Opinion ID: 2995061
Heading Depth: 2
Heading Rank: 4

Heading: Relocated Provider

Text: The Secretary has interpreted the exemption for new providers in 42 C.F.R. sec. 413.30(e) to be available to certain relocated providers. PRM sec. 2604.1 discusses when a relocated provider will be granted the status of a new provider, stating in part: [F]or purposes of this provision, a provider which relocates may be granted new provider status where the normal inpatient population can no longer be expected to be served at the new location. The distance moved from the old location will be considered but will not be the determining factor in granting new provider status. For example, a specialty hospital may move a considerable distance and still care for generally the same inpatient population, while the relocation of a general hospital a relatively short distance within a metropolitan area may greatly affect the inpatient population served. A provider seeking such new provider status must apply to the intermediary and demonstrate that in the new location a substantially different inpatient population is being served. MSC’s request for new provider status based on its relocation was denied by the PRRB. In interpreting the phrase substantially different inpatient population, the PRRB applies a same cities and towns standard: if the relocated provider’s current patients came from the same cities and towns as at its old location, then the exemption will be denied. The vast majority of patients for both MSC, the relocated provider, and Shores, the original location, come from the city of Milwaukee, and thus the PRRB denied the exemption.
Paragon’s first challenge is that the PRRB’s decision retroactively applied a new rule, violating Bowen v. Georgetown University Hospital, 488 U.S. 204 (1988). Paragon claims that current PRM sec. 2533.1.B.3, which did not come into effect until after MSC’s application for the new provider exemption, was used to dispose of its request. PRM sec. 2533.1.B.3 states that the new provider exemption may be granted to a relocated provider only if the SNF relocates to a different state-defined HSA. Paragon relies primarily on the fact that a HCFA witness at the PRRB hearing admitted that the agency applied this new standard in rejecting MSC’s application. However, the evidence does not support Paragon’s position. What the HCFA witness said is irrelevant to our review, since the PRRB’s adjudication stands as the final decision of the Secretary under 42 U.S.C. sec. 1395oo(f)(1). The PRRB simply did not apply the standard contained in PRM sec. 2533.1.B.3. The PRRB’s discussion of MSC’s request for new provider status as a relocated provider never mentions the fact that Shores and MSC are both located in HSA Number Two. Instead, the opinion relies on the fact that practically 100 percent of MSC’s admissions come from the same cities and towns as Shores’ admissions. Thus, the PRRB did not retroactively apply PRM sec. 2533.1.B.3.
Paragon’s next argument is that the same-cities-and-towns standard is arbitrary and capricious since it contra dicts the language of PRM sec. 2604.1. That PRM section states that relocation a relatively short distance within a metropolitan area can be sufficient for new provider status. Paragon claims that the same-cities-and-towns standard means that a provider that moves within a metropolitan area cannot qualify for new provider status, contradicting this portion of the PRM’s text. We reject Paragon’s textual argument. A metropolitan area can contain many different municipal corporations. If a provider primarily serving one town relocates within the same metropolitan area to a different town and begins to serve mostly residents of the new town, then that relocated provider could attain new provider status under the Secretary’s interpretation of PRM sec. 2604.1. Thus, there is no contradiction between stating that movement within a metropolitan area can be sufficient for granting new provider status while also dictating that the new location must serve patients from different cities and towns than the old location. Paragon also argues that the same- cities-and-towns standard is arbitrary since it does not take account of the fact that such incorporated areas can vary widely in size. That the standard applied by the PRRB treats disparately sized towns and cities the same is true, but agencies are permitted to rely on broad categorizations that may not perfectly reflect the underlying facts. Cf. Heckler v. Campbell, 461 U.S. 458, 467-68 (1983) (holding that using guidelines rather than a completely individualized inquiry to determine what kinds of jobs a disabled person can perform is not arbitrary or capricious). The same-cities-and-towns standard has a reasonable connection to determining whether a substantially different inpatient population is being served by a relocated provider, and is more efficient and less costly than a more detailed method.
Paragon’s next argument is that the PRRB’s decision is not supported by substantial evidence. Paragon cites patient referral and zip code data to support its claim that MSC was serving a substantially different inpatient population from Shores’. Paragon’s contention here seems to be premised on the same-cities-and-towns standard being invalid. However, we have already upheld that standard, and so the only question for purposes of substantial evidence is whether MSC’s patients came from the same cities and towns as Shores’. The PRRB found that patients for both facilities came overwhelmingly from Milwaukee, and Paragon has not challenged this finding. Therefore, the PRRB’s decision is supported by substantial evidence.