure,” see Shook, 132 F.3d at 782 (internal quotation 

marks omitted)—not to extinguish or eliminate it. Confronted 

by two plausible readings of the statute, we cannot declare 

Congress’ intent unambiguous. See Am. Petroleum Inst. v. 

U.S. EPA, 906 F.2d 729, 740 (D.C. Cir. 1990) (per curiam). 

USCA Case #12-5366 Document #1476522 Filed: 01/24/2014 Page 9 of 15
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 Section 7(b)(1) of the TMA gives us little pause. As the 

Hospitals point out, the provision employs more forceful 

language than what we see in § 1395ww(d)(3)(A)(vi): “the 

Secretary shall . . . make an appropriate adjustment.” In their 

view, the use of such mandatory language—paired with the 

non obstante clause prefacing it—demonstrates Congress’ 

unambiguous intent to direct the Secretary to adjust only the 

standardized amount. These textual aids, however, do not 

sufficiently dispel the provision’s ambiguity. We cannot say 

the use of the word “shall” makes much of a difference, for 

the broad grant of authority enshrined in § 1395ww(d)(5)(I)(i) 

also employs the same word. As with 

§ 1395ww(d)(3)(A)(vi), we are thus left with two equally 

plausible explanations: (1) a conflictive one, rendering the 

provisions mutually exclusive congressional directives; and 

(2) a harmonious one, reading the statutory authorizations as 

overlapping. The dizzying array of other canons that could 

shift the analysis one way or another—e.g., the treatment of 

the non obstante clause, see Cisneros v. Alpine Ridge Grp., 

508 U.S. 10, 18 (1993), or the presumption against implied 

repeals, see Branch v. Smith, 538 U.S. 254, 273 (2003), 

militates against finding unambiguous congressional intent 

here. 

 

B 

 The hospitals next turn to the “basic principle of statutory 

construction that a specific statute . . . controls over a general 

provision . . . particularly when the two are interrelated and 

closely positioned.” HCSC-Laundry v. United States, 450 

U.S. 1, 6 (1981) (citing Bulova Watch Co. v. United States, 

365 U.S. 753, 761 (1961)). The canon is impotent, however, 

unless the compared statutes are “irreconcilably conflicting.” 

See Detweiler v. Pena, 38 F.3d 591, 596 (D.C. Cir. 1994) 

(citing Watt v. Alaska, 451 U.S. 259, 266 (1981)). Absent 

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clearly expressed congressional intent to the contrary, it is our 

duty to harmonize the provisions and render each effective. 

See Morton v. Mancari, 417 U.S. 535, 551 (1974). 

 As explained above, § 1395ww(d)(3)(A)(vi) and section 

7(b)(1) of the TMA can be reasonably construed as grants of 

authority that complement and overlap with 

§ 1395ww(d)(5)(I)(i). Put differently, it is not unreasonable 

to say § 1395ww(d)(5)(I)(i) operates to the extent that 

§ 1395ww(d)(3)(A)(vi) and section 7(b)(1) of the TMA are 

silent. The two provisions say nothing about adjusting the 

hospital-specific rate; therefore, the broad grant of authority 

(and the Secretary’s use thereof) fills a space that the specific 

provisions do not occupy. Such an arrangement does not run 

afoul of the general/specific canon. See United States v. 

Chase, 135 U.S. 255, 260 (1890) (“It is an old and familiar 

rule that where there is, in the same statute, a particular 

enactment, and also a general one, which, in its most 

comprehensive sense, would include what is embraced in the 

former, the particular enactment must be operative, and the 

general enactment must be taken to affect only such cases 

within its general language as are not within the provisions of 

the particular enactment.” (citations and internal quotation 

marks omitted)). 

Perhaps the Hospitals’ argument is better characterized as 

one concerning superfluity. See Amoco Prod. Co. v. Watson, 

410 F.3d 722, 733 (D.C. Cir. 2005) (“It is a familiar canon of 

statutory construction that, ‘if possible,’ we are to construe a 

statute so as to give effect to ‘every clause and word.’” 

(quoting United States v. Menasche, 348 U.S. 528, 538–39 

(1955))). Their reliance on the Supreme Court’s decision in 

RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 132 S. 

Ct. 2065 (2012), confirms this. See id. at 2071 (“[T]he canon 

has full application . . . [when] a general authorization and a 

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more limited, specific authorization exist side-by-side. There 

the canon avoids not contradiction but the superfluity of a 

specific provision that is swallowed by the general one, 

‘violat[ing] the cardinal rule that, if possible, effect shall be 

given to every clause and part of the statute.’” (quoting D. 

Ginsberg & Sons, Inc. v. Popkin, 285 U.S. 204, 208 (1932) 

(alteration in original))). If § 1395ww(d)(5)(I)(i)’s 

prescription of authority is as broad as the Secretary says it is, 

they argue, parts of the statutory scheme will become 

meaningless excess and congressional directives will either be 

ignored or fulfilled by unintended means. 

 The surplusage canon is neither inviolable nor 

insurmountable. See Lamie v. U.S. Tr., 540 U.S. 526, 536 

(2004). This is particularly true when agency authority is at 

stake. See DeNaples v. Office of Comptroller of Currency, 

706 F.3d 481, 487 (D.C. Cir. 2013) (“That there is overlap 

among the various enforcement provisions is not surprising. . . 

