UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLUMBIA 

BAPTIST MEDICAL CENTER et al.

Plaintiffs, 

 v. Civil Action No. 11-cv-0899 

 

SYLVIA M. BURWELL, in her

official capacity as 

Secretary of Health and 

Human Services

Defendant. 

MEMORANDUM OPINION AND ORDER 

Pending before the Court are the parties’ objections to 

Magistrate Judge G. Michael Harvey’s Report and Recommendation 

(“R&R”), which recommends that the Court grant in part and deny 

in part plaintiffs’ motion for summary judgment, deny 

defendant’s motion for summary judgment, and remand the matter 

to the agency for further proceedings. See R&R, ECF No. 64. Upon 

consideration of the R&R, plaintiffs’ objections, defendant’s 

response to those objections, and the relevant law, the Court 

adopts Magistrate Judge Harvey’s R&R and GRANTS IN PART and 

DENIES IN PART plaintiffs’ motion for summary judgment, DENIES

defendant’s motion for summary judgment, and REMANDS this matter 

to the agency. 
2 

I. Background 

The Court will not restate the full factual background of 

this case, which is set forth in the Report and Recommendation. 

See R&R, ECF No. 64 at 3–8.1 By way of general overview, this 

case concerns the administration of Medicare, the federal 

program that provides health insurance to the elderly and 

disabled. See 42 U.S.C. §§ 1395-1395cc; see also Northeast Hosp. 

Corp. v. Sebelius, 657 F.3d 1, 2 (D.C. Cir. 2011)(explaining 

Medicare statutory provisions). The Centers for Medicare and 

Medicaid Services (“CMS”) is charged with administering the 

Medicare program. The Medicare statute is divided into five 

parts; three of which are relevant to this case. see id.

 The first relevant part is Medicare Part A which covers 

medical services provided by hospitals and other institutional 

providers. See 42 U.S.C. § 1395c. Under Part A, providers are 

paid directly by the Secretary of Health and Human services for 

the services they provide. See id. §§ 1395f(a)-(b), 1395x(u). 

This payment arrangement is commonly known as the fee-forservice system. Northeast Hosp., 657 F.3d at 2 (referring to the 

“traditional Part A fee-for-service system.”). 

Over the last forty years, Congress has provided an 

alternative to the fee-for-service arrangement under Part A 

 

1 When citing electronic filings throughout this opinion, the 

Court cites to the ECF header page number, not the original page 

number of the filed document. 
3 

through different arrangements. Medicare Part C, the second 

relevant part, is an alternative to the fee-for-service system 

that allows an individual to choose to enroll with a Health 

Maintenance Organization (“HMO”), preferred organization, or 

other private managed care plan after 1999.2 See Balanced Budget 

Act of 1997 (BBA), Pub. L. No. 105-33, §4001, 111 Stat. 251, 270 

(codified at 42 U.S.C. § 1395w-21). If a person chooses to enroll 

in Part C, the Secretary makes payments to the managed care 

plan, rather than directly to the provider. Id. § 1395w–

21(i)(1). 

From 1972 through the end of 1998, as an alternative to the 

traditional fee-for-service system, Medicare beneficiaries 

instead could enroll with a managed care organization, such as 

an HMO, which entered into a payment contract with Medicare. See

Section 1876 of the Social Security Act; 42 U.S.C. § 1395mm 

(“HMO statute”).3 Similar to present-day Medicare Part C, if a 

person chose to enroll in an HMO the Secretary made payments to 

the managed care plan, rather than to the provider. The fiscal 

 

2 Part C was formerly referred to as “Medicare + Choice” and is 

currently referred to as “Medicare Advantage.” The parties refer 

to Part C in their briefing when discussing the HMO statute, now 

located in Part E, because it was located in Part C of the 

Medicare statute during the relevant time period. 

3 The Medicare HMO statute, 42 U.S.C. § 1395mm, is and has been 

located in the “Miscellaneous Provisions” part of the Medicare 

statute. During the periods at issue, “Miscellaneous Provisions” 

were gathered in part C. Today, the Medicare + Choice (or 

Medicare Advantage) program is located in Part C, and the 

“Miscellaneous Provisions” have been moved to Part E. 
4 

periods at issue in this case are 1993–1998, i.e., prior to 

1999, and therefore are governed by the HMO statute. 

Medicare Part E sets out various “Miscellaneous Provisions.” 

Relevant to this case, Part E sets out a Prospective Payment 

System (“PPS”) for reimbursing inpatient hospital services based 

on “prospectively determined national and regional rates rather 

than on the actual amount the hospital spends.” Northeast Hosp., 

657 F.3d at 3 (citing 42 U.S.C. § 1395ww(d)(1)-(4)). Providers 

are also entitled to payment adjustments based on certain 

factors. At issue in this case is the disproportionate share 

hospital (“DSH”) payment adjustment, which provides that the 

Secretary pays more for services provided by hospitals that 

“serve[] a significantly disproportionate number of low-income 

patients.” Id. (citing 42 U.S.C. § 1395ww(d)(5)(F)(i)(I)). 

