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Baystate Medical Center v. Leavitt

March 31, 2008


The opinion of the court was delivered by: John D. Bates United States District Judge


The Secretary of the Department of Health and Human Services, through the Centers for Medicare and Medicaid Services ("CMS"), is responsible for providing payments known as "disproportionate share hospital" adjustments to hospitals that serve a significantly disproportionate share of low income patients, as set forth under the Medicare statute, Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq. Plaintiff Baystate Medical Center ("Baystate") seeks judicial review of the Secretary's final decision concerning the calculation of its adjustments for fiscal years 1993-1996 (Count One) or, in the alternative, seeks production of certain supplemental security income ("SSI") entitlement records from the Social Security Administration that would allegedly affect the amount of its adjustments (Counts Two and Three).

The parties have agreed that Count One against the Secretary should be resolved first because, if resolved in Baystate's favor, it will be dispositive of the case. The parties have filed cross-motions for summary judgment, and a motions hearing was held on February 14, 2008.*fn1

Plaintiffs in Auburn Regional Med. Ctr. v. Leavitt, Civil Action No. 07-2075 (D.D.C. filed Nov. 15, 2007) (collectively, the "Auburn plaintiffs") were allowed to participate in the briefing as amici because they have raised many of the same issues as Baystate.*fn2 For the reasons explained below, the Court will grant in part and deny in part both Baystate's and the Secretary's motions for summary judgment and remand the case to the Secretary for further proceedings.


I. Statutory and Regulatory Background

Through a complex statutory and regulatory regime, the Medicare program reimburses qualifying hospitals for the services they provide to eligible elderly and disabled patients. See generally County of Los Angeles v. Shalala, 192 F.3d 1005, 1008 (D.C. Cir. 1999). The "operating costs of inpatient hospital services" are reimbursed under a prospective payment system ("PPS") -- that is, based on prospectively determined standardized rates -- but subject to hospital-specific adjustments. 42 U.S.C. § 1395ww(d); see generally In re Medicare Reimbursement Litig., 309 F. Supp. 2d 89, 92 (D.D.C. 2004), aff'd, 414 F.3d 7, 8-9 (D.C. Cir. 2005). One such adjustment is the "disproportionate share hospital" ("DSH") adjustment which requires the Secretary to provide an additional payment to each hospital that "serves a significantly disproportionate number of low-income patients." 42 U.S.C. § 1395ww(d)(5)(F)(i)(I). Congress concluded that the additional DSH payment was necessary for hospitals serving a disproportionate share of low-income patients because they have higher costs per case. See H. R. Rep. No. 99-241, at 16-17 (1985), reprinted in 1986 U.S.C.C.A.N. 579, 594-95. Whether a hospital qualifies for the DSH adjustment, and the amount of the adjustment it receives, depends on the "disproportionate patient percentage" determined by the Secretary under a statutory formula. 42 U.S.C. § 1395ww(d)(5)(F)(v)-(vii). This percentage is a "proxy measure for low income." See H. R. Rep. No. 99-241, at 16, reprinted in 1986 U.S.C.C.A.N. at 594.

The disproportionate patient percentage is the sum of two fractions, commonly referred to as the Medicaid fraction (often called the Medicaid Low Income Proxy) and the Medicare fraction (the Medicare Low Income Proxy). 42 U.S.C. § 1395ww(d)(5)(F)(vi); Jewish Hospital, Inc. v. Secretary of Health and Human Servs., 19 F.3d 270, 272 (6th Cir. 1994). The Medicaid fraction reflects the number of hospital inpatient days attributable to patients who were eligible for medical assistance under a State Medicaid Plan, but not Medicare Part A. See 42 U.S.C. § 1395ww(d)(5)(F)(vi)(II); In re Medicare Reimbursement Litig., 309 F. Supp. 2d at 93. In contrast, the Medicare fraction reflects the number of hospital inpatient days attributable to Medicare Part A patients who are also entitled to Supplemental Security Income ("SSI") benefits at the time of their hospital stays, and thus is often referred to as the SSI fraction. See 42 U.S.C. § 1395ww(d)(5)(F)(vi)(I).

