constructions turn on whether the "such" in the denominator incorporates the Medicare and Medicaid exclusion from the numerator's parenthetical phrase. On September 13, 1995, the PRRB unanimously reversed the decision of the intermediary and granted plaintiffs' claims. See Administrative Record ("A.R.") at 57-72. Notably, the PRRB concluded that the plain meaning of the statute supported the exclusion of Medicare and Medicaid revenues from the denominator. Id. at 69.
On November 16, 1995, the HCFA Administrator reversed the PRRB's decision. Id. at 2-12. The Administrator concluded that the statute contained "incontrovertible referential ambiguity" and that the legislative history did not directly address the issues of the case. Id. at 11. The Administrator concluded that, in light of the asserted textual ambiguity, HCFA's original construction of the statute, which included Medicare and Medicaid revenues in the denominator, was "reasonable" and "neither arbitrary nor capricious from a policy standpoint." Id. at 12.
Plaintiffs filed this action under 42 U.S.C. § 1395oo(f)(1), seeking declaratory and monetary relief. In their motion for summary judgment, which seeks reversal of the Administrator's decision, plaintiffs claim that (1) the Pickle method requires the exclusion of Medicare and Medicaid revenues from the denominator, and (2) the Administrator's decision was contrary to the Medicare statute, arbitrary and capricious, and otherwise contrary to law under the Administrative Procedure Act ("APA"), 5 U.S.C. § 551 et seq. In their cross-motion for summary judgment, defendants contend that (1) Congress has clearly indicated that the denominator of the Pickle method includes Medicare and Medicaid revenues, and (2) even if Congress has not clearly indicated the inclusion of Medicare and Medicaid revenues, defendant's interpretation of the denominator should be upheld as reasonable. Upon consideration of the entire record, the Court grants plaintiffs' motion.
STANDARD OF REVIEW
Summary judgment may be granted only when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). Because the issues raised by these motions concern only questions of statutory interpretation, they are appropriate for resolution on a motion for summary judgment.
For guidance in resolving the pending motions, the Court looks to the framework for reviewing an agency's construction of a statute set forth in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 81 L. Ed. 2d 694, 104 S. Ct. 2778 (1984). Under Chevron, a court must first ascertain "whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." If, however, a court concludes that the statute is ambiguous or silent on the relevant question, it will defer to the agency's construction of the statute as long as it is "permissible."
Id. at 843.
A court must employ "traditional tools of statutory construction" to determine whether Congress has addressed a particular issue. Chevron, 467 U.S. at 843 n.9. Accordingly, "the beginning point must be the language of the statute, and when a statute speaks with clarity to an issue[,] judicial inquiry into the statute's meaning, in all but the most extraordinary circumstances, is finished." Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469, 475, 120 L. Ed. 2d 379, 112 S. Ct. 2589 (1992); accord Negonsott v. Samuels, 507 U.S. 99, 104, 122 L. Ed. 2d 457, 113 S. Ct. 1119 (1993). Thus, plain language controls statutory construction, absent a "clearly expressed legislative intention to the contrary." Qi-Zhuo v. Meissner, 315 U.S. App. D.C. 35, 70 F.3d 136, 140 (D.C. Cir. 1995) (quoting Reves v. Ernst & Young, 507 U.S. 170, 177, 122 L. Ed. 2d 525, 113 S. Ct. 1163 (1993)).
Plaintiffs prevail under the first prong of Chevron because a plain language analysis supports their construction of the Pickle denominator.
First, the words in the statute describing the denominator, when given their ordinary meaning, support plaintiffs' interpretation. Second, this interpretation succeeds in giving effect to every word describing the denominator. Last, there is no "clearly expressed legislative intent" which undermines this reading of the Pickle denominator.
As noted, the crux of the parties' disagreement turns on whether the reference to "such net inpatient care revenues" in the denominator incorporates the Medicare/Medicaid exclusion expressed in the numerator. Because "courts properly assume, absent sufficient indication to the contrary, that Congress intends words in its enactments to carry their ordinary, contemporary, common meaning," Pioneer Inv. Servs. Co. v. Brunswick Assocs. L.P., 507 U.S. 380, 388, 123 L. Ed. 2d 74, 113 S. Ct. 1489 (1993) (internal quotations omitted), the Court looks to the plain meaning of "such." This word denotes:
Of that kind, having particular quality or character specified. Identical with, being the same as what has been mentioned. Alike, similar, of the like kind. "Such" represents the object as already particularized in terms which are not mentioned, and is a descriptive and relative word, referring to the last antecedent.