“Congress assumes that such patients cost more to treat than the 

average Medicare patients, so these hospitals are entitled to 

supplemental payments.” Allina Health Services v. Sebelius, 746 

F.3d 1102, 1105 (D.C. Cir. 2014). 

Whether a hospital qualifies for a Medicare DSH adjustment, 

and the amount of that adjustment, depends on the hospital’s 

“disproportionate patient percentage [‘DPP’].” 42 U.S.C. 

§ 1395ww(d)(5)(F)(v)-(vii). This percentage is a “proxy measure” 

for the number of low-income patients a hospital serves. H.R. 

REP. No. 99-241, pt. 1, at 17 (1985). The DPP is defined as the 
5 

sum of two fractions expressed as percentages. See 42 U.S.C. 

§ 1395ww(d)(5)(F)(vi). Those fractions are referred to as the 

“Medicare” fraction and the “Medicaid” fraction. Id.

§ 1395ww(d)(5)(F)(vi)(I) & (II); see also 42 C.F.R. 

§ 412.106(b)(2). Both of these fractions require consideration 

of whether a patient was “entitled to benefits under Part A.” 

See 42 U.S.C. § 1395ww(d)(5)(F)(vi)(I). 

The first fraction, the Medicare fraction, is the percentage 

of Medicare patients who are entitled to supplemental security 

insurance. The numerator of this fraction is the sum of the 

hospital’s patient days for patients who were “entitled to 

benefits under Part A . . . and were entitled to supplementary 

[social security insurance].” Id. § 1395ww(d)(5)(F)(vi)(I). The 

denominator of the fraction is the total number of “hospital’s 

patient days for such fiscal year which were made up of patients 

who (for such days) were entitled to benefits under [Medicare] 

Part A.” Id. 

The second fraction, the Medicaid fraction, is comprised of 

the number of Medicaid patients not entitled to Medicare. The 

numerator of the fraction is “the number of the hospital’s 

patient days for such period which consist of patients who (for 

such days) were eligible for medical assistance under a State 

[Medicaid] plan . . . but who were not entitled to benefits 

under [Medicare] Part A.” Id. § 1395ww(d)(5)(F)(vi)(II). The 
6 

denominator is the total number of patient days, regardless of 

whether the patients were eligible for assistance through a 

federal program. Id.

A “fiscal intermediary,” typically a private insurance 

company acting as the Secretary’s agent, calculates DSH 

adjustments. See 42 C.F.R. §§ 421.1, 421.3, 421.100–.128. If a 

hospital disagrees with the intermediary’s determination, it may 

appeal to the Provider Reimbursement Review Board (“PRRB” or 

“Board”), an administrative body appointed by the Secretary. See

42 U.S.C. § 1395oo(a),(h). The PRRB may affirm, modify, or 

reverse the fiscal intermediary’s award. See id. § 1395oo(d). 

The Board’s decision is the final agency action unless the 

Secretary affirms, modifies, or reverses the Board’s decision 

within 60 days after the provider is notified of the decision. 

Id. § 1395oo(f)(1). A provider has a statutory right to seek 

judicial review of the agency’s final decision in federal 

district court. Id.

Plaintiffs are several hospitals that offered inpatient 

services for individuals whose care was paid for by HMOs. See

Compl., ECF No. 1 ¶¶ 5–6. The hospitals serve several elderly, 

low-income patients and are therefore entitled to supplemental 

payments, an amount determined by the disproportionate share 

percentage. See id. For fiscal years, 1995-1998, the 

Intermediary concluded HMO patient days should not be in the 
7 

numerator of the Medicaid fraction. QRS 1995-1998 DSH Medicare 

HMO Days Grps. v. BlueCross BlueShield Ass’n, PRRB Dec. No. 

2011-D20, 2011 WL 1231544, at *4 (Mar. 16, 2011). Plaintiffs 

appealed this decision to the PRRB, arguing that the patient 

days should be included in the Medicaid fraction because the HMO 

patients are not entitled to benefits under Part A. Id. This 

distinction matters because, if Part C beneficiaries are 

“included in the Medicaid fraction rather than the Medicare 

fraction, the hospitals receive a great deal more compensation.” 

Allina, 746 F.3d at 1105. 

The PRRB disagreed with plaintiffs and found that the 

“Intermediary properly excluded Medicare HMO days from the 

Medicaid fraction. QRS 1995-1998 DSH Medicare HMO Days Grps., 

2011 WL 1231544, at *6. The Board reasoned that the HMO statute 

required HMO patients to be excluded from the Medicaid fraction 

because payments to HMOs are made from the Federal Hospital 

Insurance Trust Fund established by Part A. Id. at 5–6. The 

Board’s explanation was as follows: 

The Federal Hospital Insurance Trust Fund 

was established under Part A of the Medicare 

Act to fund the services provided under Part 

A. 42 U.S.C. §§1395i(a) and (h). 

Consequently, prior to the change in the 

Medicare Act which created Part C, HMO 

inpatient hospital services were paid 

pursuant to Part A of Medicare. 