The SSI fraction -- and issues pertaining to identifying SSI patients -- lies at the heart of this case. The DSH provision defines the SSI fraction as: the fraction (expressed as a percentage), the numerator of which is the number of such hospital's patient days for such period which were made up of patients who (for such days) were entitled to benefits under part A of this subchapter and were entitled to supplemental security income benefits (excluding any State supplementation) under subchapter XVI of this chapter, and the denominator of which is the number of such hospital's patient days for such fiscal year which were made up of patients who (for such days) were entitled to benefits under part A of this subchapter.

Id. § 1395ww(d)(5)(F)(vi)(I) (hereinafter, "DSH provision" or "subparagraph (d)(5)(F)(vi)"). In other words, calculation of the numerator and denominator each require tallying the number of patient days for patients entitled to benefits under Part A of the Medicare Act; the numerator differs from the denominator in that it captures an additional restriction -- the Medicare patients in the numerator must also be entitled to SSI benefits at the time of their hospital stays. See 51 Fed. Reg. 16772, 16777 (May 6, 1986) (DSH interim final rule).*fn3 Thus, the greater the number of patient days involving SSI beneficiaries, the greater the hospital's DSH adjustment.

The SSI program is a federal assistance program for low-income individuals who are aged, blind, or disabled. 42 U.S.C. § 1382. The SSI program is administered by the Social Security Administration ("SSA"). Id. § 1381a. Hence, calculation of the numerator of the SSI fraction requires use of SSA data, in addition to the Medicare inpatient data compiled by CMS.

The Health Care Financing Administration -- the predecessor to CMS -- announced soon after enactment of the DSH provision that the Secretary, rather than the hospitals, would be solely responsible for computation of the SSI fraction in light of the voluminous data and involvement of another agency. 51 Fed. Reg. 31454, 31459 (Sept. 3, 1986) (DSH final rule).

HCFA noted that, as of 1986, the data sources for the computation of the SSI fraction included approximately 11 million billing records from the Medicare inpatient discharge file, and over 5 million records from the SSI file compiled by the SSA. Id. Computation of the SSI fraction would require matching individual Medicare billing records to individual SSI records. Id. Considering the administrative burdens and complexity of the match process, HCFA concluded that it would be solely responsible for the match process, which it would conduct retrospectively for every eligible Medicare hospital on a "fiscal year" basis -- that is, based on discharges occurring in the federal fiscal year ending each September 30. Id. at 31459-60; 42 C.F.R. § 412.106(b).*fn4 HCFA recognized that the statute provided for the match process to be based on a hospital's "cost reporting period" (rather than the fiscal year); thus, HCFA also provided each hospital the option of having its SSI fraction computed based on its own cost reporting period notwithstanding the belief that the two different periods would yield "reasonably close" percentages.*fn5 51 Fed. Reg. at 16777; 42 C.F.R. § 412.106(b).

The data underlying the match process is drawn from (1) the Medicare Provider Analysis and Review File ("MEDPAR"), which is also referred to as the Medicare Part A Tape Bill ("PATBILL"), and (2) an SSI eligibility file that the SSA transmits annually to CMS.*fn6 52 Fed. Reg. 33143, 33144 (Sept. 1, 1987); 51 Fed. Reg. at 16777. The SSI fraction is thus determined by computing the number of patient days of those patients entitled to both Medicare Part A and SSI as indicated by matching CMS's MEDPAR file and the SSA's SSI eligibility file. 51 Fed. Reg. at 16777.

Medicare payments are initially determined by a "fiscal intermediary" -- typically an insurance company that acts as the Secretary's agent for purposes of reimbursing health care providers. See 42 C.F.R. §§ 421.1, 421.3, 421.100-.128. A fiscal intermediary is required by regulation to apply the SSI fraction computed by CMS. See id. § 412.106(b)(2) and (b)(5). In contrast, the intermediary (rather than CMS) calculates the Medicaid fraction based on annual cost reporting data submitted by the provider. Id. §§ 412.106(b)(4), 413.20. The fiscal intermediary then determines the total amount of DSH reimbursement due the provider, which it sets forth in a Notice of Program Reimbursement ("NPR"). Id. § 405.1803.

