Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-09-05248/USCOURTS-caDC-09-05248-0/pdf.json

Parties Involved:
Baptist Memorial Hospital
Appellant
Kathleen Sebelius
Appellee

Document Text:

United States Court of Appeals 

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 22, 2010 Decided April 30, 2010 

No. 09-5248 

BAPTIST MEMORIAL HOSPITAL, 

APPELLANT

v. 

KATHLEEN SEBELIUS, SECRETARY, DEPARTMENT OF HEALTH 

AND HUMAN SERVICES, 

APPELLEE

Appeals from the United States District Court 

for the District of Columbia 

(No. 1:02-cv-01919-PLF) 

No. 09-5258 

ST. AGNES MEDICAL CENTER, 

APPELLANT

v. 

KATHLEEN SEBELIUS, SECRETARY, U.S. DEPARTMENT OF 

HEALTH AND HUMAN SERVICES, 

APPELLEE

USCA Case #09-5248 Document #1242604 Filed: 04/30/2010 Page 1 of 14
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Appeal from the United States District Court 

for the District of Columbia 

(No. 1:06-cv-00820) 

Leslie D. Alderman III argued the cause for appellant 

Baptist Memorial Hospital. With him on the briefs was Kenneth 

R. Marcus. 

Thomas J. Weiss, pro hac vice, argued the cause for 

appellant St. Agnes Medical Center. 

Christine N. Kohl, Attorney, U.S. Department of Justice, 

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

Anthony J. Steinmeyer, Assistant Director. Gerard Keating, 

Attorney, U.S. Department of Health & Human Services, and R. 

Craig Lawrence, Assistant U.S. Attorney, entered appearances. 

Before: GINSBURG, TATEL, and GRIFFITH, Circuit Judges. 

Opinion for the Court filed by Circuit Judge TATEL. 

TATEL, Circuit Judge: In these consolidated cases, two 

hospitals seek mandamus to compel the Secretary of Health and 

Human Services to reopen final Medicare reimbursement 

determinations regarding inpatient services provided by the 

hospitals. Concluding that the Secretary had no clear duty to 

reopen the payment decisions, the district court dismissed both 

cases for lack of mandamus jurisdiction. We agree with the 

district court on all counts and therefore affirm. 

USCA Case #09-5248 Document #1242604 Filed: 04/30/2010 Page 2 of 14
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I. 

 The central issue presented in these cases has been the 

focus of extensive litigation culminating in two controlling 

decisions from this court—In re Medicare Reimbursement 

Litigation, 414 F.3d 7 (D.C. Cir. 2005), and Monmouth Medical 

Center v. Thompson, 257 F.3d 807 (D.C. Cir. 2001). We 

therefore provide only the following brief overview of the 

applicable statutory and regulatory regime. 

Under the Medicare Act, the Secretary of Health and 

Human Services (HHS) reimburses hospitals for covered 

inpatient services provided to Medicare beneficiaries. 42 U.S.C. 

§ 1395ww. HHS administers these payments through the 

Centers for Medicare and Medicaid Services, formerly the 

Health Care Financing Administration (HCFA). To obtain 

reimbursement, hospitals submit yearly cost reports to fiscal 

intermediaries—typically private insurance companies acting on 

behalf of the Secretary. After auditing the cost report, the 

intermediary issues a Notice of Program Reimbursement (NPR), 

in which it determines the amount owed to the hospital for the 

cost reporting year at issue. 42 C.F.R. § 405.1803. Hospitals 

can appeal that determination to the Provider Reimbursement 

Review Board (“the Board”) and then to federal district court. 

42 U.S.C. § 1395oo(a), (f). 

 Hospitals serving a disproportionately high number of lowincome Medicare patients receive increased reimbursements 

known as “disproportionate share hospital” (DSH) adjustments. 

 Congress has set forth a formula for determining DSH 

adjustments based, in part, on the number of days that a hospital 

treated patients entitled to state Medicaid payments. Id.

§ 1395ww(d)(5)(F)(vi)(II). Previously, HCFA interpreted this 

statutory formula to include only those days for which hospitals 

actually received Medicaid payments—an interpretation that the 

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Fourth, Sixth, Eighth, and Ninth Circuits struck down as 

inconsistent with the Medicare Act. Cabell Huntington Hosp., 

Inc. v. Shalala, 101 F.3d 984 (4th Cir. 1996); Legacy Emanuel 

Hosp. & Health Ctr. 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. Sec’y of Health & 

Human Servs., 19 F.3d 270 (6th Cir. 1994). In 1997, 

acknowledging that its prior interpretation was “contrary to the 

applicable law in four judicial circuits,” HCFA issued Ruling 

97-2, which instructed intermediaries to include all Medicaideligible days in the DSH adjustment calculation, regardless of 

whether the hospital actually received payments for those days. 

