Court Opinion

ID: 4564020
Source: CourtListenerOpinion
Date Created: 2020-09-09 18:00:39.600359+00
Date Added: 2024-06-11T12:24:32.082038
License: Public Domain

Case: 19-30331      Document: 00515556920          Page: 1    Date Filed: 09/09/2020

            United States Court of Appeals
                 for the Fifth Circuit                             United States Court of Appeals
                                                                            Fifth Circuit

                                                                          FILED
                                                                  September 9, 2020
                                    No. 19-30331
                                                                     Lyle W. Cayce
                                                                          Clerk

   Greenbrier Hospital, L.L.C.,

                                                             Plaintiff—Appellant,

                                       versus

   Alex M. Azar, II, Secretary, U.S. Department of Health
   and Human Services,

                                                             Defendant—Appellee.

                   Appeal from the United States District Court
                      for the Eastern District of Louisiana
                            USDC No. 2:17-CV-6420

   Before King, Costa, and Ho, Circuit Judges.
   James C. Ho, Circuit Judge:
          Judges must be faithful to text. But it is not always immediately
   obvious what fidelity to text requires. What should judges do, for example,
   when two provisions of the same law appear to conflict?
          First and foremost, we attempt to reconcile the competing provisions
   in a manner that gives effect to each one. As the Supreme Court has
   explained, we show our respect for text by trying to give it full effect: “Our
   rules aiming for harmony over conflict . . . grow from an appreciation that it’s
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                                     No. 19-30331

   the job of [lawmakers],” not judges, “to write the laws and to repeal them.”
   Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1624 (2018).
          But what if the provisions simply cannot be reconciled? In that event,
   conflict with at least some text is unavoidable. Courts are “[c]ondemned by
   contradictory enactments to dishonor some bit of text.” Herrmann v. Cencom
   Cable Assocs., 978 F.2d 978, 983 (7th Cir. 1992) (Easterbrook, J.). But even
   so, respect for text requires that “judges must do the least damage they can.”
Id. And doing the “least damage” to the text means attempting to determine,
   if at all possible, which of the two conflicting provisions should govern in a
   particular case. “This is no departure from textualism,” but rather a
   “recognition” that the law “has produced a series of texts that cannot
   coexist.” Id.
          Finally, if we are truly unable to discern which provision should
   control, “the proper resolution is to apply the unintelligibility canon . . . and
   to deny effect to both provisions.” ANTONIN SCALIA & BRYAN A. GARNER,
   READING LAW: THE INTERPRETATION OF LEGAL TEXTS 189 (2012). “After
   all, if we cannot make a valid choice between two differing interpretations,
   we are left with the consequence that a text means nothing in particular at
   all.” Id. (cleaned up). But make no mistake: This is a last resort. “Courts
   rarely reach this result,” because “outright invalidation is admittedly an
   unappealing course.” Id. at 189–90.
          This case illustrates these principles in operation. Faced with an
   irreconcilable conflict between two competing provisions, we are forced to
   make a choice. We choose to minimize damage to text by giving effect to the
   provision most obviously dictated by the context of the rule.
          Here’s the conflict: Federal regulations establish a compensation
   formula for the payment of certain health care providers—a formula that
   changes once a year. But there’s a glitch. Each formula takes effect on

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   January 1 and runs until January 1 of the following year. That means that, on
   364 days of every year, there’s no conflict. But on January 1, two competing
   formulas purport to apply, making it unclear which one governs: the new
   one, or the one from the preceding year.
          Now here’s the solution that does the least damage to text: Consider
   the context of the rule. Under the previous rule, each formula ran from July
   1 until June 30—so no conflict. When regulators amended the rule to track
   the calendar year instead, they wrote the new rule (presumably by accident)
   to run from January 1 until the following January 1. Context suggests we
   resolve the conflict by giving effect to the new, incoming formula each year
   on January 1, and not the old one from the preceding year—just as the
   previous rule gave effect to the new, incoming formula each year on July 1,
   and not the old one from the preceding year.
          That is what the agency proposes. The district court agreed. And we
   do as well. Accordingly, we affirm.
                                           I.
          In 1999, Congress directed the Department of Health and Human
   Services (“HHS”) to establish and implement a new Medicare
   reimbursement scheme for inpatient psychiatric facilities (“IPFs”). Pub. L.
   No. 106-113, App. F § 124(a)(1), 113 Stat. 1501, 1501A-332 (1999).
          HHS issued a final rule in 2004 setting forth the new reimbursement
   scheme for IPFs. That rule included a transition schedule from the old
   reimbursement system to a new one over a three-year period from 2005 to
   2008. See 69 Fed. Reg. 66922, 66964–66, 66980 (Nov. 15, 2004). During the
   transition, IPFs would receive a “blended payment” based on a combination
   of the old reimbursement regime and the new one based on per diem rates.
   The particular combinations varied year by year, with a new formula coming
   into effect each year on July 1:

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           § 412.426     Transition Period.
           (a)(1) For cost reporting periods beginning on or after January 1, 2005
           and on or before June 30, 2006, payment is based on 75 percent of the
           facility-specific payment and 25 percent is based on the Federal per
           diem payment amount.
           (2) For cost reporting periods beginning on or after July 1, 2006 and
           on or before June 30, 2007, payment is based on 50 percent of the
           facility-specific payment and 50 percent is based on the Federal per
           diem payment amount.
           (3) For cost reporting periods beginning on or after July 1, 2007 and
           on or before June 30, 2008, payment is based on 25 percent of the
           facility-specific payment and 75 percent is based on the Federal per
           diem payment amount.
           (4) For cost reporting periods beginning on or after July 1, 2008,
           payment is based entirely on the Federal per diem amount.
Id. at 66980 (emphasis added).
           In 2005, HHS published a correction to the final rule in the Federal
   Register. See 70 Fed. Reg. 16724, 16729 (Apr. 1, 2005). The agency
   explained that it had “inadvertently used incorrect dates for the cost
   reporting periods” in the 2004 rule. Id. at 16726. Under the 2004 rule, a
   new formula would take effect each year on July 1. But the agency had meant
   for the new formula to take effect each year on January 1—not July 1. Id. To
   fix the error, HHS adjusted the transition timeline to align with the calendar
   year.
           But there’s a problem. The corrected regulation issued in 2005 reads
   as follows:
           § 412.426     Transition Period.
           (a)(1) For cost reporting periods beginning on or after January 1, 2005
           and on or before January 1, 2006, payment is based on 75 percent of

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           the facility-specific payment and 25 percent is based on the Federal
           per diem payment amount.
           (2) For cost reporting periods beginning on or after January 1, 2006
           and on or before January 1, 2007, payment is based on 50 percent of
           the facility-specific payment and 50 percent is based on the Federal
           per diem payment amount.
           (3) For cost reporting periods beginning on or after January 1, 2007
           and on or before January 1, 2008, payment is based on 25 percent of
           the facility-specific payment and 75 percent is based on the Federal
           per diem payment amount.
           (4) For cost reporting periods beginning on or after January 1, 2008,
           payment is based entirely on the Federal per diem amount.
Id. at 16729 (emphasis added). As HHS explained in the preamble, the
   amendment to the rule “does not reflect a change in policy, rather, it
   conforms the regulation text to the actual policy.” Id. at 16726.
           But in shifting the dates to align with the calendar year, the 2005
   amendment introduced what appears to be an unintended error.                         The
   governing formula each year runs not from January 1 to December 31, but
   from January 1 to January 1 of the following year. As a result, a single
   compensation formula governs 364 out of 365 days each year. But on January
   1, the rule imposes two conflicting formulas: the new formula that governs
   the new year, but also the previous formula from the preceding year. For
   example, a cost reporting period beginning on January 1, 2006, appears to be
   eligible for both the 25% per diem rate and the 50% per diem rate—an obvious
   problem because presumably an IPF can be reimbursed under only one
   formula per year. 1

           1
            Further adding to the confusion, the Office of the Federal Register omitted the
   correction for subsection (a)(4) from the 2005 edition of the Code of Federal Regulations.
   Under the CFR version, the 75% per diem rate still applies to cost reporting periods

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           Greenbrier Hospital, an IPF, claims that this January 1 glitch means it
   now gets to choose which formula it wishes to use to determine its
   compensation from the federal government—either the new incoming
   formula or the old one from the preceding year. Based on that theory,
   Greenbrier submitted a reimbursement claim seeking compensation at the
   75% rate—that is, the one from the preceding year—for the period from
   January 1, 2008 to December 31, 2008.
           The Centers for Medicare & Medicaid Services (“CMS”), which
   administers HHS’s reimbursements, rejected Greenbrier’s claim and paid it
   at the post-transition, 100% per diem rate.                So Greenbrier filed an
   administrative appeal with the Provider Reimbursement Review Board. The
   Board determined that Greenbrier was entitled to the 75% per diem rate, and
   therefore reversed the initial CMS decision. But the CMS Administrator
   reversed the Board’s decision sua sponte, concluding that the 100% per diem
   rate governs.
           Greenbrier sought judicial review of the Administrator’s decision.
   The district court granted summary judgment to the government.                         It
   determined that, given the conflicting reimbursement schemes, the
   regulation was ambiguous, and that the Administrator’s interpretation of the
   regulation was reasonable and therefore warranted Auer deference.

