Court Opinion

ID: 2665697
Source: CourtListenerOpinion
Date Created: 2014-04-04 08:04:13.621461+00
Date Added: 2024-06-11T13:01:38.070006
License: Public Domain

UNITED STATES DISTRICT COURT
                             FOR THE DISTRICT OF COLUMBIA

AFFINITY HEALTHCARE SERVICES,                  :
INC. d/b/a AFFINITY HOME HOSPICE               :
SERVICES et al.,                               :
                                               :
               Plaintiffs,                     :     Civil Action No.:      10-0946 (RMU)
                                               :
               v.                              :     Re Document No.:       8
                                               :
KATHLEEN SEBELIUS,                             :
in her official capacity as Secretary of the   :
U.S. Department of Health and                  :
Human Services,                                :
                                               :
               Defendant.                      :

                                  MEMORANDUM OPINION

        DENYING THE PLAINTIFFS’ MOTION FOR A TEMPORARY RESTRAINING ORDER

                                     I. INTRODUCTION

       The plaintiffs are a group of fifteen hospice care providers participating in Medicare, a

federal program administered by the Department of Health and Human Services (“HHS”). They

commenced this action pursuant to the Administrative Procedure Act (“APA”), 5 U.S.C. §§ 553

et seq., challenging HHS’s demands for repayment of funds distributed to the plaintiffs

purportedly in excess of the lawful cap on such distributions. The plaintiffs contend that the

regulation pursuant to which HHS calculated the repayment amounts conflicts with the

governing statute and must be set aside. The matter is now before the court on the plaintiffs’

motion for a temporary restraining order seeking to enjoin HHS from collecting on the subject

repayment demands or relying on the challenged regulation to demand further repayment from
the plaintiffs. Upon consideration of the parties’ submissions, the court denies the plaintiffs’

motion.

                                         II. BACKGROUND

                         A. The Statutory and Regulatory Framework

       Medicare provides health insurance to the elderly and disabled by entitling eligible

beneficiaries to have payment made on their behalf for the care and services rendered by health

care providers. See 42 U.S.C. §§ 1395 et seq. Among other services, the program covers

hospice care for individuals who are “terminally ill,”1 reimbursing hospices for services such as

nursing care, physical or occupational therapy, home health aide services, medical supplies and

counseling. Id. § 1395x(dd)(1). An individual remains entitled to hospice care benefits so long

as he or she is certified as being “terminally ill.”2 See id. § 1395d(d)(1) (establishing that

reimbursement for hospice care may be provided “during two period of 90 days each and an

unlimited number of subsequent period of 60 days each during the individual’s lifetime”).

       The Medicare statute, however, places a cap on the total amount that Medicare may

distribute to a hospice provider in a single fiscal year (November 1 through October 31). See id.

§ 1395f(i)(2)(A). Payments made to a hospice care provider in excess of the statutory cap are

considered overpayments that must be refunded by the hospice care provider. Id.

1
       An individual is “terminally ill” if he or she has “a medical prognosis that the individual’s life
       expectancy is 6 months or less.” 42 U.S.C. § 1395x(dd)(3).
2
       An individual’s initial election of hospice care must be accompanied by a certification from the
       individual’s attending physician and the medical director of the hospice program that the
       individual is “terminally ill” as defined by the statute. Id. § 1395f(a)(7)(A)(i). At the expiration
       of this initial election period, the attending physician or medical director may recertify the
       individual’s eligibility for hospice care benefits for additional sixty or ninety day periods. Id. §
       1395f(a)(7)(A)(ii).

                                                     2
       More specifically, the statute provides that the total yearly payment to a hospice provider

may not exceed the product of the annual “cap amount”3 and the “the number of [M]edicare

beneficiaries in the hospice program in that year.” Id. For purposes of this calculation,

       the “number of [M]edicare beneficiaries” in a hospice program in an accounting
       year is equal to the number of individuals who have made an election under
       subsection (d) of this section with respect to the hospice program and have been
       provided hospice care by (or under arrangements made by) the hospice program
       under this part in the accounting year, such number reduced to reflect the
       proportion of hospice care that each such individual was provided in a previous
       or subsequent accounting year or under a plan of care established by another
       hospice program.