In Jewish Hospital, Inc. v. Secretary of 

Health and Human Services, 19 F.3d 270, 274-
8 

75 (6th Cir. 1994), the term “entitled” as 

it is used in the definition of the Medicare 

fraction at 42 U.S.C. §1395ww(d)(5)(F), was 

defined as follows: 

“[t]o be entitled to some benefit means that 

one possesses the right or title to that 

benefit. Thus the Medicare proxy fixes the 

calculation upon the absolute right to 

receive an independent and readily defined 

payment.” 

The explicit language of the DSH statute 

limits inclusion in the Medicaid fraction to 

those individuals or beneficiaries “eligible 

for medical assistance under state plan 

approved under XIX” and “not entitled to 

benefits under Part A.” 42 C.F.R. 

§412.106(b)(4)(emphasis added). In that 

services to Medicare beneficiaries enrolled 

in an HMO were paid under Part A during the 

fiscal periods prior to the effective date 

of Part C, the DSH statute requires those 

days be excluded from the Medicaid 

percentage. 

Id. at *5–6 (emphasis in original). Therefore, the Board found 

that “the Intermediary properly excluded Medicare HMO days from 

the Medicaid fraction.” Id. at 6. 

The Board also made a finding that the Secretary’s policy 

during 1995-1998, the years at issue in this case, was to 

include the HMO patient days in the Medicare, but not the 

Medicaid fraction. Id. at *4. This finding was based on CMS’s 

response to a comment in a statement published in the Federal 

Register that stated that CMS believed: 

Based on the language of section 

1886(d)(5)(F)(vi) of the Act, which states 
9 

that the disproportionate share adjustment 

computation should include “patients who 

were entitled to benefits under Part A”, we 

believe it is appropriate to include the 

days associated with Medicare patients who 

receive care at a qualified HMO. Prior to 

December 1, 1987, we were not able to 

isolate the days of care associated with 

Medicare patients in HMOs and, therefore, 

were unable to fold this number into the 

calculation. However, as of December 1, 

1987, a field was included on the Medicare 

Provider Analysis and Review (MEDPAR) file 

that allows us to isolate those HMO days 

that are associated with Medicare patients. 

Therefore, since that time, we have been 

including HMO days in SSI/Medicare 

percentage. 

Id. The Board’s decision was issued on March 16, 2011 and the 

Secretary declined to review the decision, making that decision 

the final agency action. See 42 U.S.C. § 1395oo(f)(1). 

Plaintiffs sought judicial review under the APA, 5 U.S.C. 

§ 701, et seq., of the Board’s decision to exclude HMO patient 

days from the Medicaid fraction. The parties filed cross-motions 

for summary judgment and the case was referred to Magistrate 

Judge Harvey for an R&R. The parties have filed objections to 

the R&R and this case is ripe for decision. 

II. Standards of Review 

A. Objections to a Magistrate Judge’s R&R 

Pursuant to Federal Rule of Civil Procedure 72(b), once a 

magistrate judge has entered a recommended disposition, a party 

may file specific written objections. The district court “must 
10

determine de novo any part of the magistrate judge’s disposition 

that has been properly objected to,” and “may accept, reject or 

modify the recommended disposition.” Fed. R. Civ. P. 72(b)(3). 

Proper objections “shall specifically identify the portions of 

the proposed findings and recommendations to which objection is 

made and the basis for objection.” Local Civ. R. 72.3(b). “As 

numerous courts have held, objections which merely rehash an 

argument presented and considered by the magistrate judge are 

not ‘properly objected to’ and are therefore not entitled to de 

novo review.” Shurtleff v. U.S. Envtl. Prot. Agency, 991 F. 

Supp. 2d 1, 8 (D.D.C. 2013)(quoting Morgan v. Astrue, Case No. 

08–2133, 2009 WL 3541001, at *3 (E.D. Pa. Oct. 30, 2009) 

(collecting cases)). Likewise, a court need not consider cursory 

objections made only in a footnote. Hutchins v. District of 

Columbia, 188 F.3d 531, 539 n.3 (D.C. Cir. 1999). 