A provider dissatisfied with the amount of the award is entitled to request a hearing before the Provider Reimbursement Review Board ("PRRB" or "Board"), an administrative body composed of five members appointed by the Secretary who must be "knowledgeable in the field of payment of providers of services." 42 U.S.C. § 1395oo(a), (h). The Board has the authority to affirm, modify, or reverse the final determination of the intermediary "even though such matters were not considered by the intermediary in making such final determination," and the Secretary may then reverse, affirm, or modify the Board's decision within 60 days thereafter. Id. § 1395oo(d) and (f). The Secretary has assigned the function of reviewing Board decisions to the Administrator of CMS, whose decisions are considered the final decision of the Secretary. 42 C.F.R. § 405.1875.

II. Procedural and Factual Background

Baystate seeks judicial review of the Administrator's decision on its appeal from four separate notices of program reimbursement issued by the fiscal intermediary for fiscal years 1993, 1994, 1995 and 1996. Baystate alleges that the SSI fractions for those years are understated because the SSA records that CMS relied upon contained inaccurate or incomplete information on the eligibility of patients for SSI and because the match process itself was flawed.*fn7 Baystate also alleges that CMS applied an incorrect legal standard in determining the number of patients entitled to Medicare Part A. Baystate's current SSI fractions, in combination with its Medicaid fraction, yielded for those years DSH payments in the range of $12 million to $17 million each year.*fn8 AR 3820.

Baystate's claims were initially heard by the Provider Reimbursement Review Board, which issued a decision on March 17, 2006, granting in part and denying in part the appeal, and remanding the case to the intermediary for recalculation of Baystate's SSI fractions. See Board Decision at 41-42. The Administrator subsequently reversed those parts of the Board's decision granting Baystate relief, and affirmed CMS's calculation of the SSI fractions as proper. See Final Decision at 55.

The administrative proceedings before the Board consumed several years. Baystate, the intermediary,*fn9 and CMS engaged in extensive discovery over SSI eligibility records, including a three-day evidentiary hearing on disputed discovery matters in 2003. See Board Decision at 4. Baystate eventually obtained disclosure of a sample of 627 individual-specific SSI eligibility records, but not the complete set of eligibility records it originally sought. Id.; see also Final Decision at 36-37. A subsequent evidentiary hearing took place in September 2004, at which each side presented witnesses consisting largely of current or former CMS and SSA employees, as well as Baystate's consultants. See Board Decision at 4. The witnesses included, among others, Anthony Dean, the lead CMS computer programmer responsible for the SSI/MEDPAR match process; Daryl Rosenberg, a CMS computer system analyst; Janet O'Leary, CMS's National Claims History Branch Chief; Cliff Walsh, an SSA branch chief whose branch maintains the SSI master file and associated database; Alan Shafer and Patricia Cribbs, retired SSA employees involved in managing SSI data, now retained by Baystate as consultants; and David Pfeil and Gerry Smith, Baystate's expert consultants. Id. at 10, 16, 18, 22, 25, 36.

Based on the evidence submitted, the Board made extensive factual findings concerning how CMS conducted the match process, focusing on certain categories of SSI eligibility data and Medicare patient data available to CMS and employed in the process. Most of the factual findings concerning the mechanics of the match process were left in place by the Administrator's decision (see generally Final Decision at 15-16), and remain undisputed. The Social Security Administration sends CMS a tape each year containing SSI eligibility data covering a 42-month period, a tape that is prepared solely for CMS's use. Board Decision at 10. This tape, typically sent every March, covers the 36 months of the three prior calendar years and the first six months of the calendar year in which the tape is prepared.*fn10 Id. Once per quarter, CMS conducts a "MEDPAR run" -- that is, matching of the MEDPAR inpatient hospital stay records against the most recent annual SSA tape. Id. at 12. Each quarterly run covers multiple calendar and fiscal years, resulting in 10 MEDPAR runs for each fiscal year. Id. For example, the tenth and final MEDPAR run for the federal fiscal year ending September 30, 1994, occurred in December 1996. Id. Because the cost report settlement period underlying the DSH calculation process takes two to three years to complete,*fn11 multiple MEDPAR runs are available for any given cost report settlement period. Id. at 32. CMS uses one of the earliest runs to compute the SSI fractions at issue -- that is, the MEDPAR run from the June following the end of the federal fiscal year ("the June update") -- rather than up-to-date runs that are available prior to the final cost report settlement for such year. Id. at 10, 32-33.

