ST. MI CHAEL ’S MEDI CALCENTER,

et al., Pla int if

fs , v . CHARL ES E. J OHNSON, ActingSecre tary , United States Depa rtment of He a lthand

Human Se rv ic e s, Def endant. UN I TE D ST AT ES D I STRI CT C OU RT F O R T H E D IS T R IC T O F C O LU M B IA

Civil Action No. 07-1484 consolidated with 07-2036 EGS/DAR

RE P OR T A ND RE CO M M EN DA TIO N Plaintiffs’ Motion for Summary J udg ment (Doc ument No. 18), a nd Def endant’ s Motion for Summary

J udg ment (Doc ument No. 20) a re pe nding f

or consider ation by

the under signe d. Upon consider ation of the plea dings ( Document Nos. 1, 11) ; the pendingmotions; the memoranda

in support thereof

and in opposition thereto (Doc ument Nos. 21, 22, 23, 26, 27); the administrative re cord (seeDocument No. 5) and the e ntire re cord he rein, the unde rsigned
rec ommends that both moti ons be denie d without prejudice, a nd that this action be re manded f or further administrative proc eeding s consistent with the instant Report and Recommendation.
I. BACKGROUND The Pa rti es’ Cont entio ns Plaintiffs are twe nty -two hospitals “fr om multi ple urba n Metropolitan Statisti cal Ar easSt
. M i chae l ’ s M edi cal C ent er , etal
. v . J ohnson 2

(as de fined by

the Executive Off

ice of Manag ement and B udg et).” Complaint, ¶ 4. Pl aintiffs

“ a sk the Court

to d e c ide qu e sti on s o f l aw that th e B oa rd fo un d th at it

did no t ha ve the a uth ority to decide, a

nd to determine the reby

the merits of their c laims for additional Medica re pay ments[] ” ( id. at 3-4) (unnumbere d para graph) ; however , Plaintiffs chara cterize their action as one “se ekingadditional pay ments from the Medic areprogram unde r its prospective pa y ment sy stem beca

use of a n incorre ctly

calc ulated wa g e index for the Providers f or fe dera l fiscal year 2001 (Oc tober 1, 2000 - Septe mber 30, 2001) which includes Provider fiscal year s ending September 30, 2001 a

nd Dec ember

31, 2001.” Complaint, ¶ 6. As relief , Plaintiffs ask, inter alia, “[t] hat this Court require that the wag es, fringebenef its, and hours of all re classified hospitals located in the Providers’ Metropolitan Statisti cal Ar ea beincluded in the computation of the wa g e ind e x for

the Pla int if

fs fo r f e de ra l f isc a l ye ar 2 00 1 whic h w ou ld r e su lt i n a n in c re a se of collec tive reimburse ment of appr ox imately $23,956,069[.] ” Id. at 14 (unnumber ed para graph)
. Def endant, the Sec reta

ry of He alth and Human Ser vices, in his Answer , asks that the
c ourt “ a ff ir m[] the va lid ity

of the c ha lle ng e d a g e nc y

a c tio n[]” and

e nte r j ud g me nt d ism iss ingthi s action with pre

judice. Answe r (Doc ument No. 11) at 5 (unnumbere d para graph)
. Sta tuto ry and Re gul ato ry Fra mewo rk This action arises under Title XV I I Iof the Social Sec urity Act, more commonly

known as the Me dic are Ac t, a

statut or y sc he me by

wh ic h Co ngre ss e sta

bli sh e d a fe de ra lly fu nd e d h e a lth insurance program for

the elderly

and disabled. See42 U.S.C. §§ 1395 et seq . T he pr ogra m is administered by

Centers for

Medica re a nd Medica id Services ( “CMS”), for merly the Hea lth CareSt
. M i chae l ’ s M edi cal C ent er , etal
. v . J ohnson 3

A ny r ef er enc es t o H C FA i n c i t ed r egu l at i ons or t he adm i ni s t r at i ve r ecor d re f er s t o t he ent i t y now k nown 1 as CM S. Financ ing A dministration (“ HCFA” ), at the dire ction of the Sec reta ry of the United States 1 Depa rtment of He alth and Human Ser vices (“ Secre tary”). At issue in this action ar e provisions of the program whic h g overn the cost reimburse ments to providers of se rvice (“Provider s”) rende ringinpatient medical se rvice s. See42 U.S.C. § 1395ww. Specifica lly , the controve rted statut e pr ov ide s:

[T] he Secr etar

y shall adjust the proportion (a s estimated by the Secre tary from time to time of hospitals’ costs which ar e attributable to wa g es and w ag e-r elated c osts, of the [diagnosticrelated group] prospective pa y ment rate s computed under s u b p ar a gr a p h( D ) f o r ar e a d i f f e r e n c e s i nh o s p i t a l w a g e l e v e l b y a fac tor (esta

blished by

the Secr etar

y ref lectingthe re lative hospital wag e leve l in the ge ographic are a of the hospital compare d to the national ave rag e hospital wag e leve l. 42 U.S.C. § 1395ww(d)(3) (E).
II. STA ND AR

D O F RE VI EW Mo tio ns f

or Summ ar y Jud gment Pursuant to Rule 56 of the Fe dera l Rules of Civil Procedur e, summary judgme nt shall be grante d if the plea dings on f ile, toge ther with the a ffidavits, if any , show that there is no ge nuine issue as to any

materia l fac t and that the movingparty is entitled to judgment as a matter of la

w. Fe d.R.Civ.P . 56(c) . Materia l fac ts are those that “might affe ct the outcome of the suit under the g overninglaw.” Anderson v. Liberty Lobby, I nc., 477 U.S. 242, 248 (1986). The re is a g enuine issue of material fac t “if the e vidence is such that a re asonable jury could re turn a ve rdict for the non-movingparty .” Id. In consideringa motion for summary judgme nt, all evidenceand inf e re nc e s to be dr awn

fr om t he un de rl yingfa c ts mus t be vie we d in the light m os t f

avo ra ble toSt
. M i chae l ’ s M edi cal C ent er , etal
. v . J ohnson 4

the par ty opposing the motion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 58 7 ( 19 86 ). “ Ad dit ion a lly , ‘ in r uli ngon c ro ss- mot ion s f

or summa ry jud g me nt, the c ourt

sh a ll grant summary

judgme nt only

if one of the moving pa

rties is entitled to judgment a s a matter of law upon material fac ts that are not g enuinely disputed.’” American Cargo Transport, Inc. v. Natsios , 429 F. Supp. 2d 139, 145 (D.D .C. 2006) (quotingPe tc he m, In c . v . U nite d S tates, 99 F. Supp. 2d 50, 54 (D.D.C. 2000)) ( citations omitt ed). “ In a ca se involving r eview of a fina l ag ency
a c tio n und e r t

he Ad min istrativ e Pr oc e dureAc t, 5 U. S.C. § 7 06 , h ow e ve r, the sta nd ard se t f or th i n Rule 56(c) does not apply beca use of the limited role of

a cour t in reviewingthe administrative
rec ord.” Ba

y sta teMe d. Ctr. v . Le av itt , 545 F. Supp. 2d 20, 34-35 (D .D.C. 2008) (c itations omitted).

Judicial R evie w of Secretary’ s Dec ision Pursu ant to t

he Adm inis trative Procedure Act J udicial re view of Me dicar e re imbursement disputes is gove rned by the standar ds set fo rt h in the Ad min istrativ e Pr oc e dure Ac t ( “ APA ” ). 42 U. S.C. § 1 39 5o o( f) (1 ); se eals o 5 U .S. C. § 706

. To the extent nece ssary , “the r eviewingcourt shall dec ide all re levant questions of law , interpre t constituti onal and statutory provisions, and deter

mine the meaningor applica bility of the te rm s o f a

n a g e nc y a c tio n. ” 5 U .S. C. § 70 6. F ur the r, “ [t]he re vie wi ngc ourt sh a ll .
. . ho ld unlawful a

nd set aside a g ency

action, finding s, and conc lusions found to be without observanc e of pr oc e dure re qu ir e d b y

law, un su

pp or te d b y su bs tanti a l e vid e nc e , a

rb itr ary , c a

pric iou s, an a

bu se
o f d i s c r e t i o n , o r

o th e r w i s e n o ti na c c o r d an c e w i thth e l aw . ” 5 U
. S
. C
. § 7 0 6 ( 2 ) ( A )
. “ G e n e r a l l y, an ag ency' s decision is arbitra ry and ca pricious ‘if the a g ency