 B. Summary Judgment Standard 

Summary judgment should be granted only if the moving party 

has shown that there are no genuine issues of material fact and 

that the moving party is entitled to judgment as a matter of 

law. Fed. R. Civ. P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 

323 (1986); Waterhouse v. Dist. of Columbia, 298 F.3d 989, 991 

(D.C. Cir. 2002). In a case involving review of a final agency 

action under the APA, however, Rule 56(c)’s standard does not 

apply because of the court’s limited role in reviewing the 
11

administrative record. See N.C. Fisheries Ass’n v. Gutierrez, 

518 F. Supp. 2d 62, 79 (D.D.C. 2007). 

Under the APA, it is the agency’s role to resolve factual 

issues and to arrive at a decision that is supported by the 

administrative record, whereas “the function of the district 

court is to determine whether or not as a matter of law the 

evidence in the administrative record permitted the agency to 

make the decision it did.” Stuttering Found. of America v. 

Springer, 498 F. Supp. 2d 203, 208 (D.D.C. 2007)(citation 

omitted). “Summary judgment thus serves as the mechanism for 

deciding, as a matter of law, whether the agency action is 

supported by the administrative record and is otherwise 

consistent with the APA standard of review.” Id. (citing 

Richards v. Immigration & Naturalization Serv., 554 F.2d 1173, 

1177 n.28 (D.C. Cir. 1977)). 

When reviewing agency action pursuant to the APA, the Court 

must determine whether the challenged decision is, inter alia, 

“arbitrary, capricious, an abuse of discretion, or otherwise not 

in accordance with law,” 5 U.S.C. § 706(2)(A); “in excess of 

statutory jurisdiction, authority, or limitations, or short of 

statutory right,” id. § 706(2)(C); or “without observance of 

procedure required by law,” id. § 706(2)(D). The arbitrary or 

capricious provision, under subsection 706(2)(A), “is a 

catchall, picking up administrative misconduct not covered by 
12

the other more specific paragraphs” of the APA. Ass'n of Data 

Processing Serv. Orgs., Inc. v. Bd. of Governors of Fed. Reserve 

Sys. (ADPSO), 745 F.2d 677, 683 (D.C. Cir. 1984). The “scope of 

review under the ‘arbitrary and capricious’ standard is narrow 

and a court is not to substitute its judgment for that of the 

agency.” Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm 

Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). 

Although this scope of review is deferential, “courts retain 

a role, and an important one, in ensuring that agencies have 

engaged in reasoned decision making.” Judulang v. Holder, 565 

U.S. 42, 53 (2011). In evaluating agency actions under the 

arbitrary and capricious standard, the court must be satisfied 

that the agency has “examine[d] the relevant data and 

articulate[d] a satisfactory explanation for its action 

including a rational connection between the facts found and the 

choice made.” Alpharma, Inc. v. Leavitt, 460 F.3d 1, 6 (D.C. 

Cir. 2006)(internal citation and quotation marks omitted). 

Moreover, when an agency “has failed to provide a reasoned 

explanation, or where the record belies the agency’s conclusion, 

[the court] must undo its action.” Cnty. of Los Angeles v. 

Shalala, 192 F.3d 1005, 1021 (D.C. Cir. 1999)(citation and 

internal quotation marks omitted). In other words, “the agency 

must explain why it decided to act as it did.” Butte Cnty. v. 

Hogen, 613 F.3d 190, 194 (D.C. Cir. 2010). 
13

III. Analysis 

In its motion for summary judgment plaintiffs argued that 

the Board’s ruling that individuals enrolled in HMOs between 

1993 and 1998 should not be included in the Medicaid fraction 

based on the Board’s interpretation of the phrase “entitled to 

benefits under Part A” was inconsistent with the Court of 

Appeals for the District of Columbia Circuit (“D.C. Circuit”) 

precedent and therefore in violation of the APA. Pls.’ Mot., ECF 

No. 53 at 11, 15–42 (citing Northeast Hosp., 657 F.3d at 1). 

Defendant argued that the plaintiffs in this case were indeed 

entitled to benefits under Medicare Part A, under the 

Secretary’s reasonable interpretation of the HMO statute, and 

therefore there was no violation of the APA. Def.’s Mot., ECF 

No. 54 at 21. Specifically, defendant argued, contrary to even 

the Board’s analysis, that an entitlement to benefits under Part 

A simply means eligibility for benefits and not actual payment. 

Def.’s Mot., ECF No. 54 at 21. 

Magistrate Judge Harvey found that the Board’s decision was 

arbitrary and capricious and the R&R recommends that the Court 

grant plaintiffs’ motion for summary judgment in part because: 

(1) the agency’s interpretation of the term “entitled to 

benefits under Part A” to mean having a right to payment made 

for care under Part A was in direct conflict with the agency’s 

contemporaneous interpretation of the phrase offered to the D.C. 
14

Circuit in Northeast Hospital; and (2) the agency failed to 

consider whether its conclusion that HMO patient days should be 

excluded from the Medicaid fraction was a departure from clear 

prior policy during the time period relevant to this dispute. 