Baystate alleged that there were five systemic omissions from the SSA annual tapes that caused the SSI fractions for the years at issue to be understated. Id. at 23. Finding no procedural bar to reviewing the SSI fractions and concluding that section 1395ww(d)(5)(F)(vi) required an accurate determination, the Board addressed each category of omissions on its merits. See id. at 6-9. The first two categories of SSI eligibility records omitted are retroactive eligibility determinations by SSA -- that is, where SSI benefits are initially denied but subsequently granted on appeal, and where SSI benefits are temporarily on "hold" or "suspense" until additional information is obtained.*fn12 Id. at 27-29. The Board observed that these ongoing processes take, on average, a year to resolve, and thus the timing of the calculation of the SSI fraction makes a difference in the extent to which retroactive eligibility determinations are incorporated in the SSI fraction. Id. at 28-29, 32-33. The record was undisputed that, due to the timing of CMS's calculation of the SSI fraction early in the DSH calculation process -- in the June following the end of each fiscal year based on the first SSA tape for such year -- inpatient hospital stay records from MEDPAR are not matched with SSI records showing the granting or restoration of SSI benefits after each April 1 retroactively to a period within the prior fiscal year. Id. at 32. The Board found this timing improper because CMS has in its possession updated MEDPAR runs based on a subsequent updated SSA tape before the end of the DSH cost report settlement process. Id. The Board thus concluded that CMS did not use the best available data to conduct the matches. Id. at 33.

The next category of omitted SSI eligibility records consists of records considered inactive by the Social Security Administration because of the beneficiary's death, and which it thus excluded from the tapes sent to CMS until about February 1996.*fn13 Id. at 23. At that time, CMS directed SSA to cease its practice of omitting inactive data beginning with the tape for fiscal year 1995. Id. at 24. The dispute over this systemic omission -- referred to in the record as the "stale records" problem -- has remained a live issue, however, because CMS did not take corrective action for past years -- that is, for fiscal years 1993 and 1994 -- based on a determination that the impact of the omission was not material. Id.

The Board observed that CMS had attempted to assess whether the omission of the "stale records" for past years had a material impact on prior SSI fractions by creating special MEDPAR files that matched the corrected new SSI data against the existing MEDPAR files and original count of SSI days for inpatient hospital stays, thus providing a perspective on how many SSI days had been missed. Id. at 24. The Board observed that Baystate's consultant, Mr. Pfeil, testified that CMS's summary of the special MEDPAR files reflects that "the ratio of new SSI additions to old SSI deletions was greater than 17:1 for most years," and showed 400 more SSI days for one unidentified year (apparently 1994). Id. at 24-25; see also AR 5267-68 (Smith testimony indicating that 400 days at issue were from 1994). The Board found that there was no way to know the source of the additional days -- that is, whether it reflected a previously omitted "stale record," unedited data from stays in non-PPS units of a hospital, or data updates reflecting retroactive SSI eligibility determinations. Board Decision at 25. The Board concluded that, although it could not determine the amount of the financial harm, the discrepancy with respect to the 400 additional SSI days was sufficient to demonstrate that the original data was inaccurate and, furthermore, that the "systemic" nature of the error indicated relief was warranted. Id. at 25, 26.

