Court Opinion

ID: 2666329
Source: CourtListenerOpinion
Date Created: 2014-04-04 08:48:49.270088+00
Date Added: 2024-06-11T12:35:04.813253
License: Public Domain

UNITED STATES DISTRICT COURT
                      FOR THE DISTRICT OF COLUMBIA

LESTER E. COX MEDICAL         :
CENTERS,                      :
                              :
               Plaintiff,     :
                              :
          v.                  :          Civil Action No. 07-2264 (GK)
                              :
KATHLEEN SEBELIUS,1 Secretary :
of Health and Human Services, :
                              :
               Defendant.     :

                           MEMORANDUM OPINION

      Plaintiff Lester E. Cox Medical Centers (“Plaintiff” or “Cox”)

is a provider of acute care, inpatient hospital services located in

Missouri.     Plaintiff brings this action against Kathleen Sebelius

in her official capacity as Secretary of the Department of Health

and   Human    Services   (“Defendant”   or   “HHS”),   after   Defendant

dismissed Cox’s administrative appeal for failure to appear at a

hearing.      Pursuant to the Medicare Act, 42 U.S.C. § 1395 et seq.,

and the Administrative Procedure Act (“APA”), 5 U.S.C. § 551 et

seq., Cox challenges that decision. This matter is before the Court

on Plaintiff’s Motion for Summary Judgment [Dkt. No. 24] and

Defendant’s Cross-Motion for Summary Judgment [Dkt. No. 25].         Upon

consideration of the Motions, Oppositions, Replies, and the entire

record herein, and for the reasons stated below, Plaintiff’s Motion

      1
       Pursuant to Fed. R. Civ. P. 25(d), Secretary of Health and
Human Services Kathleen Sebelius is automatically substituted as
Defendant for former Secretary Michael O. Leavitt.
for Summary Judgment is denied and Defendant’s Motion for Summary

Judgment is granted.

I.   BACKGROUND2

     Part A of the Medicare Act provides for prospective payments

to healthcare providers, such as Plaintiff, that offer inpatient

care to Medicare beneficiaries.      See 42 U.S.C. § 1395ww(d).    Under

this “prospective payment system” (“PPS”), hospitals receive a pre-

determined payment that is calculated based on a complex statutory

formula.    Providers file annual cost reports that detail the

“reasonable costs” they have incurred and the portion of those

costs that are covered by Medicare.         42 U.S.C. § 1395g(a); 42

C.F.R. § 413.50.        HHS delegates Medicare administration to the

Centers for Medicare and Medicaid Services (“CMS”).            CMS often

contracts   out    to   “fiscal   intermediaries,”   usually   insurance

companies, the task of auditing the providers’ cost reports and

creation of a Notice of Program Reimbursement (“NPR”), which

informs the hospital of the intermediary’s final determination of

its Medicare reimbursement for the period in question.         42 C.F.R.

§§ 405.1803, 421.100.

     In this challenge to the intermediary’s calculation of one of

the several Medicare hospital-specific adjustments that can be made

to the PPS, Cox argues that the Intermediary wrongly calculated its

     2
          Unless otherwise noted, the facts set forth herein are
drawn from the Administrative Record (“AR”) [Dkt. No. 10].

                                    -2-
“disproportionate share hospital” (“DSH”) adjustment.3            Certain

hospitals   receive   a   payment   adjustment   because   they   serve   a

“significantly disproportionate number of low-income patients.” 42

U.S.C. § 1395ww(d)(5)(F)(i)(I).      Eligibility for this adjustment,

as well as its value, is determined by looking to a provider’s

“disproportionate patient percentage.” Id. at § 1395ww(d)(5)(F)(v).

Under § 1395ww(d)(5)(F)(vi), this percentage is calculated by

combining two fractions, known as the Medicare Proxy and the

Medicaid Proxy.   42 C.F.R. § 412.106(b).

     The merits of this case deal with Cox’s challenge to the

exclusion of certain days from the numerator of the Medicaid Proxy.