R&R, ECF No. 64 at 13–21. Magistrate Judge Harvey recognized 

that the Board’s failure to address evidence of a contrary 

practice casts doubt on whether the adjudication should be given 

retroactive effect. Id. at 20. Magistrate Judge Harvey noted one 

additional wrinkle in the case, specifically that Plaintiff 

Stamford Hospital’s dispute encompasses fiscal years 1993-1994, 

while all other plaintiffs dispute fiscal years ranging from 

1995-1998. Id. at 22. Magistrate Judge Harvey pointed out that 

there was no evidence in the administrative record for the 

fiscal years of 1993-1994. Id. 

Magistrate Judge Harvey recommends that the Court remand 

this case back to the Secretary to: (1) provide its rationale 

for its contemporaneous contradicting interpretation of the DSH 

calculation, or to align its interpretation with that offered by 

the Secretary in Northeast Hospital; (2) consider whether the 

Secretary’s interpretation conflicts with prior practices, and, 

if so, whether plaintiffs had settled expectations and whether 

the changes produced real economic consequences for plaintiffs; 

and (3) for the parties to develop a factual record concerning 

the Secretary’s treatment of HMO patient days during 1993-1994 
15

fiscal years. Id. at 15–22. 

In their objections, plaintiffs agree with Magistrate Judge 

Harvey’s finding that the Board’s decision was arbitrary and 

capricious, however plaintiffs do not believe that a remand is 

necessary. Pls.’ Objection, ECF No. 68 at 1. Rather than remand, 

plaintiffs argue that the appropriate remedy is for the Court to 

order the Board to count the HMO patient days in the Medicaid 

fraction, which would require this Court to rule on whether the 

HMO patient days were in fact paid under Medicare Part A during 

the time frame at issue in this case. Id. at 8–11. Plaintiffs 

also argue that no remand is necessary to consider Stamford 

Hospital’s claims related to the 1993-1994 fiscal years because 

there is sufficient evidence in the administrative record from 

which a Court can determine that HMO patient days were excluded 

from the Medicare fraction as far back as 1987. Id. at 16. 

Alternatively, in the event of a remand, plaintiffs request that 

this Court retain jurisdiction over this case. 

 Defendant, on the other hand, disagrees with Magistrate 

Judge Harvey’s finding that the Board’s decision was arbitrary 

and capricious, but agrees that if the Court adopts the R&R that 

a remand is the appropriate remedy. Def.’s Objection, ECF No. 69 

at 10. Defendant argues that Magistrate Judge Harvey erred in 

relying on Northeast Hospital because that case involved a 

different legal question about a different Medicare program, 
16

Part C. Id. at 8–10. Defendant states, however, that a remand is 

appropriate in this case if the Court grants summary judgment in 

plaintiffs’ favor. Id. at 10. Defendant takes no position as to 

whether the Court should retain jurisdiction over this case 

pending administrative review. See generally, id. 

The Court will first address defendant’s argument that the 

Board’s decision was not in violation of the APA. After finding 

that the Board indeed violated the APA in failing to address 

both its contrary policy regarding HMO patient days, and 

contrary contemporaneous interpretation of the Medicare statute, 

the Court will next address plaintiffs’ objections which concern 

the appropriate remedy in this case. 

A. Defendant’s Objections 

Defendant objects to Magistrate Judge Harvey’s 

recommendation that the Board’s decision to exclude HMO patient 

days from the Medicaid fraction was in violation of the APA. See 

generally Def.’s Objection, ECF No. 69. Again, under APA review, 

the question for the Court is whether the Board’s decision was 

“arbitrary, capricious, an abuse of discretion, or otherwise not 

in accordance with law.” 5 U.S.C. § 706(2)(A). “Normally, an 

agency rule would be arbitrary and capricious if the agency has 

relied on factors which Congress has not intended it to 

consider, entirely failed to consider an important aspect of the 

problem, offered an explanation for its decision that runs 
17

counter to the evidence before the agency, or is so implausible 

that it could not be ascribed to a difference in view or the 

product of agency expertise.” Motor Vehicle Mfrs., 463 U.S. at 

43. “An agency may not, for example, depart from a prior policy 

sub silentio.” FCC v. Fox Tele. Stations, Inc., 556 U.S. 502, 

515 (2009). Instead, “[a]n agency must . . . ‘display awareness 

that it is changing position’” and provide “‘good reasons’” for 

the change. Mary V. Harris Found. v. FCC, 776 F.3d 21, 24–25 

(D.C. Cir. 2015)(quoting Fox Tele. Stations, 556 U.S. at 515). 

Similarly, “[a]n agency errs when it ignores contradictory 

relevant evidence regarding a critical factor in its decision.” 

New Life Evangelistic Ctr., Inc. v. Sebelius, 672 F. Supp. 2d 

61, 74 (D.D.C. 2009)(citing Morall v. Drug Enforcement Admin., 

412 F.3d 165, 178 (D.C. Cir. 2005)); see also El Rio Santa Cruz 

Neighborhood Health Ctr., Inc. v. HHS, 396 F.3d 1265, 1278 (D.C. 