. . . entirely

failed to c onsider an imp or tant a sp e c t of

the pr ob le m, o ff

e re d a n e xplanatio n f

or its de c isi on

that r un s c ounte r t oSt
. M i chae l ’ s M edi cal C ent er , etal
. v . J ohnson 5

e vid e nc e be fo re the a g e nc y , o r i s so imp la us ibl e that it

c ou ld n ot b e a sc ri be d to a dif fe re nc e in view or the product of a g ency expertise.’” Johnson v. U .S. Dep’ t of Educ. , 580 F. Supp. 2d 154, 1 5 7 (D
. D. C
. 2 0 0 8 ) ( qu o t i n g Motor VehicleMfrs. Ass’n v. State Farm M ut. Auto. Ins. Co. , 463 U.S. 29, 43 (1983)) ( internal c itations omi tted). “A s long a s an ag ency has examined the re levant data a nd articulated a sa

tisfactory explanation for its action[,] including a rational c onnection betwee n the fa cts found and the choice made, c ourts will not dis turb the ag ency' s action.” He ar tla nd

Re g’ l M e d. Ctr. v . Le av itt

, 5 1 1 F. S u

p p . 2 d 4 6 , 5 1 (D
. D. C
. 2 0 0 7 ) ( ci t i n g Motor Veh. Mfrs. Ass’n, 463 U.S. at 43). The sc ope of r eview of an ag ency

decision ac cording ly

is narrow , and a f eder al cour

t is not t o substitut e its judgme nt for that of the ag ency . See Orion Reserve s Ltd. P’ship v. Salazar , 553 F.3d 697, 706 ( D.C. Cir. 2009) (citations omitted). When review ing
an a dmi nis tr ativ e de c isi on , “ the burd e n o f s ho wi ngthat th e a g e nc y a c tio n v iol ate s th e APA standards f

alls on the provider .” Heartland, 5 1 1 F. S u p p . 2 d at5 1 (c i t i n g Diplomat Lakewood In c . v . H arris , 613 F.2d 1009, 1018 ( D.C. Cir. 1979)) (c itation omit ted). “T h e S u p re m e C o urts etfo rtha two -s t ep ap p ro ac ht o d et erm i n e w h eth er anage n cy 's interpre tation of a statute is valid under the APA. Quantum Entertainment, Ltd v. U.S. De p’t of the Interior , No. CIV.A.07-1295, 2009 WL401871, at *4 (D.D .C. Feb. 19, 2009) (citing Chevron, U.S.A., I

nc. v. Natural Res. De

f. Council, Inc., 467 U.S. 837 (1984)). A pplication of the “ Chevron defe renc e” sta ndard “ require s the court to first look to ‘whe ther Congress ha s sp ok e n to the pr e c ise qu e sti on at is su e .’ I f s o, the c ourt e nd s it s in qu ir

y . B ut, if the statut e is ambiguous or silent, the second step r equire s the court to def er to the a g ency' s position, as long as it is ‘based on a

permissible construc tion of the statute.’” Id . (interna l citation omitt ed). The Secre tary ’s interpre tation of his own regulations is entitl ed to “substantial def ere nce[,]” andSt
. M i chae l ’ s M edi cal C ent er , etal
. v . J ohnson 6

T he B o ard ’ s une xp l aine d ac q uiesc en ce i n P l ainti f f s’ ch ara cteriza t i o n o f

t he i ssue p rese nted as a 2 “q u e stio n [] o f l a w ” is en tire ly “co n c lus o ry [a n d ] u n su p p o rte d [,]” a n d the c o u rt n e e d no t d e fer to it
. See B ay sta te M e d . C tr. v. L e a v itt , 5 8 7 F . S u p p . 2 d 3 7 , 4 3 (D .D .C . 2 0 0 8 ) (c itatio n s o m itt e d ). “must be g iven controllingweight unless it is plainly err oneous or inconsistent with the regulation.” Tho ma s J

e ffe rso n U niv . v . S ha lal a , 512 U.S. 504, 512 (1994) (c itation omit ted). “Where the re gulations involve a complex, highly technica l regulatory

program such a s Medica re, br oad def

ere nce is ‘a ll the more wa rra nted.’” St. An tho ny 's H

e alt h Ct r. v . Le av itt

, 579 F. Supp. 2d 115, 119 (D.D .C. 2008) (quotingThomas Jefferson Univ., 512 U.S. at 512) (inter nal quotations omit ted).
III . D ISC USS ION Consideration of the pa

rties’ motions for summary judgme nt, in accordancewith the principles of Chevron defe renc e, re quires, in the first instance , revie w of the a g ency ’s final action. Howe ver, in this action, ther e is no “fina l action” whic h can berevie wed. The undersigned finds that the a bsence of re viewable “fina l action” is not, as Plaintiffs sug g est, a function of the B oard’ s determination that it did not have the a uthority to decide “ questions of law” (seeComplaint ¶ 1); rathe r, the impediment is the abse nce f rom the administrative re cord 2 of any indication of how CMS interprete d and applied 42 U .S.C. § 1395ww(d)(3) (E). Put another way , the B oard’ s acquie scenc e in Plaintiffs’ contention that their a ppeal pr esente d an iss ue of law t o b e c e rt if