Pl.’s Mot. for Summ. J., or in the Alternative, Summ. Adjudication

of the Issues at 2 (“Pl.’s Mot.”) [Dkt. No. 24].      Plaintiff charges

that Defendant wrongly refused to include the patient-days that it

provided under the State’s General Relief program as Medicaid-

eligible days for purposes of the Medicaid fraction.          Failure to

include those days had the effect of reducing the hospital’s DSH

adjustment.

     The Medicare Act permits dissatisfied providers to bring their

claims before the Provider Reimbursement Review Board (“PRRB” or

“the Board”).   42 U.S.C. § 1395oo(a).    On February 9, 1998, in Case

No. 98-3283, Plaintiff challenged the NPR issued by its fiscal

     3
            There are both Medicare DSH payments and Medicaid DSH
payments.

                                    -3-
intermediary for the fiscal year ending September 30, 1992, by

raising several substantive challenges to the calculation of the

Medicaid    fraction.    In   May   of   2004,     the   Plaintiff   and   the

intermediary negotiated an agreement, AR at 619-20, which was

forwarded to the Board. The Board then granted Plaintiff’s request

for withdrawal of its appeal and Case No. 98-3283 was closed.               AR

at 625.

     Prior to withdrawal of its case, Cox requested that the DSH

issue which it had raised in Case No. 98-3283 be combined with

another appeal to create a group appeal.            The Board allowed this

group appeal (Case No. 04-1779G) to go forward.               A hearing was

scheduled for October 19, 2007.               Prior to that hearing, the

intermediary had filed a jurisdictional brief arguing that the DSH

issue had already been resolved by the 2004 settlement agreement in

Case No. 98-3283.

     On September 19, 2007, the Board received notification that an

attorney would be representing the providers in the group appeal,

Case No. 04-1779G.        AR at 199.          According to the Government,

Plaintiff   was   not   represented      by    counsel   before   this   time.4

Further, there is no record of counsel entering an appearance in

     4
          Defendant      also notes that part of the reason that the
Board scheduled the      October 19, 2007, hearing was to clarify the
highly complicated      procedural history of Cox’s appeal.    Def.’s
Opp’n to Pl.’s Mot.     at 15 n. 10.

                                     -4-
the case after notifying the Board on September 19.                  Def.’s Opp’n

to Pl.’s Motion at 14 (“Def.’s Opp’n”) [Dkt. No. 26].

     On October 13, 2007, days before the scheduled hearing in the

group   appeal,   Plaintiff     filed    with    the   Board   a     request      for

“expedited judicial review” (“EJR”).            Such a procedure allows the

Board to authorize judicial review of an Intermediary action that

“involves a question of law or regulations relevant to the matters

in controversy whenever the Board determines . . . that it is

without   authority     to    decide    the     question.”         42    U.S.C.     §

1395oo(f)(1).       Cox maintained that the Board did not have the

authority to decide certain questions of law and regulations.

Pl.’s Mot. at 4.

     The Board disagreed.        It issued its EJR ruling on October 17,

2007, in which it concluded that, for several reasons, the issues

should proceed to a hearing, and that immediate judicial review was

not appropriate.      AR at 44-45.       Among the issues that the Board

wanted to resolve at the hearing was whether the intermediary’s

2005 jurisdictional challenge was a valid one.                Id. at 45. (“The

Board will hear the [jurisdictional] challenge and the Providers’

[sic]   response,    along    with   other    motions,   at    the      October    19

hearing.”).

     On October 17, 2007, Plaintiff received notice--the same day

that the PRRB denied EJR--that it was permitted to appear at the

hearing by telephone.        On October 18, 2007, Cox informed the Board

                                       -5-
that it would not be appearing at the hearing at all, AR at 31; in

response,     on    October    19,   2007,      the   Board   sent   Cox   a   letter

indicating that failure to appear would result in dismissal, AR at

2.   The hearing was conducted on October 19, but Plaintiff chose

not to attend.        On October 22, 2007, the Board formally dismissed

Case No. 04-1779G with prejudice due to Plaintiff’s failure to

appear.      AR at 1.