The Board also considered whether CMS knew of the stale records omission prior to February 1996 as part of its inquiry into whether CMS had nonetheless used the "best available data," which, if so, might warrant denial of relief. Id. at 33-35. Ms. Rosenberg had testified that CMS knew there was "something wrong with the numbers" at least by 1993, because SSI records were inexplicably dropped when DSH percentages were recalculated. Id. at 33. Mr. Pfeil also had been in contact with three CMS employees about this problem in 1993 when CMS could not reconstruct previously published SSI calculations. Id.; AR 5419-29. Thus, the Board concluded that CMS knew or should have known at least by 1993 that there was a problem with the SSI data received from SSA, and thus CMS could not claim that the incomplete tapes were the "best available data." Board Decision at 25, 35. The Board noted that CMS had lost or destroyed the special MEDPAR files and unidentified SSA tapes some time after 1997, but did not make any findings of bad faith on that basis. Id. at 34-35.

The next category of omitted SSI eligibility records involved persons receiving a forced or manual payment on a temporary basis in lieu of the automated payments that are typically used for SSI payments. In those instances, to prevent a duplicate automated payment, SSA's practice is to terminate the recipient's existing record, start a new record that retains a "forced pay" code (C01 or M01) but indicates no payment is due, and later create a third record to resume payment when the manual payment action is resolved. Id. at 26. As a result, the SSA annual tapes received by CMS would indicate that "forced pay" recipients have no SSI entitlement. Id. at 26-27. Baystate identified one such stay that was not counted in the sample of SSI records obtained through discovery. Id. at 27. CMS did not dispute that forced pay recipients should be reflected in the count of SSI days in the numerator of the SSI fraction, but submitted that the impact was too small to warrant retroactive correction. Id. However, the Board concluded that, in light of the systemic nature of the problem, and testimony from a former SSA employee, Mr. Shafer, indicating the problem was "common," the omissions would be likely to deflate Baystate's SSI fraction. Id. It further concluded that the omission could be corrected by modifying a computer program to check a person's earlier SSI records when a forced pay code appears on a tape. Id.

The last category of SSI data at issue concerns patients who are not eligible to receive SSI payments, but who have a special status under Section 1619(b) of the Social Security Act, 42 U.S.C. § 1382h(b), that enables them to receive Medicaid assistance based on a past entitlement to SSI payments. Such patients are intentionally excluded from the SSA annual tapes because, in CMS's view, they are not "entitled to supplemental security income benefits" as required by subparagraph (d)(5)(F)(vi) of the DSH statutory provision. Id. at 30. The Board disagreed, finding that the special status under Section 1619(b) is a "supplemental security income benefit" within the meaning of the DSH provision. Id.

The Board also considered whether, independent of these systemic omissions from the SSI eligibility data, Baystate's SSI fractions were understated due to flaws in the match process. Baystate contended that certain types of omissions inevitably occurred because CMS failed to use individuals' own social security numbers to match records, and instead used other allegedly inadequate "patient identifiers" in the MEDPAR database and SSA tapes.*fn14 Id. at 15.

The Board reviewed extensive testimony from CMS and SSA employees to ascertain which patient identifiers CMS relies upon and the role that social security numbers play. From the MEDPAR database, the record is clear and undisputed. CMS uses a patient's Health Insurance Claim Account Number ("HICAN"), which consists of a social security or railroad retirement number followed by an alpha-numeric beneficiary identification code indicating the relationship between the patient and the account holder.*fn15 Id. at 14. However, the HICAN may or may not be the patient's own social security number. Id. For example a married woman receiving Medicare Part A benefits on the account of her husband, based on his social security status, would have a HICAN composed of the husband's nine-digit social security number followed by an alpha-numeric beneficiary identification code ("BIC") indicating her spousal relationship to him. Id.

CMS runs a computer program that matches each HICAN against numbers known as "Title II numbers" derived from the SSA annual tapes. Id. at 14, 16. The "Title II" number is a number used to track an individual's benefits under the Social Security Retirement program under Title II of the Social Security Act,*fn16 and consists of the social security number of the Title II record holder (the person whose work history qualifies for benefits) and an alpha-numeric suffix, or BIC, that denotes the relationship between the beneficiary and the Title II record holder.*fn17 Id. at 13. The Board observed that "[o]ften an individual's HIC[AN] number is the same as his or her Title II number," thus enabling matches to occur. Id. at 14. But there are undisputed problems with using the Title II number as the identifier: (1) an individual may have more than one Title II number at the same time because he or she may have received benefits under more than one Title II account, and (2) a person's Title II number may change over time due to marriage, divorce, death of a spouse, or changes in work status. Id. at 13-14. The Board found this variation in Title II numbers significant because SSA's annual tape includes a field for only one Title II number, ordinarily the oldest Title II number, thus preventing some matches from occurring.*fn18 Id. at 14.