Cir. 2005)(finding agency action “arbitrary and capricious 

because [it] failed adequately to address relevant evidence 

before it”). These considerations also apply to agency 

adjudications. Allentown Mack Sales & Serv., Inc. v. NLRB, 522 

U.S. 359, 374 (1998). 

Magistrate Judge Harvey found that the Board’s decision was 

arbitrary and capricious because it failed to explain its 

contrary change in position and failed to consider an important 

aspect of the problem. See R&R, ECF No. 64 at 13–21. The Court 
18

agrees. The Board’s decision was based on an interpretation of 

the statute that focused solely on the source of payment. 2011 

WL 1231544 at * 6. The Board concluded that “services to 

Medicare beneficiaries enrolled in an HMO were paid under Part A 

during the fiscal periods prior to the effective date of Part C, 

the DSH statute requires those days be excluded from the 

Medicaid percentage.” Id. Because the Federal Hospital Insurance 

Trust Fund was established under Part A to fund services under 

Part A, the Board reasoned, HMO inpatient hospital services were 

paid pursuant to Part A and therefore the HMO patients were 

“entitled to benefits under Part A.” Id. And because HMO 

patients were entitled to benefits under Part A under this 

interpretation of the statute, the Board excluded the HMO 

patient days from the Medicaid fraction. See 42 U.S.C. 

§ 1395ww(d)(5)(F)(vi)(II)(explaining numerator of Medicaid 

fraction consists of patient days for individuals eligible for 

medical assistance through a state plan, but not entitled to 

benefits under Medicare Part A). 

The problem with that reasoning, as Magistrate Judge Harvey 

explained, is that this holding is based on an interpretation 

that “flatly contradicts” the agency’s contemporaneous 

interpretation offered in Northeast Hospital of the same 

statutory provision. See R&R, ECF No. 64 at 13–14. In Northeast 

Hospital, the Secretary argued that “entitled to benefits under 
19

Part A” meant mere eligibility for benefits and not a right or 

entitlement to payment. Northeast Hosp., 657 F.3d at 6; cf. 2011 

WL 1231544 at * 6 (“[t]o be entitled to some benefit means that 

one possesses the right or title to that benefit. Thus the 

Medicare proxy fixes the calculation upon the absolute right to 

receive an independent and readily defined payment.”). 

The Board failed to consider, or even acknowledge, that it 

was simultaneously arguing for contrary interpretations of the 

same statutory provisions. In the administrative proceedings the 

Board interpreted the phrase “entitled to benefits under Part A” 

in the DSH calculation to mean having a right to payment for 

care made under Part A. Medicare HMO Days Grps., 2011 WL 

1231544, at *5–6. Whereas the agency’s interpretation offered 

to the D.C. Circuit was eligibility for payment and not a right. 

See Northeast Hosp., 657 F.3d at 6. The Board’s decision relied 

solely on this contrary interpretation of the statute, without 

any explanation of its change of position. As the Supreme Court 

has stated, “the requirement that an agency provide reasoned 

explanation for its action would ordinarily demand that it 

display awareness that it is changing position.” F.C.C. v. Fox, 

556 U.S. 502, 515 (2009). Without some recognition of a reason 

for this contrary interpretation, the agency did not meet its 

obligation under the APA to provide a reasoned explanation for 

its actions. See id.
20

Similarly, the Board’s failure to address its change in 

policy rendered its decision arbitrary and capricious. As the 

D.C. Circuit explained in Northeast Hospital, during the fiscal 

years at issue in this case, the agency’s practice was to 

exclude the HMO patient days from the Medicare fraction. 