      The PRRB is authorized by statute to “make rules and establish

procedures, not inconsistent with the provisions of this subchapter

or regulations of the Secretary, which are necessary or appropriate

to   carry    out    the    provisions”    of    the   statute.      42    U.S.C.   §

1395oo(e).     CMS issued PRRB Instructions in March of 2002, setting

forth the Board’s policies and guidelines.                See PRRB Instructions

at Introduction.5          One of the rules directed at providers states:

“[i]f you fail to appear at the hearing without a good cause

finding by the Board, [the Board] will dismiss your case with

prejudice.”        PRRB Instructions at III.B.I.d.

      5
          Since the filing of this action, the PRRB Instructions in
place have been modified in key respects. See PRRB Rules (July 1,
2009), available at http://www.cms.hhs.gov/PRRBReview/Downloads
/PRRBRules2009_070109.pdf.    These updated Rules apply only to
appeals pending or filed on or after July 1, 2009. Id. at Forward.
For purposes of this Memorandum Opinion, the relevant text is the
2002       PRRB      Instructions,            available         at
http://www.cms.hhs.gov/PRRBReview/Downloads/PRRB_Instructions_Mar
ch_03.pdf, which is the version that governs Plaintiff’s appeal.

                                          -6-
       On August 3, 2009, parties filed their Motions.6                 On October

1,    2009,    the    Court   denied    Plaintiff’s   request      to    stay    the

proceedings while a related case was pending before another Judge

of this Court.         Minute order (Oct. 1, 2009).       Briefing was fully

completed on January 13, 2010.

II.    STANDARD OF REVIEW

       The Medicare Act provides for judicial review of a final

decision made by the Board.             42 U.S.C. § 1395oo(f)(1).            The Act

instructs the reviewing court to apply the provisions of the APA.

Id.        Under the APA, the agency decision is set aside if it is

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

accordance with law.”         5 U.S.C. § 702(2)(A).

       “The arbitrary and capricious standard [of the APA] is a

narrow standard of review.”             Citizens to Preserve Overton Park,

Inc. v. Volpe, 401 U.S. 402, 416 (1971).           It is well established in

our    Circuit       that   “[t]his    court’s   review   is   .   .     .    highly

deferential” and “we are ‘not to substitute [our] judgment for that

of the agency’ but must ‘consider whether the decision was based on

       6
          At parties’ request, this case was stayed on July 2,
2008, in light of motions before our Court of Appeals for rehearing
of a related case, Adena Reg’l Med. Ctr. v. Leavitt, 527 F.3d 176
(D.C. Cir. 2008).    Minute Order (July 2, 2008).    Rehearing was
denied. However, the briefing schedule was further extended when
Plaintiff requested an additional stay to await the outcome of the
petition for certiorari filed in the Adena case. Order (Oct. 30,
2008). The Supreme Court elected not to hear that case. A new
briefing schedule was put in place on July 1, 2009. Minute Order
(July 1, 2009).

                                         -7-
a consideration of the relevant factors and whether there has been

a clear error of judgment.’”      Bloch v. Powell, 348 F.3d 1060, 1070

(D.C. Cir. 2003) (citations and internal quotation marks omitted);

see also United States v. Paddack, 825 F.2d 504, 514 (D.C. Cir.

1987).

      If the “agency’s reasons and policy choices . . . conform to

‘certain minimal standards of rationality’ . . . the [agency

decision] is reasonable and must be upheld.”          Small Refiner Lead

Phase-Down Task Force v. EPA, 705 F.2d 506, 521 (D.C. Cir. 1983)

(citation omitted); see Kisser v. Cisneros, 14 F.3d 615, 619 (D.C.

Cir. 1994).

      Summary judgment will be granted when there is no genuine

issue as to any material fact. See Fed. R. Civ. P. 56(c).                Since

this case involves a challenge to a final administrative decision,

the   Court’s   review   on    summary    judgment   is   limited   to    the

administrative record.        Holy Land Found. for Relief and Dev. v.