Id. § 1395f(i)(2)(C) (emphasis added). Thus, the Medicare statute directs HHS to account for the

fact that an individual may receive care in more than one fiscal year by requiring HHS to count

that individual as a beneficiary in each year in which he or she receives hospice care benefits,

with that number proportionally reduced to reflect care provided in previous or subsequent years.

Id.

       To implement these statutory cap provisions, HHS promulgated a reimbursement

regulation governing the calculation of the statutory cap amount. See 42 C.F.R. § 418.309. In

pertinent part, the regulation provides that the “number of beneficiaries” portion of the statutory

cap calculation includes

       [t]hose Medicare beneficiaries who have not previously been included in the
       calculation of any hospice cap and who have filed an election to receive hospice
       care . . . from the hospice during the period beginning on September 28 (35 days
       before the beginning of the cap period) and ending on September 27 (35 days
       before the end of the cap period).

3
       The statute defines the “cap amount” for a year as “$6,500, increased or decreased . . . by the
       same percentage as the percentage increase or decrease, respectively, in the medical care
       expenditure category of the Consumer Price Index.” Id. § 1395f(i)(2)(B). According to the
       plaintiffs, the “cap amount” was $20,585.39 for fiscal year 2006 and $21,410.04 for fiscal year
       2007. Pls.’ Mot. at 11.

                                                   3
Id. § 418.309(b) (emphasis added). The regulation does not provide for the proportional

allocation of beneficiaries across years of service. See id.

                                B. The Plaintiffs’ Claims

       The plaintiffs are fifteen Medicare-certified hospice care providers to whom HHS issued

cap repayment demands for fiscal years 2006 and 2007. See generally Compl. They challenge

these repayment demands on the grounds that 42 C.F.R. § 418.309, the regulation pursuant to

which the demands were calculated, conflicts with 42 U.S.C. § 1395f(i)(2), the statutory

provision the regulation purports to implement. See generally id. The plaintiffs assert that

whereas the Medicare statute requires HHS to allocate the cap amount across years of service by

proportionally adjusting the “number of beneficiaries” in any given year to reflect hospice

services provided to an individual in previous and subsequent years, the reimbursement

regulation provides that an individual is counted as a beneficiary only in a single year, depending

on when he or she first elects hospice benefits. See id. ¶¶ 49-53. The plaintiffs allege that as a

result, “unused cap amounts in one fiscal year are ‘trapped’ in the prior year, regardless of

whether the beneficiary continues to receive care in subsequent years. The failure to allocate the

cap across years of care results in [] understated aggregate hospice cap allowances and, in turn,

overstated repayment demands.” Id. ¶ 51.

       On May 25, 2010, HHS’s Provider Review Reimbursement Board (“PRRB”) granted the

plaintiffs’ request for expedited judicial review of their group challenge to the validity of 42

C.F.R. § 418.309. Id. ¶ 11. The plaintiffs subsequently filed a complaint in this court on June 8,

2010. See generally Compl. On June 21, 2010, the plaintiffs filed this motion for a temporary

restraining order. See generally Pls.’ Mot. The plaintiffs seek an order enjoining HHS from

continuing to collect from the plaintiffs on its hospice cap repayment demands for fiscal years

                                                  4
2006 and 2007 and from otherwise relying the challenged regulation in connection with the

plaintiffs. See generally id. Upon receipt of the plaintiffs’ motion, the court set an expedited

briefing schedule. See Minute Order (June 22, 2010). With this motion now ripe for

adjudication, the court turns to the applicable legal standards and the parties’ arguments.