Northeast Hosp., 657 F.3d at 16 (emphasis added). In responding 

to the Secretary’s argument that the agency’s rulemaking in 1990 

shows that the agency “interpreted the Medicare fraction to 

include managed care days,” the D.C. Circuit explained that the 

Secretary’s argument was belied by the agency’s actual practice 

with regard to HMOs from at least as early as 1995. Id. The 

Secretary’s actual practice of excluding HMO patient days from 

the Medicare fraction was evidenced by the fact that “[the 

Secretary] was not using the managed care field in the program 

file for calculating Medicare fractions, making it impossible to 

count HMO days in the Medicare fraction.” Id. (citing Baystate 

Med. Ctr. v. Mut. of Omaha Ins. Co., PRRB Dec. No. 2006–D20, 

2006 WL 752453, at *31 (Mar. 17, 2006)). 

When presented with evidence of this prior policy of 

excluding HMO patient days from the Medicare fraction in the 

proceedings below, the Board ignored it. See Administrative 

Record (“A.R.”), ECF No. 51-2 at 90–91. During the 

administrative proceedings, plaintiffs referenced testimony and 

government reports which supported its argument that the agency 
21

“did not actually adopt or follow [a] policy to count Medicare 

HMO days in the Medicare [fraction].” Id. In failing to respond 

to this evidence, the Board failed to examine the “relevant data 

and articulate a satisfactory explanation” for its determination 

of the issue, and ignored contradictory evidence regarding a 

critical factor in its decision. Alpharma, Inc., 460 F.3d at 6 

(D.C. Cir. 2006). Based on these errors, the Board did not 

adequately explain its reasoning and its decision was arbitrary 

and capricious. See Atchinson Topeka and Sante Fe Railway Co., 

v. Wichita Bd. Of Trade, 412 U.S. 800 at 808 (1973)(“Whatever 

the ground for the departure from prior norms . . . it must be 

clearly set forth so that the reviewing court may understand the 

basis of the agency’s actions.”) 

Defendant responds by arguing Northeast Hospital was a 

different case reviewing a different statutory scheme. Def.’s 

Objection, ECF No. 69 at 5–10. The distinctions pointed out by 

the defendant, however, are not legally significant. It is true 

that Medicare Part C and the HMO statute are different systems,

however, the two systems are merely two types of managed care 

programs. Each serves the same function within disputes over DSH 

adjustments because enrollment in either program provides a 

basis to claim that an enrollee is not “entitled to benefits 

under Part A.” See Northeast Hosp., 657 F.3d at 6 (identical 

argument with respect to Part C enrollment). In Northeast 
22

Hospital, the Secretary offered the treatment of HMO patient 

days as evidence that Medicare Part C patient days should be 

treated the same because both HMO and Medicare Part C patient 

days are types of “managed care days.” Id. at 16 (“The Secretary 

argues that the 1990 rulemaking shows she has long interpreted 

the Medicare fraction to include managed care days and has never 

limited the calculation to reimbursements paid directly to 

hospitals under Part A.”). Defendant now seeks to retreat from 

this characterization to argue that the two programs should be 

treated differently. To the extent that the Secretary seeks to 

explain away the contrary position, this Court may not accept 

defendant’s post-hoc rationalizations as a substitute for the 

Board’s explanation, or lack thereof. See Remmie v. Mabus, 898 

F. Supp. 2d 108, 120 (D.D.C. 2012)(stating agency’s purported 

rationale of a final decision explained in its briefing to the 

Court is no substitute for the agency’s actual explanation). 

B. Plaintiffs’ Objections 

Plaintiffs take issue with Magistrate Judge Harvey’s 

recommendation to remand this case back to the Board, rather 

than to direct the Board to include the HMO patient days in the 

Medicaid fraction. Pls.’ Objection, ECF No. 68 at 8. As the D.C. 

Circuit has explained, a remand to an agency with instructions 

to reach a certain result is a “remedy reserved for rare cases 

of an agency’s persistent failure to explain itself,” Checkosky 
23

v. S.E.C., 139 F.3d 221, 222 (1998), or “in rare cases[] when 

the reviewing court is convinced that remand would serve no 

purpose,” Allina, 746 F.3d at 1111 n.6. Furthermore, “legitimate 

concerns about judicial overreaching always militate in favor of 

affording the agency just one more chance to explain its 

decision.” Tennessee Gas Pipeline Co. v. F.E.R.C., 926 F.2d 

1206, 1214 (D.C. Cir. 1991)(Thomas, J., concurring). 

Plaintiffs argue that remand for further proceedings is not 

necessary in this case because the Board “must apply the version 

of the Secretary’s regulations in effect during the time periods 

relevant to this dispute, which limited the Medicare fraction to 

only those specific inpatient days actually paid by Part A.” 

Pls.’ Objection, ECF No. 68 at 8. In other words, plaintiffs 

request that the Court “rule on whether HMO days were actually 

paid under Part A,” and if they were not paid, to order the 

Board to count the HMO patient days under the Medicaid fraction. 

Id.

Several cases in the D.C. Circuit counsel against this 

option. In Tennessee Gas Pipeline Co. v. F.E.R.C., the D.C. 

Circuit considered whether it was appropriate to remand for a 

third time to an agency which twice failed to adequately explain 

its decision. 926 F.2d 1206. Despite the fact that the case had 

“dragged on for about eight years” and the agency had supplied 

“woefully inadequa[te]” explanations in both the original and 
24

the remand proceedings, the Court remanded the case back to 

F.E.R.C. a third time because “ratemaking is for the Commission 

and not for [the court].” Id. at 1206. 

Conversely, in Greyhound Corp. v. ICC, the D.C. Circuit 

found that, for the second time, the agency failed to justify 

its conclusion to maintain securities jurisdiction over the 

Greyhound Corporation although the agency’s own precedent seemed 

to preclude such a ruling. 668 F.2d 1354 (D.C. Cir. 1981). The 

D.C. Circuit concluded that since the agency had “ample time and 

opportunity” during the first remand to “provide a reasoned 

explanation” for the decision to maintain securities 

jurisdiction, but failed to do so, the Court found “no useful 

purpose to be served” by giving the agency a third opportunity 

to supply a satisfactory explanation. Id. at 364. 