   beginning on or before January 1, 2008, consistent with the text of the Federal Register.
   But only those cost reporting periods that begin on or after July 1, 2008—rather than
   January 1, 2008—trigger the 100% per diem rate. The misprint thus leaves a six-month gap
   for cost reporting periods beginning after January 1, 2008, but before July 1, 2008.
            Contrary to Greenbrier’s argument, the text of the Federal Register, and not the
   misprint in the CFR, controls. The CFR is a reproduction of regulations that agencies
   promulgate in the Federal Register. See 44 U.S.C. § 1510(a). So when a conflict between
   the two exists, we look to the rule’s original publication—just as we do when a conflict
   exists between the Statutes at Large and the United States Code. See U.S. Nat’l Bank of
   Or. v. Indep. Ins. Agents of Am., Inc., 508 U.S. 439, 448 (1993).

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   Greenbrier now appeals. We review the district court’s grant of summary
   judgment de novo. Patel v. Tex. Tech Univ., 941 F.3d 743, 747 (5th Cir. 2019).
                                           II.
          Ordinarily, we try to reconcile potentially conflicting provisions by
   attempting to read the text in harmony. But that is not possible here. The
   competing formulas were promulgated at the same time, cover the same
   topic, and are directed to the same end. Yet they are mutually exclusive.
   They collide full-on. The parties agree that the regulations cannot logically
   be construed to simultaneously impose two different payment formulas for
   the same services. See SAMUEL JOHNSON, 1 THE HISTORY OF RASSELAS 51
   (1759) (inconsistent statements “may both be true,” but they “cannot both
   be right”).
          Our only remaining options, then, are either (1) do the least damage
   to text, by choosing which of the two competing provisions to give effect, or
   (2) if it is not possible to identify a principled basis for choosing one provision
   over the other, then deny effect to both provisions. As noted, “outright
   invalidation is admittedly an unappealing course.” SCALIA & GARNER,
   READING LAW at 190. Where possible, we should do “the least damage” to
   the text by giving effect to at least one of the competing provisions.
   Herrmann, 978 F.2d at 983.
          And we can do so here. Context makes clear that we should construe
   the 2005 rule to give effect to the new formula, and not the formula from the
   preceding year, when presented with a cost report that begins on January 1.
   That is how the previous rule worked: Under the express terms of the 2004
   rule, the new formula would take effect at the beginning of each July. See 69
   Fed. Reg. at 66980. See also, e.g., Ross v. Blake, 136 S. Ct. 1850, 1857–58
   (2016) (consulting statutory “precursor” for context). We see no reason not
   to construe the 2005 rule the same way: The new formula should take effect

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   at the beginning of each calendar year, just as it did at the beginning of July
   each year. After all, as HHS explained, it was revising the 2004 rule simply
   because it “inadvertently used incorrect dates” by starting the new formulas
   each year on July 1, rather than on January 1 as originally intended. 70 Fed.
   Reg. at 16726. Moreover, HHS made clear that “[t]his correction does not
   reflect a change in policy, rather, it conforms the regulation text to the actual
   policy.” 70 Fed. Reg. at 16726. 2
           Greenbrier responds that the 2005 rule should be construed to
   authorize any cost report that begins on January 1, 2008, to be reimbursed
   under either the new formula or the formula from the preceding year—
   whichever one Greenbrier chooses. We disagree.
           To begin with, giving IPFs the option to choose would contradict the
   express statement that the 2005 rule effects no substantive change in policy.
           What’s more, there is no basis anywhere in the text of the rules for
   giving Greenbrier the choice of formula. Tellingly, during oral argument,
   Greenbrier’s counsel was unable to provide any textual support for the
   proposition that HHS meant to make a “one day only” offer to medical
   providers to choose between two competing compensation formulas. That is
   unsurprising. For there is no greater textual basis for giving the choice of
   formula to the provider, rather than to HHS. Come to think of it, there is no
   greater textual basis for giving the choice to anyone, rather than, say, to simply
   impose the formula that results in greater compensation (to favor
   beneficiaries) or lesser compensation (to favor taxpayers). The text of the
   rule is entirely indeterminate on all of these questions. It would make more

           2
             Our conclusion is further confirmed by subsequent preambles in the Federal
   Register, which make clear that the new formula applies on January 1 of each year. See 71
   Fed. Reg. 27040, 27042 (May 8, 2006); 72 Fed. Reg. 25602, 25603 (May 4, 2007); 73 Fed.
   Reg. 25709, 25710–11 (May 7, 2008).

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   sense to deny effect to both payment formulas—but of course Greenbrier
   does not make that argument.
                                       ***
          In sum, we cannot resolve the conflict, so we limit the damage to text
   by applying the new incoming rule on January 1, rather than the old rule from
   the preceding year. That is what context indicates. It is what the agency
   proposes. And it is what the district court permitted. Accordingly, we affirm.

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