Health Care Financing Administration Ruling 97-2 (Feb. 27, 

1997) (“Ruling 97-2” or “HCFAR 97-2”). 

The two cases before us involve the intersection of Ruling 

97-2 and HHS regulations authorizing the reopening of 

intermediary reimbursement determinations. Pursuant to 42 

C.F.R. § 405.1885(a) (1997), as that regulation existed at all 

relevant times, an intermediary’s reimbursement determination 

“may be reopened” if the affected hospital moves to do so 

“within 3 years of the date of the notice of the intermediary 

determination.” Unlike NPR determinations themselves, an 

intermediary’s decision whether to reopen a determination under 

this provision is both discretionary and unreviewable. Your 

Home Visiting Nurse Servs., Inc. v. Shalala, 525 U.S. 449, 452–

56 (1999). Additionally, 42 C.F.R. § 405.1885(b) (1997)—the 

key provision at issue here—provides that a determination 

rendered by the intermediary “shall be reopened and revised by 

the intermediary if, within the aforementioned 3-year period, 

[HCFA] notifies the intermediary that such determination or 

decision is inconsistent with the applicable law, regulations, or 

general instructions issued by [HCFA].” 

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In Monmouth, the first of our two previous decisions 

regarding this issue, we concluded that Ruling 97-2 constitutes 

notice under section 405.1885(b) that HCFA’s former method of 

calculating DSH adjustments was “inconsistent with the 

applicable law.” 42 C.F.R. § 405.1885(b). Accordingly, we 

held that because section 405.1885(b) speaks in mandatory 

terms, it imposes a nondiscretionary duty on the Secretary, 

enforceable through mandamus, to reopen NPRs decided within 

the three years before the issuance of Ruling 97-2—

notwithstanding the fact that Ruling 97-2 itself states that the 

agency “will not reopen settled cost reports based on this issue.” 

See Monmouth, 257 F.3d at 814–15. Then, in In re Medicare, 

we clarified that this clear duty to reopen applies to NPRs issued 

during the three years prior to Ruling 97-2 even for hospitals 

that had failed to appeal a cost report or request reopening: 

“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).” In re Medicare, 414 F.3d at 11. 

Relying on our decisions in Monmouth and In re Medicare, 

the two hospitals in these consolidated appeals seek mandamus 

to compel the Secretary (through her intermediaries) to reopen 

their cost reports and apply the more favorable DSH calculation 

adopted in Ruling 97-2. See 28 U.S.C. § 1361. The first 

hospital, Baptist Memorial, challenges a 1993 NPR that 

determined, pursuant to HCFA’s former eligible days 

calculation, that it was ineligible for a DSH adjustment for its 

FY 1991 cost report. In 1994, Baptist appealed that decision to 

the Board. While that appeal was still pending, HCFA issued 

Ruling 97-2. The Board then advised Baptist of the filing 

schedule for the appeal and warned that its case would be 

dismissed if Baptist missed the applicable deadlines. Despite 

this reminder, Baptist failed to submit its “position papers” on 

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time, and the Board consequently dismissed its appeal for want 

of prosecution in 1998. Four years later, Baptist filed this 

mandamus action in the U.S. District Court for the District of 

Columbia, seeking an order compelling the Secretary to reopen 

and correct the 1993 reimbursement determination pursuant to 

the eligible but unpaid days calculation set forth in Ruling 97-2. 

The second hospital before us, St. Agnes Medical Center, 

challenges its intermediary’s 1992 NPR determination regarding 

its FY 1990 cost report. In 1995, St. Agnes asked the 

intermediary to reopen the cost report and provide a DSH 

adjustment, but the intermediary rejected that request. St. Agnes 

appealed that decision to the Board, and on June 4, 1997 (after 

Ruling 97-2’s issuance), the parties settled, agreeing that the 

intermediary would reopen St. Agnes’s cost report to apply a 

DSH adjustment. After doing so and applying the former 

eligible days calculation, however, the intermediary informed 

St. Agnes that it failed to meet the qualifying threshold for an 

adjustment. Then, in 1999, the Board dismissed St. Agnes’s 

appeal on the ground that it lacked jurisdiction over that appeal 

in view of Your Home Visiting Nurse Services, Inc. v. Shalala, 

525 U.S. at 453, in which the Supreme Court held that the Board 

lacks authority to review an intermediary’s refusal under section 

405.1885(a) to reopen a reimbursement determination. Seven 

years after the dismissal of its appeal, St. Agnes sought 

mandamus relief in the district court. 