Another problem identified by the Board was that many individuals receiving SSI are not assigned Title II numbers on the SSA annual tapes. Id. at 16-17, 20. This would, however, result in missed matches only if CMS were using Title II numbers exclusively, without regard to the social security numbers listed on the SSA annual tapes. After considering inconsistent testimony from CMS's principal MEDPAR programmer, Mr. Dean, at two different hearings, the Board concluded that social security numbers on the SSA tapes were not utilized, and thus individuals receiving SSI payments outside of the Title II program would have been omitted from the match process. Id. at 16-21, 42. Mr. Dean initially testified at a 2003 hearing that he runs a program called SSISORT that reformats the SSI data received from SSA, drops all SSI records that do not include a Title II number, and puts the remaining SSI records in a new output file. Id. at 16. He repeated in other testimony that, if "there is no Title II number, which is all we are . . . on our end, that is all we are really concerned about . . . this [SSISORT] process would not write that record out. . . . I wouldn't keep that record." Id. He also called the other data elements in SSA's annual tapes, including social security numbers, "useless." Id.

But at the evidentiary hearing the next year, Dean insisted that social security numbers from the SSA annual tapes are, in fact, used in the matching process. Id. at 17. He testified that CMS runs matches against two numbers (instead of one) -- the Title II number, plus a second number that CMS generates from the social security number with the addition of "A" in the BIC position, which he also calls a HICAN. Id. He denied that the SSISORT program discards records from the SSA tapes if they do not contain a Title II number, since, under his revised testimony, "we create a record from every record Social Security sends us by generating a HIC[AN] off of the Social Security number" and "we'll match against numbers that are provided in the Title 2 field and we'll match against numbers provided in the Social Security field because we generate a [HICAN] from that." Id. (emphasis added).

The Board discounted the later testimony in light of the strength of Mr. Dean's original testimony and corroborating evidence. In particular, it noted that CMS's discovery responses during the administrative proceedings denied that CMS matched based on a second number derived from a social security number: "'[CMS] has no recollection, and no documentation concerning, whether CMS ever saw a need . . . to employ secondary or alternative matching criteria' in addition to or in lieu of, the HICAN." Id. at 19; see also AR 3650-51. The Board also observed that a long-time CMS employee, Ms. O'Leary, believed that social security number information would not have been incorporated. Board Decision at 19.

Based on its review of the testimony, the Board ultimately concluded that there is a "great likelihood" that matches will be missed because of the "failure to match on a unique identifier and/or multiple criteria," and further that beneficiaries' social security numbers and alternative identifiers, such as name and gender, should be utilized, as occurs in a comparable matching process that is in place to monitor SSI payments to patients in nursing homes. Id. at 13, 21. Based on its findings, the Board granted Baystate substantially all of the relief requested on issues concerning the completeness of SSI data and its management during the match process.

Id. at 41-42. The Board found that granting this relief would impose no significant administrative burden, since it involved primarily redesigning the computer program to capture the information at issue. Id. at 42.

The Board, however, rejected Baystate's claims that the universe of Medicare Part A patient days was counted based on an incorrect legal standard -- a standard that affects the count of days in both the numerator and denominator of the SSI fraction.*fn19 Id. at 35-40. On this front, Baystate alleged that CMS had been overinclusive in its count of patient days by counting all days that were "covered" by Medicare Part A, including Medicare HMO days, even if the provider had not received any payment. Id. at 37-40. The Board concluded that the statutory DSH provision and its implementing regulation defined the denominator solely in terms of a patient's "entitle[ment] to benefits under part A" of Medicare, and thus the count of Medicare Part A days properly included those days for which Medicare Part A provided coverage to the patient, including HMO days, even though the hospital may not have received payment. Id.

