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Carney Hospital Transitional Care Unit v. Leavitt

April 24, 2008

CARNEY HOSPITAL TRANSITIONAL CARE UNIT, PLAINTIFF,
v.
MICHAEL O. LEAVITT, SECRETARY, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES DEFENDANT.



The opinion of the court was delivered by: Royce C. Lamberth, United States District Judge

MEMORANDUM OPINION

Now before the Court comes defendant Michael O. Leavitt's motion [11] to dismiss. Upon full consideration of the motion, plaintiff's opposition, the reply, the entire record herein, and applicable law, the Court GRANTED defendant's motion in an Order [16] dated March 31, 2008. The reasons for the Court's Order are set forth below.

I. BACKGROUND

Plaintiff Carney Hospital Transitional Care Unit ("Carney TCU") is a hospital-based skilled nursing facility ("SNF") located on the campus of Carney Hospital in Boston, Massachusetts. (See Compl. ¶ 1.) Carney Hospital decided to form Carney TCU in 1994 when it purchased the operating rights held by Franklin Nursing Home, which was located in Braintree, Massachusetts. (See id. ¶ 24.) Franklin ceased operations in December 1994, and Carney TCU opened in October 1995 as a distinct part of Carney Hospital. (See id. ¶ 28.)

On February 1, 1996, Carney Hospital submitted to its Medicare fiscal intermediary a request for a new provider exemption in an effort to gain temporary entitlement to reimbursement from Medicare for all of its reasonable nursing costs without limitation by the routine cost limits for SNFs established pursuant to 42 U.S.C. § 1395x(v)(1)(A). (See id. ¶ 29.) CMS denied Carney TCU's request on May 8, 1996, finding that Carney TCU was previously Franklin Nursing Home, was established due to Franklin's relocation, and was thus not a new provider entitled to an exemption under 42 C.F.R. § 413.30(e).*fn1 (See id. ¶ 30.) According to Carney TCU, denial of its request for a new provider exemption resulted in reduced Medicare reimbursement of $3,000,000 during fiscal years 1996, 1997, and 1998. (See id. ¶ 32.)

On July 25, 1996, Carney Hospital appealed CMS's decision and requested a hearing before the Provider Reimbursement Review Board ("PRRB"). (See id. ¶ 33.) Following a hearing, the PRRB found that CMS's rejection was proper. (See id. ¶ 35.)

Carney TCU sought judicial relief in this Court by filing a lawsuit in September 2004. See Carney Hosp. Transitional Care Unit v. Leavitt, No. 04-cv-1598 ("Carney I").*fn2 Two months later, this Court granted defendant's consent motion [7] to stay proceedings pending the D.C. Circuit's decision in St. Elizabeth's Medical Center of Boston, Inc. v. Thompson, 396 F.3d 1228 (D.C. Cir. 2005), a similar case involving denial of a new provider exemption request. Soon after the D.C. Circuit decided that case, defendant moved to remand Carney I to the Secretary of the Department of Health and Human Services (the "Secretary") for a determination consistent with the standard announced St. Elizabeth's. On June 1, 2006, this Court ordered Carney I remanded to the Secretary for application of the St. Elizabeth's standard and for consideration of the full administrative record that was before the PRRB. (See Remand Order, Carney I, Docket Entry No. 21.)

On remand, the CMS Director of the Chronic Care Policy Group found that in light of St. Elizabeth's, denial of Carney TCU's exemption was still proper. (See CMS Policy Group Decision (Nov. 2, 2006), Ex. A to Compl. at 6.) The CMS decision instructed plaintiff:

This is the final decision of the CMS. If Carney Hospital Transitional Care Unit is dissatisfied with this decision, as provided at 42 C.F.R. § 413.30(c), it may seek review of this decision by filing a request for hearing with the Provider Reimbursement Review Board within 180 days of the date of this decision. We refer the parties to Medicare regulations, 42 C.F.R. Part 405 Subpart R for further information about the Board's authority and proceedings before it.

(See id.)

Carney TCU filed its complaint in this lawsuit on December 28, 2006.*fn3 Plaintiff asserts that review by this Court is proper because the Secretary-in violation of the Court's remand order-delegated to the CMS Policy Group its obligation to apply the St. Elizabeth's standard and ignored the Court's instruction that he consider the record that was available to the PRRB. (See Compl. ¶ 43--45.) Further, Carney TCU does not view appeal to the PRRB as a prerequisite to judicial review because the PRRB already made a determination regarding plaintiff's new provider exemption request-albeit before the Court of Appeals issued its St. Elizabeth's opinion. Thus, according to Carney TCU, it has exhausted administrative remedies. Defendant disagrees and moves to dismiss Carney TCU's complaint for lack of subject matter jurisdiction because plaintiff failed to exhaust administrative remedies as envisioned by the Medicare statute.

II. ANALYSIS

A. Legal Standard

1. Standard of Review: Motion ...


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