The district court dismissed both mandamus actions for 

lack of jurisdiction. Noting that the two hospitals sought 

reopening of NPRs issued more than three years prior to Ruling 

97-2’s issuance in 1997, the court concluded that neither 

hospital could show that it had a clear right to relief or that the 

Secretary had a nondiscretionary duty to act under the 

regulation—prerequisites for mandamus jurisdiction. See

Power v. Barnhart, 292 F.3d 781, 784 (D.C. Cir. 2002) 

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(outlining requirements for mandamus relief). In reaching this 

conclusion, the district court also rejected the hospitals’ 

argument that they were entitled to mandamus relief because 

they had jurisdictionally proper appeals pending when HCFA 

issued Ruling 97-2. Baptist Mem’l Hosp. v. Johnson, 603 F. 

Supp. 2d 40, 45–46 (D.D.C. 2009); St. Agnes Med. Ctr. v. 

Sebelius, 628 F. Supp. 2d 78, 83–84 (D.D.C. 2009). 

Baptist and St. Agnes appealed the denials of their 

mandamus petitions. Because both cases require us to answer 

the same principal question—whether section 405.1885(b) 

mandates reopening of NPRs issued more than three years prior 

to issuance of Ruling 97-2 where the hospitals had appeals 

pending at that time—we consolidated the appeals. 

II. 

The Mandamus Act grants district courts original 

jurisdiction over “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. A court may grant mandamus relief “only 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 plaintiff.” Power, 292 F.3d at 784 (internal 

quotation marks omitted). We review a district court’s 

determination whether a plaintiff has satisfied these standards de 

novo. In re Medicare, 414 F.3d at 10. 

In Monmouth and In re Medicare, we held that the 

Secretary had a clear duty to reopen the hospitals’ NPRs 

pursuant to section 405.1885(b) because the notice of 

inconsistency—i.e., Ruling 97-2—occurred within the threeyear period after the date of the challenged reimbursement 

determinations. Baptist and St. Agnes concede, as they must, 

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that unlike the hospitals in Monmouth and In re Medicare, they 

seek reopening of “intermediary determinations that were issued 

before the three-year reopening window, as measured from the 

issuance of HCFAR 97-2.” Appellants’ Br. 26. They 

nonetheless contend that the district court erred in dismissing 

their mandamus actions because Ruling 97-2’s “appeal 

provision” imposes on the Secretary a nondiscretionary duty to 

reopen their cost reports. The portion of Ruling 97-2 on which 

the hospitals rely states: 

We will not reopen settled cost reports based on this 

issue. For hospital cost reports that are settled by 

fiscal intermediaries on or after the effective date of 

this ruling, these [eligible but unpaid] days may be 

included. For hospital cost reports which have been 

settled prior to the effective date of this ruling, but for 

which the hospital has a jurisdictionally proper appeal 

pending on this issue pursuant to either 42 CFR 

405.1811 or 42 CFR 405.1835, these [eligible but 

unpaid] days may be included for purposes of 

resolving the appeal. 

Homing in on the last sentence of this paragraph, the hospitals 

argue that Ruling 97-2 creates a mandatory duty to reopen their 

cost reports because they had “jurisdictionally proper appeal[s]” 

pending before the Board when HCFA issued the 1997 ruling. 

 

In arguing that the appeal provision compels the Secretary 

to reopen their cost reports, however, the hospitals lose sight of 

the fact that under Monmouth and In re Medicare it is section 

405.1885(b), not Ruling 97-2, that creates the obligation to 

reopen. Ruling 97-2 merely serves as the notice of 

inconsistency that triggers the Secretary’s duty to reopen and 

revise NPR determinations. But that obligation—and thus the 

clear duty to act required for mandamus relief—itself derives 

USCA Case #09-5248 Document #1242604 Filed: 04/30/2010 Page 8 of 14
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from section 405.1885(b)’s “shall be reopened” language. And 

the scope of section 405.1885(b)’s mandate is clear: it expressly 

limits the duty to reopen to cases in which HCFA provides a 

notice of inconsistency to intermediaries within three years of 

the NPR. Ruling 97-2’s appeal provision is therefore beside the 

point, as it does nothing to alter section 405.1885(b)’s three-year 

reopening limitation. See Monmouth, 257 F.3d at 814–15 

(“[Section] 405.1885(b) impose[s] a clear duty on intermediaries 

to reopen DSH payment determinations for the hospitals. The 

portion of HCFAR 97-2 that conflicts with that duty is simply 

inapplicable.”); see also 42 C.F.R. § 405.1885(a) (“No such 

determination or decision may be reopened after such 3-year 

period except as provided in paragraphs (d) and (e) of this 

section.”). 