                                          III. ANALYSIS

                  A. Legal Standard for Awarding Interim Injunctive Relief

        This court may issue interim injunctive relief only when the movant demonstrates “[1]

that he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the

absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an

injunction is in the public interest.”4 Winter v. Natural Res. Def. Council, Inc., 129 S. Ct. 365,

374 (2008) (citing Munaf v. Geren, 128 S. Ct. 2207, 2218-19 (2008)). It is particularly important

for the movant to demonstrate a likelihood of success on the merits. Cf. Benten v. Kessler, 505
U.S. 1084, 1085 (1992) (per curiam). Indeed, absent a “substantial indication” of likely success

on the merits, “there would be no justification for the court’s intrusion into the ordinary

processes of administration and judicial review.” Am. Bankers Ass’n v. Nat’l Credit Union

Admin., 38 F. Supp. 2d 114, 140 (D.D.C. 1999) (internal quotation omitted).

        The other critical factor in the injunctive relief analysis is irreparable injury. A movant

must “demonstrate that irreparable injury is likely in the absence of an injunction.” Winter, 129
S. Ct. at 375 (citing Los Angeles v. Lyons, 461 U.S. 95, 103 (1983)). Indeed, if a party fails to

make a sufficient showing of irreparable injury, the court may deny the motion for injunctive

4
        The APA authorizes reviewing courts to stay agency action pending judicial review. 5 U.S.C. §
        705. Motions to stay agency action pursuant to these provisions are reviewed under the same
        standards used to evaluate requests for interim injunctive relief. See Cuomo v. U.S. Nuclear
        Regulatory Comm’n, 772 F.2d 972, 974 (D.C. Cir. 1985).

                                                   5
relief without considering the other factors. CityFed Fin. Corp. v. Office of Thrift Supervision,

58 F.3d 738, 747 (D.C. Cir. 1995). Provided the plaintiff demonstrates a likelihood of success

on the merits and of irreparable injury, the court “must balance the competing claims of injury

and must consider the effect on each party of the granting or withholding of the requested relief.”

Amoco Prod. Co. v. Gambell, 480 U.S. 531, 542 (1987). Finally, “courts of equity should pay

particular regard for the public consequences in employing the extraordinary remedy of

injunction.” Weinberger v. Romero-Barcelo, 456 U.S. 305, 312 (1982).

       As an extraordinary remedy, courts should grant such relief sparingly. Mazurek v.

Armstrong, 520 U.S. 968, 972 (1997). The Supreme Court has observed “that a preliminary

injunction is an extraordinary and drastic remedy, one that should not be granted unless the

movant, by a clear showing, carries the burden of persuasion.” Id. Therefore, although the trial

court has the discretion to issue or deny a preliminary injunction, it is not a form of relief granted

lightly. In addition, any injunction that the court issues must be carefully circumscribed and

“tailored to remedy the harm shown.” Nat’l Treasury Employees Union v. Yeutter, 918 F.2d 968,

977 (D.C. Cir. 1990).

           B. The Court Denies the Plaintiffs’ Motion Because the Plaintiffs’ Have
                         Failed to Demonstrate Irreparable Harm

       To substantiate the plaintiffs’ claim that they will suffer irreparable harm absent

immediate injunctive relief, the plaintiffs submit declarations from the administrators of four of

the fifteen plaintiff hospices describing the hardships caused by the repayment demands at issue.

See generally Decl. of Jenny Olivo Irizarry (“Irizarry Decl.”); Decl. of Sandra McKenzie

(“McKenzie Decl.”); Decl. of Drew Martin (“Martin Decl.”); Decl. of Theresa Hidalgo

                                                  6
(“Hidalgo Decl.”).5 Each administrator states that his or her hospice received cap repayment

demands seeking the repayment of hundreds of thousands of dollars paid by HHS for services

rendered to eligible Medicare beneficiaries in 2006, 2007 and/or 2008. Irizarry Decl. ¶ 4;

