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Cookeville Regional Medical Center v. Leavitt

September 26, 2006


The opinion of the court was delivered by: James Robertson United States District Judge


Pending before the court is Defendants' Motion to Alter the Judgment [28]. For the reasons set forth below, that motion would be granted if the case were remanded to this court.


Plaintiffs, fifteen Tennessee hospitals, brought an action against the Secretary of Health and Human Services ("the Secretary") seeking a declaration that the Secretary's method of calculating reimbursements under the Medicare statute's disproportionate share hospital (DSH) formula, 42 U.S.C. § 1395ww(d)(5)(f)(vi), was unlawful. They also sought reimbursement they would be entitled to receive under their interpretation of the DSH formula, for services they provided to low-income patients prior to January 20, 2000 (the date the Secretary began applying the interpretation they seek). Both sides moved for summary judgment.

On September 30, 2005, I granted plaintiffs' motion for summary judgment, denied defendants' motion for summary judgment, and stated that the reasons for the ruling, along with a remedial order, would follow. On October 28, 2005, I issued a memorandum explaining my conclusion that "the Secretary's exclusionary method of calculating the DSH adjustment that was in effect before January 20, 2005 contravenes clear and unambiguous statutes." Mem. Order at 20 [dkt. # 22]. I ordered the Secretary to instruct his fiscal intermediaries to correct plaintiffs' cost reports for the fiscal years at issue within 90 days of their receipt of the relevant documentation from the plaintiffs. Defendants appealed that ruling on December 27, 2005.

Notwithstanding that he had already appealed, the Secretary moved for the entry of final judgment on January 18, 2006, citing Rule 58 of the Federal Rules of Civil Procedure, which states that "Every judgment...must be set forth on a separate document." Fed. R. Civ. P. 58(a)(1). On January 28, 2006, I granted the motion, stating:

The order of September 30, 2005, granting the motion for summary judgment, would ordinarily have sufficed as and for a final, appealable order, but in this case the memorandum explaining that order was not issued for another 28 days, and the later memorandum was accompanied by a remedial order. The sequencing of the court's orders was not calculated to "avoid dispute and promote certainty," and the government's confusion is understandable. The Clerk is accordingly directed to enter final judgment in favor of the plaintiff and against the government.

Order of Jan. 24, 2006 (Dk. 25). Pursuant to that order, the Clerk entered final judgment for the plaintiffs on February 2, 2006.

The February 2, 2006 judgment, which at the time seemed to be a simple matter of bookkeeping, had the convenient effect (for the government) of reopening the 10-day window for motions to alter or amend under Rule 59(e). The Secretary took advantage of this, and, on February 13, 2006, filed his motion to alter or amend the judgment based on a new statutory provision enacted five days earlier as part of the Deficit Reduction Omnibus Act of 2005 ("DRA"). Pub. L. 109-171. Section 5002 of that act, entitled "Clarification of Determination of Medicaid Patient Days for DSH Computation," amended the Medicaid provision at issue in this litigation to reflect the Secretary's position, and purported to ratify his regulations of January 20, 2000, including "the policy in such regulations regarding discharges occurring prior to January 20, 2000."

After the Secretary's Rule 59(e) motion was filed, the Court of Appeals stayed the Secretary's appeal pending resolution of the motion that is now before me. Ordinarily I would be hesitant to rule on a motion to alter a judgment while an appeal is pending. The Court of Appeals has made it clear that I am to do something with the motion, however, and accordingly, under Smith v. Pollin, 194 F.2d 349, 350 (D.C. Cir. 1952), I will consider the Rule 59(e) motion and indicate whether I would grant it, so that the Secretary may then ask the Court of Appeals for a remand for entry of the order.


An extended discussion of the statutory framework governing the DSH formula appears in the October 2005 memorandum and will not be repeated here. Stated simply, the issue is whether "expansion populations"*fn1 are necessarily "eligible for medical assistance under a State plan approved under subchapter XIX." 42 U.S.C. § 1395ww(d)(f)(vi)(II). The recently enacted Section 5002 of the DRA amends the DSH formula to state explicitly that such populations are not so eligible:

In determining...the number of the hospital's patient days for such period which consist of patients who (for such days) were eligible for medical assistance under a State plan approved under title XIX, the Secretary may, to the extent and for the period the Secretary determines appropriate, include patient days of patients not so eligible but who are regarded as such because they receive benefits under a demonstration project approved under title XI.

DRA, Section 5002(a), Pub. L. 109-171 (emphasis added). The Secretary argues that this amendment is a "clarification" of the DSH formula, rather than a substantive change, and thus, that I should revisit my conclusion about the meaning of the DSH formula in light of this Congressional input. Alternatively, according to the Secretary, even if this amendment does reflect a substantive change of the DSH formula, in Section 5002(b) Congress has now approved and ratified the Secretary's pre-2000 exclusionary ...

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