As the district court explained, moreover, even if the appeal 

provision had any effect here, that provision says only that 

eligible but unpaid days “may” be included if a hospital has an 

appeal pending on the issue: “While the above paragraph 

[containing the appeal provision] plainly permitted the Secretary 

and the Review Board to rely on HCFAR 97-2’s policy change 

when settling appeals pending at the time HCFAR 97-2 was 

issued, it does not require them to do so.” Baptist, 603 F. Supp. 

2d at 46; see St. Agnes, 628 F. Supp. 2d at 83. The hospitals 

respond that although the word “may” usually connotes a degree 

of discretion, in this context it actually means “must” or “shall.” 

But we agree with the district court that the most natural reading 

of this provision is the one that is most obvious: “may” is 

permissive rather than obligatory. The appeal provision 

therefore cannot provide the “clear duty to act” necessary to 

sustain the hospitals’ requests for mandamus relief. Power, 292 

F.3d at 784 (internal quotation marks omitted). 

Reinforcing this conclusion, the appeal provision specifies 

that eligible but unpaid days may be included “for purposes of 

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resolving the appeal” under 42 C.F.R. §§ 405.1811 or 405.1835. 

In other words, the appeal provision is just that: it pertains to the 

resolution of appeals, not to the reopening of settled cost reports 

under section 405.1885. Because neither Baptist nor St. Agnes 

had any such appeal pending when it brought its mandamus 

action in the district court, there is no extant appeal to 

“resolv[e]” through application of the new eligible days 

calculation. 

 Baptist and St. Agnes further contend that even if Ruling 

97-2 creates no duty to reopen, the filing of their appeals tolled 

the three-year reopening limitation. But because neither 

hospital pressed this argument in the district court, they cannot 

do so for the first time here. See Adams v. Rice, 531 F.3d 936, 

945 (D.C. Cir. 2008) (refusing to consider argument never made 

in district court). 

III. 

 Having disposed of the principal argument shared by 

Baptist and St. Agnes, we turn to the arguments unique to each 

hospital. 

Baptist Memorial 

Baptist raises an alternative theory of mandamus relief 

based on a 1994 policy memorandum HCFA issued in the wake 

of the Sixth Circuit’s decision in Jewish Hospital v. Secretary of 

Health & Human Services, 19 F.3d 270—the first of the four 

circuit court decisions striking down the former eligible days 

calculation as inconsistent with the Medicare Act. This “Sixth 

Circuit Memorandum” informed the HCFA regional office of 

the Jewish Hospital opinion and instructed it to apprise 

intermediaries serving hospitals within the Sixth Circuit of the 

resulting “change in policy concerning DSH calculations.” 

Located within the jurisdiction of the Sixth Circuit, Baptist 

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argues that the Sixth Circuit Memorandum constitutes a notice 

of inconsistency for purposes of section 405.1885(b). 

If, as Baptist alleges, the Sixth Circuit Memorandum 

qualifies as proper notice of inconsistency, then it would indeed 

trigger section 405.1885(b)’s duty to reopen. This is because 

HCFA issued the memorandum in 1994—comfortably within 

the three-year period following Baptist’s 1993 NPR. Although 

it is unclear from the record whether HCFA ever conveyed the 

new policy articulated in the Sixth Circuit Memorandum to 

intermediaries (as required to qualify as notice under section 

405.1885(b)), we need not decide whether the memo triggered a 

“clear right to relief” or “duty to act” (the first two requirements 

for mandamus relief) because Baptist has failed to show that 

there was “no other adequate remedy available” (the third 

requirement for mandamus relief). Power, 292 F.3d at 784 

(internal quotation marks omitted). 

 Baptist filed its appeal with the Board just a few days after 

the Sixth Circuit issued its decision in Jewish Hospital—

controlling authority directly supporting Baptist’s argument that 

the intermediary should have calculated its DSH adjustment 

using eligible but unpaid days. And while that appeal was 

pending, HCFA issued the Sixth Circuit Memorandum, which 

adopted Jewish Hospital as binding on intermediaries. Yet 

instead of raising the Jewish Hospital decision in its appeal to 

the Board and then, if necessary, seeking subsequent court 

review pursuant to 42 U.S.C. § 1395oo(f), Baptist abandoned its 

appeal altogether. As the district court rightly concluded, 

Baptist has offered no “compelling reason for its failure to 

pursue these avenues of relief.” Baptist, 603 F. Supp. 2d at 47; 

see Heckler v. Ringer, 466 U.S. 602, 616 (1984) (“The commonlaw writ of mandamus, as codified in 28 U.S.C. § 1361, is 

intended to provide a remedy for a plaintiff only if he has 

exhausted all other avenues of relief.”). 