 Perhaps most relevant to this case is the D.C. Circuit’s 

opinion in Allina Health Services v. Sebelius. 746 F.3d 1102. As 

in this case, plaintiffs in Allina alleged the agency had 

erroneously interpreted the term “entitled to benefits under 

Part A” for the purposes of the DSH calculation. Id. at 1105. 

The district court held, among other things, that the agency had 

failed to sufficiently explain a change in policy of how the DSH 

calculation was computed. Id. Rather than remand the case back 

to the agency, however, the district court “ordered the 

Secretary to recalculate the hospitals’ reimbursements by 
25

counting Part C days under the Medicaid fraction.” Id. at 1107. 

The D.C. Circuit reversed the portion of the district 

court’s opinion directing the Secretary to recalculate the 

hospitals’ reimbursements using an alternative methodology. Id.

at 1111. The D.C. Circuit stated that the district court erred 

in not simply identifying the error and remanding for the agency 

to address that error. Id. (citation omitted); see also Sec. & 

Exch. Comm'n v. Chenery Corp., 332 U.S. 194, 201 (1947)(“After 

the remand was made, therefore, the Commission was bound to deal 

with the problem afresh, performing the function delegated to it 

by Congress.”). 

Plaintiffs argue that “[t]he Court would not be intruding 

upon the agency’s prerogatives in making this determination, 

because the Board has already ruled that HMO days are paid under 

Part A.” Pls.’ Objection, ECF No. 68 at 10. This argument misses 

the point. The Board’s determination was made under an 

inconsistent interpretation of a statutory provision. Moreover, 

the Board failed to recognize, let alone address, what seems to 

be a clear change in policy during the fiscal years relevant to 

this case. Magistrate Judge Harvey’s recommendation for remand 

is a sound one because the Board may very well make a different 

determination once it “aligns its interpretation of the DSH 

calculation with that offered by the Secretary in Northeast 

Hospital.” See R&R, ECF No. 64 at 15. Under such circumstances, 
26

the Court is not convinced that the Board’s actions were 

egregious enough “to trigger the once-in-a-decade” remedy of a 

Court directing the agency on how to solve a particular problem. 

Tennessee Gas Pipeline, 926 F.2d at 1214; see also Cty. of Los 

Angeles v. Shalala, 192 F.3d 1005, 1011 (D.C. Cir. 1999) 

(“[U]nder settled principles of administrative law, when a court 

reviewing agency action determines that an agency made an error 

of law, the court's inquiry is at an end: the case must be 

remanded to the agency for further action consistent with the 

corrected legal standards.”). 

C. The Court Will Retain Jurisdiction Pending Completion of 

the Remand Proceedings 

Plaintiffs request that in the event of a remand this Court 

retain jurisdiction over this case. Pls.’ Objection, ECF No. 68 

at 20–21. Defendants do not object to this request. See 

generally Def.’s Objection, ECF No. 69. 

The “norm” in administrative cases is to “vacate agency 

action that is held to be arbitrary and capricious and remand 

for further proceedings consistent with the judicial decision, 

without retaining oversight over the remand proceedings.” 

Baystate Med. Ctr. v. Leavitt, 587 F. Supp. 2d 37, 41 (D.D.C. 

2008)(collecting cases). A court does have “discretion to retain 

jurisdiction pending completion of a remand and to order 

progress reports in the meantime” in unusual circumstances such 
27

as “cases alleging unreasonable delay of agency action.” Alegent 

Health-Immanuel Med. Ctr. v. Sebelius, 917 F. Supp. 2d 1, 3 

(D.D.C. 2012). 

In this case, plaintiffs argue the likelihood of extreme 

agency delay is sufficient to warrant the retention of 

jurisdiction over this case. The appeals in this case were filed 

in 2004 and the Board rendered a decision seven years later. In 

light of the long delay in its first appeals, plaintiffs request 

semi-annual reports on the status of the case to this Court 

during remand. Considering the lapse of time between the various 

appeals and the decision during the original administrative 

proceedings, and the fact that the government does not object to 

this request, the Court will retain jurisdiction over this 

action. 

IV. Conclusion and Order 

For the foregoing reasons, the Court adopts Magistrate 

Judge Harvey’s R&R. Accordingly, the Court GRANTS IN PART and 

DENIES IN PART plaintiffs’ motion for summary judgment, DENIES

defendant’s motion for summary judgment, and REMANDS this matter 

to the agency. The Court shall retain jurisdiction over this 

matter pending the completion of the remand proceedings.

SO ORDERED. 

Signed: Emmet G. Sullivan 

 United States District Judge 

 February 28, 2019