ie d f or e xpe dit e d ju dic ia l r e vie w i s n ot p ro bativ e of wh at f a c tor s CM S considere d–or dec lined to consider–in makingthe adjustment which is the subjec t of 42 U.S.C. § 1395ww(d) (3)( E). In the abse nce of any rec ord in the administrative re cord of what de te rm inatio n CM S ma de wi th r e sp e c t to the a dju stm e nts , a nd wh at f a c tor s w e rec on sid e re d in makingsuch adjustments, the cour t has no basis upon which to dete rmine whe ther CMS’sSt
. M i chae l ’ s M edi cal C ent er , etal
. v . J ohnson 7

See A d m inistra tive R e c o rd , [C ivil A c tio n ] N o . 1 :0 7 -cv -0 1 4 8 [4 ] (“ 2 0 0 1 A .R .” ); see a lso A d m i ni st rat i ve 3 R eco rd, [C i vi l A ct i o n] N o . 1:07
- cv- 0 2 0 3 6 (“ 2 0 0 0 A
. R
. ”).

See [P la intiff

s’] F ina l P o sitio n P a p e r a n d S c h e d u le o f P ro v id e rs w ith E x h ib its, 2 0 0 1 A .R . 8 2 - 4 1 7 ; s ee 4 a lso [ Pl ai n t i f

f s ’ ] Rev i s ed Sc h edu l es of Pr ov i der s w i t h Exh i bi t s 1A- 22G , da t ed O ct ober 24, 2007, 2000 A. R. 9 - 445. See 2000 A. R. 631. 5 deter minations were c ontrary

to law, or other

wise ar bitrary and ca pricious. The unde rsigned has r eviewe d the four- volume, approximately 1100-pag e administrative
rec ord in an ef

fort to find a r ecor d of the e x tent to which [CM S] considere d–or excluded fr om 3 consideration–“the wag e, fringe benef it, and hour data

of re classified hospitals located in the Providers’ Me tropolitan Statist ical Ar ea f or purpose s of ca lculatingthe Providers’ f eder al fisca l year 2001 and 2000 wa g e index and Geographic Adjustment Fac tor.” SeePlaintiffs’ Statement of Material Fa cts as to Which There is No Genuine I ssue (“ Plaintiffs’ Statement”) ( Document No
. 1 8 ), ¶ 3
. T h e r ec o rd s o f th e d et erm i n at i o n s fo r e ac hh o s p i t al co n s i s ten t i re l y o f ao n e- p age “F inal Medica

re ( Title XVI I I ) Settlement” spre adshee t. Even the most spec ific of these includes 4 no information, on the spre adshee t or elsewhe re, which indicates howthe figures r ecorded on the sprea dsheets we re de rived. In this contex t, the char acte rization of the issue “questions of law ” 5 (seeComplaint at 3) is premature
. See, e .g., Ba y sta te , 587 F. Supp. 2d at 38 (r emand wa rra nted wh e re a sp e c ts o f t

he Se c re tary ’s de c isi on

we re“ ina de qu ate ly

e xpla ine d” ); se eid . at 42 -4 3 ( in i ts application of the defe rential APA standa rd of r eview, “ the [court] must be satisfied that the ag ency has ‘e x amine[d] the re levant data and ar ticulate[d] a satisfa ctory

explanation for its action including a

rational c onnection betwe en the f acts found a

nd the choicemade.’ ”) ( citations and int e rn a l qu otatio ns omi tte d) ; se eals o Heartland Hosp. v. Thompson , 328 F. Supp. 2d 8,14 (D.D.C. 2004) ( “in a c ase involvingAPA-base d judicial revie w . . . if the a g ency has not
c on sid e re d a ll r e le va

nt f a c tor s . . . the pr op e r c ours e , e xce pt i n r arec ir c ums tanc e s, is t o r e mand toSt
. M i chae l ’ s M edi cal C ent er , etal
. v . J ohnson 8