Ashcroft, 333 F.3d 156 (D.C. Cir. 2003) (citing Camp v. Pitts, 411

U.S. 138, 142 (1973)); Richards v. Immigration & Naturalization

Serv., 554 F.2d 1173, 1177 (D.C. Cir. 1977)) (“Summary judgment is

an appropriate procedure for resolving a challenge to a federal

agency’s administrative decision when review is based upon the

administrative record.”).

                                    -8-
III. ANALYSIS

     Plaintiff mounts several challenges to the Board’s actions.

It   argues   that     the   dismissal    for    failure   to   appear   “was

inappropriate,” that the Board’s jurisdictional decision was in

error, and that the Court should hold that the hospital’s General

Relief patient-days count as Medicaid-eligible days for purposes of

calculating its Medicaid DSH fraction.

     1.     The Board’s Decision to Dismiss Plaintiff’s Case for
            Failure to Appear at the Hearing Was Not Arbitrary or
            Capricious.

     The    decision    under   review    is    the   Board’s   dismissal   of

Plaintiff’s appeal for failure to appear, a decision that was

issued orally on October 19, 2007, and in writing on October 22,

2007.7    AR at 22-23; 1; see also Pl.’s Mot. at 7 (“Based upon this

     7
          In its Opposition and Reply brief, Plaintiff challenges
the dismissal order as not having been decided by a quorum of the
PRRB, as required by 42 C.F.R. § 405.1845(d) (2000). Pl.’s Opp’n
and Reply to Def.’s Opp’n to Pl.’s Mot. at 7-10 (“Pl.’s Reply”)
[Dkt. No. 28-29]. In support of this position, Plaintiff observes
that the dimissal order was signed by only one member of the Board.
See AR at 1.     This point was not raised in the Complaint or
Plaintiff’s Motion.    An argument that is not raised before the
reply is untimely and will not be allowed. La. Pub. Serv. Comm’n v.
FERC, 482 F.3d 510, 521 (D.C. Cir. 2007). Plaintiff argues in the
preface to its Reply brief that because the brief is a joint
Opposition and Reply, it is appropriate to raise certain arguments
in that filing. Pl.’s Reply at 2. However, its quorum argument is
not designed to respond to a new or unexpected point at issue;
indeed, it pertains to the dispositive issue in the case, and
therefore raising it at such a late juncture is inappropriate.

     Assuming arguendo that this argument is timely, Plaintiff mis-
characterizes the record. At the October 19, 2007 hearing, the
Chair of the Board announced the decision orally, and on October
                                                          (continued...)

                                    -9-
non-appearance, the Board dismissed the Hospital’s case, with

prejudice.”).    This ruling represents the Board’s “final decision”

on   the   matter.   See   42   U.S.C.    §   1395oo(f)(1)    (stating   that

“[p]roviders shall have the right to obtain judicial review of any

final decision of the Board”).      Consequently, the dismissal is the

only order that is before the Court to review.          Id.

      Plaintiff at times recognizes that the dismissal for failure

to appear is the decision before the Court, see Pl.’s Mot. at 7,

11, and at times seems to completely ignore it and argues that the

Court should reach the merits of its appeal, see Pl.’s Mot. 21-22.

The Court cannot reach the merits of the case if they were not the

basis of the agency’s decision. See High Country Home Health, Inc.

(...continued)
22, 2007, issued the written decision. The lone signature on the
written order does not change the fact that the Board as a whole
came to the conclusion to dismiss Plaintiff’s appeal. See AR at
22-23 (oral ruling before five members of PRRB). Additionally, the
closing of the letter reads “For The Board,” and is signed by
Suzanne Cochran, its chairman. AR at 1. Therefore, the quorum
argument, even if timely, fails.

     It bears mentioning that there is a certain disingenuousness
underlying Plaintiff’s position.     Cox observes that the policy
behind the quorum requirement is, in part, to ensure that the
provider community is represented on the Board, as two of the five
Board members must be representative of that community.       Pl.’s
Reply at 8. Cox complains that the dismissal signed by Cochran on
behalf of the Board deprived the provider “of a decision in which
at least one member representing the provider community was a
participant.” Id. at 9. Five members were present at the hearing,
so the provider community was certainly represented when the issues
were discussed in depth. AR at 9. In addition, Cox elected not to
attend the hearing, which assuredly would have been the best way to
guarantee that its interests were represented.