On April 7, 2006, CMS notified the parties of the Administrator's intent to review the Board's decision, based upon comments submitted by CMS's Center for Medicare Management and the Intermediary. AR 97-98. The Administrator subsequently affirmed the Board's holding that CMS had counted the universe of Medicare Part A patient days, including HMO days, using the correct legal standard, but reversed in all other respects. Final Decision at 31-55. He determined that, as a threshold matter, Baystate was precluded from challenging the SSI fraction at all because, in his view, the regulation governing calculation of the SSI fraction, 42 C.F.R. § 412.106(b), authorizes only two calculations -- the computation based on the federal fiscal year and, upon request, recalculation of the fraction based on a hospital's cost reporting period. Id. at 17-21. He thus concluded that further recalculations were unauthorized.*fn20 Id. at 17-18.

The Administrator then proceeded to address the merits of Baystate's claims, leaving largely undisturbed the Board's findings that the types of SSI eligibility data at issue would not be reflected in the SSI fractions, but finding that those omissions were not significant. He focused first on the level of precision that is required in calculating the SSI fraction under section 1395ww.*fn21 Id. at 23. The Administrator held that the Board erred in holding CMS to a standard of "absolute precision," which improperly allowed the SSI fraction to be continuously corrected with later updated data and hence precluded the finality of payments. Id. at 23-26. He reasoned that the prospective payment system requires instead only that payment rates be "based on the best available data at the time" and that the "best available data is 'accurate' data in fact for purposes of payments under [the inpatient prospective payment system]." Id. at 23 (emphasis added). He viewed this standard as reflected in the agency's prior statements that it would obtain "reasonably accurate but not perfect calculations." Id. The efficient administration of a complex regulatory benefits program involving millions of records, he reasoned, necessarily allows room for "acceptable rates of error," drawing guidance from other precedents involving allocation of benefits. Id. at 26 (quoting Califano v. Boles, 443 U.S. 282, 285 (1979)). He thus concluded that the law authorizes an "acceptable rate of error," which was satisfied in this case. Id. at 26-27.

The Administrator observed that, out of the sample of 627 individual-specific SSI eligibility records Baystate had compiled, it had shown only 12 stays that were omitted from its SSI fractions, an error rate of 1.59 percent. Id. at 36-37. Moreover, the sample was likely to exaggerate the number of errors because it consisted of records "for individuals for whom the MEDPAR data . . . indicated no SSI days were associated with their stay" and thus would only "increase [the provider's] Medicare DSH payments if later information was different from the original record." Id. at 37. The sample was further likely to exaggerate errors because Baystate "had only requested records for those individuals that [it], based on State Medicaid data believed were, or likely were, eligible for SSI." Id. But assuming the 1.59 percent rate of missed matches was correct, the Administrator concluded that it nonetheless failed to support Baystate's claim that the best available data was not used or that its reimbursement was affected by the errors. Id.

He reached similar conclusions concerning an "acceptable rate of error" when looking at each individual category of omitted data. He concluded that retroactive SSI eligibility determinations -- that is, resolutions in a beneficiary's favor following a suspension or hold of SSI benefits or upon appeal within SSA -- would have only a "minimal impact" on a provider's DSH fraction, which "combined with the need for finality in the process," makes use of later data (i.e., a subsequent SSA tape) impractical. Id. Drawing from a Federal Register notice addressing the issue of updated SSI data in more detail, he explained:

We understand that many hospitals are concerned that later data matches may produce a different Medicare fraction. However, we believe there needs to be administrative finality to the calculation of a hospital's Medicare fraction. CMS has previously stated that its goal is to obtain reasonably accurate but not perfect calculations (51 Fed. Reg. 16777). Additionally, our data have shown that 98 to 99 percent of SSI eligibility determinations are made and remain unchanged 6 months after the end of the Federal fiscal year. . . . Given the time between the end of [a] hospital's cost reporting periods and when we are furnished with SSI eligibility information for that period, we ...

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