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National Hospice and Palliative Care Organization, Inc. v. Weems

November 24, 2008

NATIONAL HOSPICE AND PALLIATIVE CARE ORGANIZATION, INC., PLAINTIFF,
v.
KERRY N. WEEMS, IN HIS OFFICIAL CAPACITY AS ACTING ADMINISTRATOR, CENTERS FOR MEDICARE & MEDICAID SERVICES, AND MICHAEL O. LEAVITT, IN HIS OFFICIAL CAPACITY AS SECRETARY, DEPARTMENT OF HEALTH AND HUMAN SERVICES, DEFENDANTS.



The opinion of the court was delivered by: Colleen Kollar-kotelly United States District Judge

MEMORANDUM OPINION

Plaintiff National Hospice and Palliative Care Organization, Inc., ("National Hospice") bring this suit for declaratory and injunctive relief against Kerry N. Weems, in his official capacity as Acting Administrator of the Centers for Medicare and Medicaid Services, and Michael O. Leavitt, in his official capacity as Secretary of the United States Department of Health and Human Services, (collectively "CMS").*fn1 National Hospice seeks judicial review of a final rule recently promulgated by CMS that, in relevant part, eliminates the budget neutrality adjustment factor ("BNAF"), an adjustment to the hospice wage index that is applied to Medicare payments for hospice services.

National Hospice filed the present complaint on September 5, 2008, along with a Motion for a Preliminary Injunction seeking to enjoin CMS from implementing the relevant portion of a final rule phasing out the BNAF effective October 1, 2008 ("2008 Final Rule"). The parties and the Court thereafter agreed to convert National Hospice's Motion for a Preliminary Injunction into a decision on the merits through cross-motions, and CMS agreed that, in the event National Hospice ultimately prevails in this case, CMS would retroactively reimburse hospices in accordance with the Court's final ruling for any amounts that would have been paid had the BNAF not been phased out beginning October 1, 2008.

Currently pending before the Court are National Hospice's Motion [2] for Preliminary Injunction ("Pl.'s Mot"), which the Court is treating as a Motion for Summary Judgment pursuant to the parties' agreement, and CMS' Motion [13] to Dismiss, or in the Alternative, for Summary Judgment ("Defs.' Mot."). After a thorough review of the parties' submissions, the administrative record, applicable case law, statutory authority and regulations, the Court concludes that it lacks subject matter jurisdiction over National Hospice's claims. Accordingly, because the Court resolves this matter solely on the legal grounds that it lacks subject matter jurisdiction and does not reach the merits of this case, the Court shall treat Defendants' Motion as a Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) and shall grant Defendants' Motion to Dismiss. Furthermore, as the Court is without jurisdiction to consider the merits of this case, the Court shall deny without prejudice Plaintiff's Motion for Summary Judgment, for the reasons set forth below.

I. BACKGROUND

The Court shall first describe the Medicare statutes, regulations, and procedures providing the necessary context for the legal and procedural backgrounds that follow.

A. Medicare Statutes, Regulations, and Procedures

1. Reimbursement for Hospices

Established in 1965 under Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq., Medicare is a federally funded health insurance program for the elderly and disabled. Subject to a few exceptions, Congress authorized the Secretary of Health and Human Services ("Secretary") to issue regulations defining reimbursable costs and otherwise giving content to the broad outlines of the Medicare statute. See 42 U.S.C. § 1395x(v)(1)(A). Section 122 of the Tax Equity and Fiscal Responsibility Act of 1982 (Pub. L. 97-248), enacted in 1982, expanded the scope of Medicare benefits by authorizing coverage for hospice care for terminally ill beneficiaries. See Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. 97-248, § 122, 96 Stat. 356, 364. The hospice benefit was designed to provide patients who are terminally ill with comfort and pain relief, as well as emotional and spiritual support, generally in a home setting. See Final Rule Providing Medicare Hospice Coverage, 48 Fed. Reg. 56,008, 56,008 (Dec. 16, 1983). Medicare hospice services include nursing care, physical or occupational therapy, speech-language pathology services, medical social services, counseling, home health aide services, physicians' services, and short-term inpatient care, as well as drugs and medical supplies. 42 U.S.C. § 1395x(dd)(1). To be eligible for hospice benefits, an individual must be certified as "terminally ill," which is statutorily-defined as having a "medical prognosis that the individual's life expectancy is 6 months or less." Id. at §§1395f(a)(7)(A), 1395x(dd)(3)(A).

Hospice providers are reimbursed pursuant to section 1814(i) of the Social Security Act. Id. at § 1395f(i). The statute provides generally that hospice providers be paid "an amount equal to the costs which are reasonable and related to the cost of providing hospice care or which are based on such other tests of reasonableness as the Secretary may prescribe in regulations . . . ." Id. at § 1395f(i)(1)(A). The Secretary has, pursuant to this statutory authority, promulgated hospice-specific regulations directing the payment for hospice care under the Medicare Act. See 42 C.F.R. § 418, Subpart G (§§ 418.301 et seq.) ("Payment for Hospice Care").