                                   -10-
v. Thompson, 359 F.3d 1307, 1315 (10th Cir. 2004) (“These arguments

largely go to the merits, and given that the only final decision by

the Board is a dismissal for untimeliness, we have no occasion to

consider the merits of High Country’s underlying claims here.”).

       Thus, there is no question that the Court cannot reach the

merits in this case.       The Board’s decision to dismiss the appeal

for    failure   to   appear   at   the     October    19,   2007,     hearing   is

unambiguous.     See AR at 1 (“Since the Provider failed to appear at

the scheduled hearing, the Board hereby dismisses the case with

prejudice.”).     That decision will be upheld if the Board provided

a “rational connection between the facts found and the choice

made.”    Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins.

Co., 463 U.S. 29, 43 (1983).

       PRRB Instructions state that “[i]f [the provider] fail[s] to

appear at the hearing without a good cause finding by the Board,

[the   Board]    will   dismiss     [the]    case   with     prejudice.”     PRRB

Instructions at III.B.I.d.          There is no dispute that Plaintiffs

received notice of the consequences of inaction.                     See AR at 2

(letter from Board to Cox informing Plaintiff that “[f]ailure to

appear    will   result   in   dismissal       of     your   case”).    Plaintiff

characterizes this notice as a “threat,” and claims that it did not

appear for the hearing because “any such appearance would . . . be

                                      -11-
overly burdensome and futile.”8    Pl.’s Mot. at 7. In light of these

facts, the Board’s clearly stated rule gave adequate notice to

Plaintiff, and dismissal with prejudice was eminently reasonable in

light of Plaintiff’s failure to follow that rule.

      This is especially true because of the enormous burden PRRB

has in dealing with a large volume of appeals.9             In a case whose

procedural posture closely resembles this one, this Court found

that the PRRB appropriately relied on its procedural rules in

dismissing an appeal for failure to file a position paper on time.

See Rapid City Reg’l Hosp. v. Sebelius, Civ. No. 06-1828, 2010 WL

367544, at *4 (D.D.C. Feb. 2, 2010).       Such rules are necessary for

the Board to control and efficiently dispose of its substantial

docket.     Id. at *3-5.     As our Court of Appeals has stated in

upholding the Board’s enforcement of its rules, “the Board’s

procedural rules mean what they say and say what they mean.”

Baptist Mem’l Hosp.-Golden Triangle v. Sebelius, 566 F.3d 226, 227

(D.C. Cir. 2009).

      There is no challenge to the validity of the PRRB Instructions

or   to   agency   regulations.   The    Board   cannot     be    faulted   for

following its own rules in this case.            Cf. Rapid City, 2010 WL

      8
          The Board gave Plaintiff the             option    to    appear    by
telephone or in person. AR at 3, 46.
      9
          The Board’s backlog of cases as of May 23, 2008, was
approximately 6,800 cases. Gov Opp’n to Pl.’s Mot. at 19 n. 12
(citing Federal Register) (“Gov Opp’n) [Dkt. No. 26].

                                  -12-
367544, at *5 (reasoning that “[i]t is completely rational and

reasonable for a court, or agency, to impose deadlines, and to

interpret them strictly and uniformly”).           For all these reasons,

the Board’s decision is affirmed, and Plaintiff’s Motion is denied.

     2.    Plaintiff’s EJR Request Is Not Before the Court.

     Plaintiff, in an effort to evade the consequence of its

failure   to   appear,   insists   that   the    Board’s   handling   of   the

jurisdictional question must be reviewed and reversed.           Pl.’s Mot.

at 12.    As already discussed, only one “final decision” is before

the Court: the Board’s dismissal for failure to appear at the

hearing. Plaintiff’s convoluted argument that the EJR denial forms

the basis of this Court’s review is not supported by the law or the

facts in the record.