McKenzie Decl. ¶ 4; Martin Decl. ¶ 4; Hidalgo Decl. ¶ 4. Lacking the funds to repay these

amounts, and unable to obtain commercial loans, the hospices ultimately entered into repayment

plans with HHS, under which they are required to make monthly payments of principal and

interest to HHS. Irizarry Decl. ¶¶ 5-6; McKenzie Decl. ¶¶ 5-6; Martin Decl. ¶¶ 5-6; Hidalgo

Decl. ¶¶ 5-6. The strain of these monthly payments, which according to the plaintiffs account for

between ten and forty percent of each hospice’s operating revenue, has forced them to lay off

staff, drastically reduce expenditures and contemplate bankruptcy or closure. Irizarry Decl. ¶¶ 6-

9; McKenzie Decl. ¶¶ 6-9; Martin Decl. ¶¶ 6-10; Hidalgo Decl. ¶¶ 6-9. The plaintiffs assert that

the hardships detailed in these four declarations are representative of those facing all fifteen

plaintiff hospices as a result of the payment demands. See Pls.’ Mot. at 5-6; Pls.’ Reply at 8-9;

see generally Decl. of Brian Daucher.

       HHS maintains that the plaintiffs have not made an adequate showing of irreparable

harm. See Def.’s Opp’n at 12-19. It states that the plaintiffs have submitted no information

whatsoever regarding the financial situation of eleven of the fifteen plaintiff hospices. Id. at 12-

13. Moreover, HHS asserts that the four declarations submitted by the plaintiffs at best

demonstrate hardship attributable to the existence of the statutory cap rather than the challenged

regulation. Id. at 13. HHS argues that regardless of whether the court ultimately sets aside the

challenged regulation, the plaintiffs will still be subject to the statutory cap provisions and will

5
       Irizarry is the Executive Director of plaintiff Hospicio Toque de Amor, Irizarry Decl. ¶ 1;
       McKenzie is the President of plaintiff Affinity Home Hospice Services, McKenzie Decl. ¶ 1;
       Martin is the Director of Operations of plaintiff Local Hospice, Inc., Martin Decl. ¶ 1; Hidalgo is
       the Executive Director/Clinical Director of plaintiff Freedom Hospice, Hidalgo Decl. ¶ 1.

                                                    7
retain a significant hospice cap repayment liability. Id. Noting that the plaintiffs have offered no

indication as to how much the cap repayment demands at issue would be reduced under a

“permissible” calculation, HHS maintains that the plaintiffs have failed to show that the financial

hardships they are suffering are due to the excessiveness of the repayment demands resulting

from the challenged regulation. Id. at 13-14. Furthermore, HHS argues that the plaintiffs cannot

rely on the repayment demands for fiscal year 2008 as they have not challenged the propriety of

those demands in this action. Id. at 30-35.

       “To demonstrate irreparable injury, a plaintiff must show that it will suffer harm that is

‘more than simply irretrievable; it must also be serious in terms of its effect on the plaintiff.’”

Hi-Tech Pharmacal Co. v. U.S. Food & Drug Admin., 587 F. Supp. 2d 1, 11 (D.D.C. 2008)

(quoting Gulf Oil Corp. v. Dep’t of Energy, 514 F. Supp. 1019, 1026 (D.D.C. 1981)); accord

Robinson-Reeder v. Am. Council on Educ., 626 F. Supp. 2d 11, 14 (D.D.C. 2009); Sandoz, Inc. v.

Food & Drug Admin., 439 F. Supp. 2d 26, 31-32 (D.D.C. 2006); see also Wis. Gas Co. v. Fed.

Energy Regulatory Comm’n, 758 F.2d 669, 674 (D.C. Cir. 1985) (noting that to warrant

emergency relief, the harm must be certain, great, actual and imminent). Purely economic harm

is not considered sufficiently grave under this standard unless it will “cause extreme hardship to

the business, or even threaten destruction of the business.” Gulf Oil, 514 F. Supp. at 1025

(observing that “some concept of magnitude of injury is implicit in the [standard for issuing a

preliminary injunction]”).