Black's Law Dictionary 1432 (6th ed. 1990). As applied to the Pickle method, because the "such" in the denominator immediately precedes "net inpatient care revenues," it must refer to the last antecedent of "net inpatient care revenues." This last antecedent is "net inpatient care revenues (excluding any of such revenues attributable to [Medicare] or [Medicaid])." 42 U.S.C. § 1395ww(d)(5)(F)(i)(II). The denominator must incorporate the parenthetical phrase excluding Medicare or Medicaid revenues because that phrase modifies "net inpatient care revenues."
In effect, the parenthetical phrase "particularize[s]" the "object." Black's Law Dictionary 1432 (6th ed. 1990).
Furthermore, a construction of the Pickle denominator that incorporates the exclusion of Medicare and Medicaid revenues gives effect to all of the words in the denominator. See Washington Hosp. Ctr. v. Bowen, 254 U.S. App. D.C. 94, 795 F.2d 139, 145 (D.C. Cir. 1986) (where possible, courts must construe statutes to give effect to every word Congress used). Under this construction, "such" refers to net inpatient care revenues as modified by the Medicare/Medicaid exclusion. Additionally, "total," which immediately precedes "such," refers to the whole of this amount.
In other words, "total" clarifies that the denominator includes all of the modified net inpatient care revenues, and not simply that portion attributable to "indigent care from State and local government sources."
Hence, it distinguishes the numerator from the denominator.
By contrast, defendant's construction of the statute fails to effectuate every word in the Pickle denominator. Defendant contends that "such net inpatient care revenues" in the denominator must refer to all net inpatient care revenues because the previous use of "such" in the parenthetical phrase referred to all net inpatient care revenues, including those attributable to Medicare and Medicaid.
Because "identical words used in different parts of the act are intended to have the same meaning," Gustafson v. Alloyd Co., 513 U.S. 561, 131 L. Ed. 2d 1, 115 S. Ct. 1061, "especially when . . . repeated within a given sentence," Brown v. Gardner, 513 U.S. 115, 118, 130 L. Ed. 2d 462, 115 S. Ct. 552 (1994), defendant contends that the "such" in the denominator must parallel that in the parenthetical phrase. This argument, however, strains credulity because "such" is a "descriptive and relative" term, the meaning of which depends on the last antecedent. Black's Law Dictionary 1432. Thus, by definition, "such" cannot automatically acquire the same meaning as that of a prior use of the word. However, even assuming that this rule of statutory construction applies in this instance, defendant's interpretation still fails to effectuate the term "of such." Without that term, the denominator reads "total net inpatient care revenues." If added, the term "of such" becomes surplusage because the denominator already expresses the meaning defendant ascribes to "of such," namely, that the denominator includes all net inpatient care revenues. Because courts should seek to avoid treating statutory terms as surplusage, Bailey v. United States, 516 U.S. 137, 116 S. Ct. 501, 506-507, 133 L. Ed. 2d 472 (1995), defendant's construction cannot attach to the Pickle denominator.
The plain language of the statute controls the interpretation of the statute, absent a "clearly expressed legislative intention contrary to that language, which would require [the Court] to question the strong presumption that Congress expresses its intent through the language it chooses." INS v. Cardoza-Fonseca, 480 U.S. 421, 432 n.12, 94 L. Ed. 2d 434, 107 S. Ct. 1207 (1987) (internal quotation omitted); accord Oi-Zhuo, 70 F.3d at 140. The Court finds no such intention because the legislative history is unclear, and thus inconclusive.
Congress originally enacted the Pickle amendment as part of the Comprehensive Omnibus Budget Reconciliation Act of 1986 ("COBRA"), Pub. L. No. 99-272, 100 Stat. 158 (1986). Shortly thereafter, Congress amended the Pickle denominator in the Omnibus Budget Reconciliation Act ("OBRA") of 1987, Pub. L. No. 100-203, 101 1330-59 (1987), by inserting the words "net inpatient care" to clarify whether the revenues in the denominator referred to net or gross revenues.
The OBRA's legislative history includes two references to the formula for the Pickle denominator. The first reference is in a section of a House Conference report that describes the Pickle method before the 1987 amendment:
Additional payments are made to PPS hospitals that serve a disproportionate share of low-income patients. Under one criterion, a hospital located in an urban area, which has 100 or more beds, may receive such payments if it can demonstrate that more than 30 percent of its inpatient care revenues (excluding any Medicare or Medicaid revenues) are provided by State and local government payments for indigent care.