Opinion ID: 767907
Heading Depth: 4
Heading Rank: 1

Heading: Statutory and Regulatory Text

Text: 41 St. Francis's first argument is that PRM § 2534.5 is inconsistent with the plain language of the governing statute and regulation. St. Francis's Br. at 23. We disagree with this contention because the statute explicitly granted the Secretary broad discretion and because she exercised this discretion consistent with the clear policy choices Congress made in the statute. 42 Neither Congress in 42 U.S.C. § 1395yy nor the Secretary in 42 C.F.R. § 413.30 mandated that a HB-SNF be reimbursed any amount above the statutory RCL set forth in § 1395yy. St. Francis therefore overstates its case when it claims the language of these provisions dictates that a provider who demonstrates that its costs in excess of its cost limit are 1) due to the provision of atypical services and 2) reasonable, attributable, identified and verified, is entitled to reimbursement in full above the cost limit. St. Francis's Br. at 24 (emphasis added). Instead, both provisions are phrased in the permissive, merely stating that the Secretary may adjust cost limits upward. 42 U.S.C. § 1395yy(c); 42 C.F.R. § 413.30(f). Moreover, neither provision provides guidance as to the level of adjustment the Secretary must make. Specifically, 42 C.F.R. § 413.30 provides that although limits may be adjusted when atypical, they should only be adjusted upward to the extent the costs are reasonable. 42 C.F.R. § 413.30(f). As the Secretary argued, this explicitly placed the determination of typicality of services versus reasonableness of costs within her discretion. 8 43 Having noted what the statute does not do, it is important to note what it does do. As discussed supra, Congress responded to studies demonstrating that about half of the greater cost of HB-SNFs was due to inefficiency by establishing a two-tier system which prevents HB-SNFs from being reimbursed for those inefficient costs. Hence, for HB-SNFs, Congress set the new statutory cost limit at fifty percent of the difference between 112% of the mean per diem costs for HB-SNFs and FS-SNFs. Of course, just as Congress did not address how the Secretary should generally grant upward adjustments in reimbursements, it also did not specify how the Secretary should do so in light of this new regime accounting for HB-SNFs' inefficiency. Yet again, she was granted discretion to make this determination. 44 Given these aspects of the statute, we agree with the district court that the Secretary's interpretation of the regulation and statute in the PRM is reasonable, not arbitrary. First, we agree with the Secretary that the best way to characterize the effect of the PRM is that it applies a discount factor to all HB-SNFs to account for the unreasonable costs above those of FS-SNFs. As the district court recognized, discounting for these unreasonable costs comports with the general recognition by Congress that certain systemic inefficiencies... associated with unreasonable costs [] are associated with HB-SNFs. St. Francis, 10 F.Supp.2d at 892. In fact, the PRM calculation reduces the reimbursement to HB-SNFs by the very same proportion that Congress deemed to be inefficient -- half of the difference in costs between FS-SNFs and HB-SNFs. 9 Likewise, the guideline comports with 42 C.F.R. § 413.30, which allows the Secretary to determine the extent to which costs for atypical services are reasonable. 42 C.F.R. § 413.30(f). 45 In sum, PRM § 2534.5 does not create the two-tier system in contravention of the statute and regulation. To the contrary, the Secretary merely acted within the discretion she was granted by putting into place the very cost ratio established by Congress in 42 U.S.C. § 1395yy and elaborated upon by 42 C.F.R. § 413.30. 10