       In this case, the plaintiffs have offered substantial evidence that for four of the plaintiff

hospices, the cap repayment demands issued by HHS are causing extreme hardship and threaten

the survival of those entities. See Irizarry Decl. ¶¶ 7-9; McKenzie Decl. ¶¶ 7-9; Martin Decl. ¶¶

7-10; Hidalgo Decl. ¶¶ 7-9. But even assuming that the concerns expressed in these declarations

                                                  8
are representative of the threat facing all the plaintiffs, there is no evidence of the extent to which

these prospective injuries result from the application of the challenged regulation. At no point do

the plaintiffs suggest that their success on the merits would relieve all, or even most, of their cap

repayment obligations. See generally Compl.; Pls.’ Mot.; Pls.’ Reply. Indeed, the plaintiffs

offer no indication whatsoever of the extent to which their repayment obligation for any fiscal

year would be affected were they to succeed on the merits, beyond the bare allegation in the

complaint that if HHS had properly applied the Medicare statute, their “cap liability for fiscal

years 2006 and 2007 would have been materially reduced.” Compl. ¶ 56.

       The significance of this oversight is borne out in other hospice cases in which the

plaintiff hospices offered a calculation of the injury resulting from the challenged regulation.

See, e.g., Hospice of N.M., LLC v. Sebelius, Civ. Action No. 09-145 (D.N.M.) (Docket Item No.

24-1); IHG HealthCare, Inc. v. Sebelius, Civ. Action No. 09-3233 (S.D. Tex.) (Docket Item No.

21); Russell-Murray Hospice, Inc. v. Sebelius, Civ. Action No. 09-2033 (D.D.C.) (Docket Item

No. 13-9). In one such effort, the plaintiff hospice predicted that a proper cap calculation would

have resulted in a reduction in cap liability of $0 for 2004 and 2005, $15,233.19 for 2006 and

$315,798.09 in 2007. See IHG HealthCare, Inc. v. Sebelius, Civ. Action No. 09-3233 (S.D.

Tex.) (Docket Item No. 21). Given the potential for such vast, year-to-year variations, the court

cannot assume, based on the evidence presented in this case, that the application of the

challenged regulation, rather than a regulation that, from the plaintiffs’ perspective, complies

with the Medicare statute, will result in any irreparable harm to the plaintiff hospices.

       Naturally, any calculation offered by the plaintiffs will be hypothetical to some degree, as

no alternative regulation exists to the challenged reimbursement regulation. This fact, however,

does not relieve the plaintiffs of the obligation to demonstrate that they will be

                                                  9
irreparably harmed by the continued application of the challenged regulation.6 Cf. Procter &

Gamble Co. v. Ultreo, Inc., 574 F. Supp. 2d 339, 348-49 (S.D.N.Y. 2008) (holding that evidence

of lost sales resulting from false advertising was insufficient to establish irreparable harm

because the plaintiff failed to “distinguish between the lost sales it believes it would experience

from lawful competition and truthful advertising from the lost sales it believes it would

experience from the alleged false advertising”); Fla. Wildlife Fed’n v. Goldschmidt, 506 F. Supp.
350, 369-70 (S.D. Fla. 1981) (concluding that the plaintiffs failed to show irreparable harm as

“there [was] no demonstrated proximate cause between the activities attacked and the harm

feared”). And the hypothetical nature of any losses the plaintiffs may be suffering certainly

does not justify the windfall to the plaintiffs that would result from a blanket injunction on the

cap repayments demands at issue, as the court can plainly direct the refund of any amounts

overpaid when resolving the merits of the litigation. See Compassionate Care Hospice v.

Sebelius, 2010 WL 2326216, at *5 (W.D. Okla. June 7, 2010) (invalidating the reimbursement

regulation and ordering HHS to calculate and refund any amounts overpaid by the plaintiff

hospice); accord Hospice of N.M., LLC v. Sebelius, 691 F. Supp. 2d 1275, 1295 (D.N.M. 2010).