     Cox argues that the Board decided the jurisdictional question

in the process of rendering its EJR decision on October 17, 2007.

Pl.’s Reply at 2-3.         It bases this argument on the Board’s

statement that “jurisdiction has not been established.”           AR at 46.

In Plaintiff’s view, this amounts to an admission by the Board that

it lacked jurisdiction over the appeal, and this admission deprived

it of the authority to proceed with any hearing and to dismiss the

case when Plaintiff failed to appear.           Pl.’s Reply at 3-4.

     However, the Board made no such jurisdictional finding in its

October 17, 2007, EJR decision.       The language cited by Plaintiff

ends a paragraph in which the Board notes that the Intermediary is

                                   -13-
challenging jurisdiction.          AR at 45.   The Board set the hearing in

order to “hear the challenge and the Providers’ response, along

with other motions.”         Id.    The Board never ruled that it lacked

jurisdiction to conduct a hearing.             In fact, the purpose of the

hearing, in part, was to determine whether or not the Board had

jurisdiction over Plaintiff’s appeal.           Cf. United States v. United

Mine Workers of Am., 330 U.S. 258, 291 (1947) (explaining well-

known principle that a court has jurisdiction to decide its own

jurisdiction).        Cox failed to appear at the proceeding, and only

then did the Board dismiss the case.

        The Court is also not persuaded by Plaintiff’s efforts to

portray the Board’s decision to hold a hearing that discussed

jurisdiction as impermissible under the regulations.           Pl.’s Reply

at 6.        Plaintiff points to regulatory language that states, “[t]he

information and documentation required with respect to the filing

of a request for a hearing is used by the Board to determine

jurisdiction.”        42 C.F.R. § 405.1842(b)(2) (2007).10 However, there

        10
          42 C.F.R. §§ 405.1842 has been amended. The Court relies
on the text of the regulations in place during Plaintiff’s
administrative appeal in 2007, found at 42 U.S.C. § 405.1842
(2007).

                                      -14-
is no language in the Regulation precluding the Board from holding

a hearing.

     Further, PRRB Instructions and regulations do not allow for

immediate judicial review where EJR is denied, as it has been here.

Under 42 C.F.R. § 405.1842(h)(1) (2007), the Board’s decision to

grant EJR is a final, reviewable decision.              Under 42 C.F.R. §

405.1842(g)(2) (2007), “[i]f there are factual or legal issues in

dispute on an issue within the authority of the Board to decide,

the Board will not make an [EJR] determination on the particular

issue but will proceed with a hearing.”            The PRRB Instructions

confirm   that    EJR   denial   will    result   in   a   hearing.         PRRB

Instructions at I.E.III.

     In short, Plaintiff’s various attempts to shift the Court’s

focus   from   the   one   dispositive    issue   in   this   case    are    not

convincing.      The EJR denial is not before the Court.             The Board

made no jurisdictional ruling in denying EJR, as is evidenced by

the clear language of its October 17, 2007 decision.                 AR at 45.

Finally, denial of EJR is not, under the relevant regulations, a

basis for judicial review.

     3.    The Court Has No Authority to Rule on the Merits of
           Plaintiff’s Challenge.

     For the reasons discussed above, the Court will not reach the

merits of Plaintiff’s arguments.         See Country, 359 F.3d at 1315;

see also Anaheim Mem’l Hosp. v. Shalala, 130 F.3d 845, 853 (9th

Cir. 1997).      The Board did not decide the appeal on substantive

                                   -15-
grounds.    The only issue before the Court is whether dismissal for

failure to appear was an arbitrary and capricious decision.

IV.   CONCLUSION

      For   the   foregoing   reasons,    Defendant’s   Cross-Motion   for

Summary Judgment is granted, and Plaintiff’s Motion for Summary

Judgment is denied.      An order shall issue with this Memorandum

Opinion.

                                           /s/
March 9, 2010                             Gladys Kessler
                                          United States District Judge

Copies to: attorneys on record via ECF

                                   -16-