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 Baptist insists that it did supply a valid reason for 

abandoning its appeal: “the Hospital reasonably believed that it 

was unnecessary for it to pursue its appeal of fiscal year 1991 

before the [Board] because the Hospital was of the 

understanding that the intermediary was required to unilaterally 

reopen the cost report to make the DSH adjustment by 

including” eligible but unpaid days. Appellants’ Br. 50 (internal 

quotation marks omitted). But for purposes of mandamus 

jurisdiction, the question is whether Baptist had an adequate 

remedy. It did—the administrative appeal that it subsequently 

abandoned. Even though this remedy may have been, in 

Baptist’s view, redundant (because Baptist thought the 

intermediary was obligated to reopen the NPR on its own 

initiative), that hardly renders it inadequate. Having failed to 

pursue the adequate remedy afforded by the administrative and 

judicial appeal processes, Baptist cannot now seek to vindicate 

its alleged right to relief through mandamus. 

St. Agnes 

 St. Agnes’s alternative argument suffers from the same 

flaw. It contends that once the intermediary reopened its cost 

report pursuant to the 1997 settlement agreement, the 

intermediary was obligated to include eligible but unpaid days 

in the DSH calculation. According to St. Agnes, that obligation 

derives from three sources: (1) Ruling 97-2; (2) the Ninth 

Circuit’s decision in Legacy Emanuel Hospital & Health Center 

v. Shalala, 97 F.3d 1261—the third in the quartet of circuit court 

opinions striking down HCFA’s former eligible days 

interpretation; and (3) the “Ninth Circuit Memorandum,” a 

HCFA directive (analogous to the Sixth Circuit Memorandum 

discussed above) instructing the regional office to notify fiscal 

intermediaries serving hospitals in the Ninth Circuit, where St. 

Agnes is located, of the Legacy Emanuel decision. When 

calculating the DSH adjustment for the reopened cost report, 

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however, the intermediary, allegedly in violation of all three of 

these authorities, used HCFA’s former eligible days calculation. 

St. Agnes complains that it lacked any remedy for this violation 

because “once the Board had dismissed [its appeal] for lack of 

jurisdiction” pursuant to Your Home, it “was left without a 

further avenue to obtain the benefit to which it was entitled 

under the reopening.” Reply Br. 31. 

Your Home, however, only barred St. Agnes from seeking 

review of the intermediary’s refusal to reopen the FY 1990 cost 

report; it did not prevent St. Agnes from challenging the 

reimbursement determination made by the intermediary after the 

intermediary reopened the cost report in 1997. As the Supreme 

Court explained, “an intermediary’s affirmative decision to 

reopen and revise a reimbursement determination ‘shall be 

considered a separate and distinct determination’ to which the 

regulations authorizing appeal to the Board are applicable.” 

Your Home, 525 U.S. at 453 (quoting 42 C.F.R. § 405.1889). 

Although St. Agnes’s intermediary may not have “revise[d]” the 

DSH adjustment, the Ninth Circuit has interpreted the appeal 

regulations as permitting Board review of “all matters the fiscal 

intermediary had reconsidered upon reopening the cost report,” 

not just those cost items modified on reopening. French Hosp. 

Med. Ctr. v. Shalala, 89 F.3d 1411, 1420 (9th Cir. 1996); see 

Edgewater Hosp., Inc. v. Bowen, 857 F.2d 1123, 1135 (7th Cir. 

1989) (noting that an intermediary’s decision not to change 

challenged cost items “itself was a reconsideration” subject to 

appeal), amended by 866 F.2d 228 (7th Cir. 1989). 

 

Yet St. Agnes made no effort to appeal the intermediary’s 

1997 reimbursement determination to the Board, and it gives us 

no persuasive reason to believe it could not have done so. Nor 

did it take any other action to contest the implementation of the 

settlement agreement until it filed its mandamus action in the 

district court seven years later. Because St. Agnes, like Baptist, 

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failed to seek relief through available administrative and judicial 

review procedures, it cannot do so now through mandamus. 

IV. 

For the foregoing reasons, we affirm the district court’s 

dismissals of both mandamus actions. 

So ordered. 

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