       In sum, despite the plaintiffs’ allegations of hardship caused by their overall repayment

obligations, they fail to demonstrate what they are required to demonstrate to obtain injunctive

relief – namely, that the application of the challenged regulation in particular is causing them

6
       This discussion should in no way suggest that the plaintiffs must offer such a calculation to
       satisfy the very different requirements of Article III standing. See, e.g., Tri-County Hospice, Inc.
       v. Sebelius, 2010 WL 784836, at *1-2 (E.D. Okla. Mar. 8, 2010) (concluding that the plaintiff
       hospice was not required to show the difference between the HHS calculation and a proposed
       calculation by the hospice to establish standing); accord Lion Health Servs., Inc. v. Sebelius, 689
F. Supp. 2d 849, 855 (N.D. Tex. 2010) (holding that to demonstrate injury-in-fact, “[the] plaintiff
       does not need to prove that its cap overpayments will certainly be less if calculated under lawful
       regulations”); L.A. Haven Hospice, Inc. v. Leavitt, 2009 WL 5868513, at *3-4 (C.D. Cal. Jul. 13,
       2009) (holding that the plaintiff hospice had standing to challenge the reimbursement regulation
       without devising its own proposed regulation).

                                                   10
irreparable harm.7 Because this failure alone warrants denial of interim injunctive relief, the

court denies the plaintiffs’ motion.8 See Chaplaincy of Full Gospel Churches v. England, 454
F.3d 290, 297 (D.C. Cir. 2006) (observing that “[a] movant’s failure to show any irreparable

harm is . . . grounds for refusing to issue a preliminary injunction, even if the other three factors

entering the calculus merit such relief”); Fraternal Order of Police Library of Cong. Labor

Comm. v. Library of Cong., 639 F. Supp. 2d 20, 25 (D.D.C. 2009) (holding that “[b]ecause [the]

plaintiffs cannot establish that the Merger will cause irreparable harm . . . the Court need not

address the remaining preliminary injunction factors, and . . . concludes that the motions for

preliminary injunctions must be denied”).

7
       The plaintiffs rely on National Mining Association v. U.S. Army Corp of Engineers, 145 F.3d
1399 (D.C. Cir. 1998) in support of the alternative argument that they are not required to make a
       separate showing of irreparable injury because they are challenging the validity of a regulation.
       Pls.’ Mot. at 9-10. Yet National Mining Association concerned the necessity of demonstrating
       irreparable harm to obtain a permanent injunction issued at the resolution of the merits, and
       expressly limited its holding to that species of injunction. See 145 F.3d at 1409 (holding that
       “once the court reached the conclusion that the rule was indeed illegal (i.e., not merely that the
       plaintiffs had a reasonable probability of success on the merits, as would be necessary for a
       preliminary injunction), there was no separate need to show irreparable injury, as that is merely
       one possible basis for showing the inadequacy of the legal remedy”) (citations and quotation
       marks omitted).
8
       The court notes that this matter appears ripe for expedited resolution. As the plaintiffs point out,
       numerous courts have already addressed the legal question at the heart of this dispute and have
       uniformly held that the challenged reimbursement regulation fails APA review. See Pls.’ Mot. at
       1-2; Pls.’ Reply at 5-6; see generally Pls.’ Notice of Status of Related Cases. The plaintiffs also
       rightly point out that numerous courts have already addressed the standing challenge alluded to in
       the defendant’s opposition brief. See Pls.’ Reply at 6-7. Accordingly, the court fully expects and
       intends to resolve the merits of this dispute without delay.

                                                   11
                                   IV. CONCLUSION

       For the foregoing reasons, the court denies the plaintiffs’ motion for a temporary

restraining order. An Order consistent with this Memorandum Opinion is separately and

contemporaneously issued this 1st day of July, 2010.

                                                          RICARDO M. URBINA
                                                         United States District Judge

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