. Congress could reasonably hand the agencies a palette 

sufficiently sophisticated to capture the full spectrum of 

enforcement possibility.” (citing RadLAX, 132 S. Ct. at 

2072)). 

The canon is particularly unhelpful when both 

interpretive outcomes lead to some sort of surplusage—either 

§ 1395ww(d)(3)(vi)(A) and section 7(b)(1) of the TMA must 

give way to the broad grant of authority in 

§ 1395ww(d)(5)(I)(i), or the last must be declared a nullity. 

While it is possible to give the first two provisions full effect 

without gutting § 1395ww(d)(5)(I)(i) in its entirety, we would 

need to engage in a statutory rewrite to do so—e.g., insert the 

word “only” here and there, insert a limiting clause to the 

Secretary’s otherwise broad grant of authority, etc. This is 

not our role, see Pub. Citizen, 533 F.3d at 816–17 (declining 

to “add[] words that are not in the statute that the legislature 

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enacted” (citing United States v. Monsanto, 491 U.S. 600, 611 

(1989))), and we note the need for such manipulation creates 

strong doubts about whether the Hospitals’ interpretation is 

correct, let alone unambiguously clear. 

We cannot divine the precise reasons for the manner of 

Congress’ enactments. Perhaps, to build on the Bard’s turn of 

phrase, the legislature sought “to make assurance triple sure.” 

Despite the potential for statutory redundancy, Congress may 

have decided to clarify—not once, but twice—what the 

Secretary was permitted to do, thereby handing her “a palette 

sufficiently sophisticated to capture the full spectrum of . . . 

possibility.” See DeNaples, 706 F.3d at 487. At the very 

least, we remain unconvinced the statutory scheme is 

unambiguous in evincing Congress’ intent. 

C 

 Finally, the Hospitals point to the American Taxpayer 

Relief Act of 2012, which states “the Secretary of Health and 

Human Services shall not have authority to fully recoup past 

overpayments related to documentation and coding changes 

from fiscal years 2008 and 2009.” Pub. L. No. 112-240, 

§ 631(a)(2), 126 Stat. 2313, 2353 (2013). Acknowledging 

that their argument with respect to the Act is legally futile, the 

Hospitals instead cite it in an appeal to sound policy and 

judicial prudence. It would make “little sense,” they argue, 

for Congress to constrain the Secretary’s authority with 

respect to recoupment adjustments, while leaving untouched 

her authority to make prospective adjustments. See Reply Br. 

at 17–18. 

 We need not dwell on this point too long, as “[s]uch 

policy arguments are more properly addressed to legislators or 

administrators, not to judges.” See Chevron, 467 U.S. at 864. 

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And in any event, the Secretary offers a plausible explanation: 

as there was nothing left to recoup with respect to FY 2008 

and FY 2009, Congress decided to close that particular tap. 

See Hospital Inpatient Prospective Payment Systems for 

Acute Care Hospitals and the Long-Term Care Hospital 

Prospective Payment System and Fiscal Year 2013 Rates, 77 

Fed. Reg. 53,258, 53,276 (Aug. 31, 2012) (“Because these 

adjustments, in effect, balanced out, there was no year-to-year 

change in the standardized amount due to this recoupment 

adjustment for FY 2012. . . . [A]ll overpayments made in FY 

2008 and FY 2009 have been fully recaptured with 

appropriate interest, and the standardized amount has been 

returned to the appropriate baseline.”). 

D 

 The only certainty that we can discern from the statutory 

scheme is that it is unclear. We must therefore turn to step 

two of the Chevron inquiry: the reasonableness of the 

Secretary’s interpretation. The Secretary determined there 

was an artificial increase unrelated to any actual change in the 

severity of illnesses treated. She therefore made a downward 

adjustment to the rate paid to rural and sole community 

hospitals in order to ameliorate the increasing rate paid to all 

hospitals due to the revamping of the diagnosis coding 

system. In so doing, the Secretary reasonably exercised her 

authority under § 1395ww(d)(5)(I)(i) to provide “for such 

other exceptions and adjustments to [IPPS] payment amounts 

. . . as the Secretary deems appropriate.” 

 This case ultimately concerns the Secretary’s ability to 

combat artificial increases in payment amounts, i.e., to 

minimize the hospitals’ receipt of funds for expenses they 

have not incurred. See Changes to the Hospital Outpatient 

Prospective Payment System and CY 2008 Payment Rates, 72 

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Fed. Reg. at 47,178. In attempting to preserve this financial 

windfall, the Appellants argue for a statutory interpretation 

that severely cabins the Secretary’s ability to rectify a difficult 

and legitimate problem. We do not think this is a reasonable 

approach, particularly as the Appellants’ gain comes at every 

other participating hospital’s loss. However much Congress 

sought to protect hospitals serving underserved 

communities—hospitals that are already protected under 

special formulae—we cannot say such a cumulative benefit 

was unquestionably intended by the legislature. 

III 

 The Hospitals contend our inquiry ends at the first 

Chevron step. Our analysis suggests otherwise. We agree 

with the district court’s conclusion that the statutory scheme 

was ambiguous and unclear. Its decision, therefore, is 

Affirmed.

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