T he und ers i gned i s m i nd f ul t hat i n a recent act i o n i n whi ch t he same st at ut o ry pro vi si o n was at i ss ue, t he 6 cour t r evi ewed t he f

i nal ac t i on of

t he Secr et ar y , an d ul t i mat el y det er mi ned t hat t he f i nal ac t i on of

t he Secr et ar y was a rb itra ry a n d c a p ric io u s. S e e A n n a J a c q u e s H o sp ita l v. L e a v itt , 53 7 F. Sup p . 2d 24 , 28 (D
. D
. C
. 20 0 8 ). I n Anna Jac ques Hos

pi t al , t he co urt did no t ad d res s t he i ss ue o f t he suf f i ci ency o f

t he ad m i ni st rat i ve reco rd; ho wever, t he co urt ap p arent l y f

o und t hat i n t hat case, t he ad m i ni st rat i ve reco rd– unl i ke t he ad m i ni st rat i ve reco rd i n t he i nst ant a c tio n
– inc lud e d a re c o rd tha t t h e S e c re ta ry h a d , i n fac t, e x c lud e d the d a ta w h ic h w a s the su b je c t o f t h e a c tio n . I d. at 3 4 (“ [T ]he Secret ary excl ud ed wage d at a o f hosp i t al s t hat had co nvert ed t o [cr i t i cal access ho spi t al ] s t at us[
. ]”). T he u n d e rs ign e d ha s n o b a sis fo r m a k ing su c h a fi n d ing in this in sta n c e . the ag ency

for a dditional investigation or e x planation.”) (citations and inter nal quotations omitted). 6 This court re cently

observe d that “administrative pr ocedur es exist precisely so that the ag ency with expertise in matters such as r eimbursement may be g iven an oppor

tunity to corre ct
err ors made by

the intermedia

ry .” Brad

le yMe m’ l H

os p. v . Le av itt

, Civ.A.No. 04-0416, 2009 WL504681, at *8 (D.D .C. March 2, 2009) . Whil e that obser vation was made in the context of consideration of whether

mandamus wa s an appr opriate r emedy wher e the pr oviders had not pursued their

administrative re medies, the unde rsigned finds that it is equally apt her e. Calculation by

the cour t of reimburse ment rate s applicable to the twenty-two provider s who are the Plaintiffs in this action would require a virtually trial-like proc eedingfor the r esolution of the disputed fac tual issues. See, e .g., Pla int if fs ’ S tate me nt, De fe nd ant’ s State me nt o f M ate ri a l F a c ts
a s to Whic h T he re is N o G e nu ine I ssu e (D oc ume nt N o. 20 ), De fe nd ant’ s Re sp on se to P la int if fs ’ Statement of Material Fa cts as to Which There is No Genuine I ssue (Doc ument No. 20-3), Def endant’ s L ocal Rule 7(H ) [sic] Statement of Ge nuine I ssues of F act in Support of De fenda nt’s Opposition to P laintiffs’ Motion For Summary J udg ment (Doc ument No. 26). Such a proce eding would be inimical to the principles of Chevron defe renc e. No a uthority supports the proposition that the cour

t may –as Plaintiffs reque st–simpl y “re quire that the w ag es, fringebenef its, and hours of a ll r e c la ssi fi e d h os pit a ls l oc ate d in the Pr ov ide rs ’ M e tr op oli tan St atis tic a l Are a be inc lud e d inSt
. M i chae l ’ s M edi cal C ent er , etal
. v . J ohnson 9

S e e B ay sta te , 5 8 7 F . S u p p . 2 d a t 4 1 (th e no rm w ith re sp e c t t o re m a n d is t h a t co u rt d o e s n o t re ta in 7 ju risd ic tio n o v e r th e re m a n d p ro c e e d ing s) (c itatio n s o m itt e d ). the computation of the w ag e index” and aw ard “ an incr ease of collec tive reimburse ment of approximately

$23,956,069[.] ” Complaint at 14.
CO NC LU SION For the fore g oing r easons, it is, this 19 day of Mar ch, 2009, th RE CO M M EN DE D that both motions for summary judgme nt be DENIED, and that th is action be r emande d to the Secre tary for the a rticulation of finding s, as to eac h provider which is a Plaintiff in this action, with respec t to what “adjustment” w as made pursuant to 42 U. S.C. § 1 39 5ww( d) (3 )( E) ; and it i s F UR THER

RE CO M M EN DE D that these c onsolidated ac tions be dismis sed. 7

____________/s/__________________ DEB ORAH A. ROB I

NSON Un i t edS t at es M agi s trat e J u d ge

Wi th in t en d ay s of t h e filin g of t h e in st an t re p or t an d r ec om me n d at io n , e it h erp ar tyma y file w ritten objec tions. S uch objections sh all ide ntify w ith sp ecif icity th e p ortion s of the f indin gs a nd recommend ations to w hich objec tion is made , a nd the basis f or th e objection. I n th e ab sence of timely objections , further review of issues add ressed he rein may b e d eemed w aived .