As specified in CMS' regulations, hospices are reimbursed, via an intermediary,*fn2 for "each day during which the beneficiary is eligible and under the care of the hospice, regardless of the amount of services furnished on any given day." 42 C.F.R. § 418.302(e)(1). Payments vary depending on the type of care provided on the particular day. See id. at § 418.302(e)(2). There are four levels of care a hospice patient may receive: routine home care, continuous home care, inpatient respite care and general inpatient care. Id. at § 418.302(b). Each category of hospice care has its own daily payment rate, which is established by CMS in accordance with the methodology prescribed by Congress, codified at 42 U.S.C. § 1395f(i)(C). Id. at §§ 418.306(a), (b). Each fiscal year, CMS determines the new payment rates for the four categories of hospice care by adjusting the prior fiscal year's payment rates by a market based percentage increase ("MBPI"). See 42 U.S.C. § 1395f(i)(1)(C)(ii); 42 C.F.R. § 418.306(b)(2).*fn3 The result of these calculations is the nationwide payment rates for the four categories of hospice care, which the Court shall refer to, for purposes of this opinion, as the "statutory payment rates."

The statutory payment rates are then adjusted to reflect geographic differences in labor costs throughout the country. See 42 C.F.R. §§ 418.302(g), 418.306(c). This is accomplished through application of the hospice wage index. See 42 C.F.R. § 418.306(c). As set out in CMS regulations, the local intermediaries apply the relevant hospice wage index value to the statutory payment rates to determine the specific payment rates applicable to a particular hospice. 42 C.F.R. § 418.306(c); 73 Fed. Reg. at 24,001. That is, the hospice wage index is intended to "permit payment of higher rates in areas with relatively high wage levels, and proportionately lower rates in areas with wage levels below the national average." Final Rule Establishing 1997 Revised Hospice Wage Index, 62 Fed. Reg. 42,860, 42,860 (Aug. 8, 1997). In order to implement the adjustments for wage variations, the statutory payment rates for each of the four categories of hospice care are broken down into a labor and non-labor component. Id. at 42,861. CMS then multiplies the labor component by the hospice wage index value attributable to the area in which the hospice is located, to determine the adjusted labor component. Id. Once the adjusted labor component is calculated, it is added to the non-labor component of the applicable hospice payment rate (which does not vary based on geography) to determine a particular hospice's adjusted payment rates. Id. The Court shall refer to these payment rates, which have been adjusted to account for local wage differences, as the "adjusted payment rates."

2. The Hospice Wage Index

CMS has required application of a hospice wage index to the labor component of the statutory payment rates in this way since the index was first established in 1983. The methodology for calculating the hospice wage index, however, has changed over time. That is, although a hospice wage index has existed in one form or another since 1983, the hospice wage index itself has varied. The instant lawsuit focuses on one aspect of that changing methodology-the BNAF.

a. The Initial Hospice Wage Index (1983-1997)

The initial hospice wage index, as adopted in 1983, was based on the wage index established that same year for the determination of Medicare inpatient hospital prospective payment rates, which was in turn based on 1981 Bureau of Labor Services ("BLS") hospital data. See Proposed Rule Regarding 1997 Revised Hospice Wage Index, 61 Fed. Reg. 46,579, 46,580 (Sept. 4, 1996). The hospice wage index was not amended for several years, and therefore continued to be calculated based on the 1981 BLS data. Id. CMS commenced a negotiated rulemaking process in October of 1994 to consider and select a new methodology for calculating the hospice wage index. Id. As part of the rulemaking process, CMS established the Negotiated Rulemaking Advisory Committee on the Medicare Hospice Wage Index ("Committee"). Id.

The Committee met five times between November 1994 and April 1995, before eventually reaching consensus on a new methodology for determining the hospice wage index, as set forth in the Committee Statement. Id. The Committee made several recommendations, which, after notice and comment rulemaking, were in large part adopted by CMS as part of a final rule published on August 8, 1997 ("1997 Final Rule"). See 62 Fed. Reg. at 42,681.

b. The Revised Hospice Wage Index (1997-2008)

In the 1997 Final Rule, CMS announced, consistent with the Committee's recommendations, that the hospice wage index would no longer be determined based on the 1981 BLS data. Id. at 42,862. Rather, the hospice wage index, going forward, would be based on a version of the current hospital wage index,*fn4 subject to certain adjustments-including, as is relevant here, the BNAF. See id. The 1997 Final Rule provided that the revised hospice wage index would be implemented over a three-year transition period, at the conclusion of which the revised hospicewage index would be fully implemented. Id. The revised hospice wage index would be updated yearly thereafter. Id.

The budget neutrality adjustment factor, or BNAF, was recommended by the Committee and adopted by CMS as part of the 1997 Final Rule. Id. As described by the Committee, the BNAF was intended to ensure that

[E]ach year in updating the wage index, aggregate Medicare payments to hospices would remain the same, using the revised wage index as if the 1983 wage index had not been updated. Thus, although payments to individual hospice programs may change each year, overall Medicare payments to hospices would not be affected by updating the wage index, that is, budget neutrality will be maintained during and after the transition period.

Proposed Rule for Revised 1997 Revised Hospice Wage Index, 61 Fed. Reg. 46,579, 46,581 (Sept. 4, 1996). The BNAF was calculated annually, according to the following methodology.

62 Fed. Reg. at 42,862.First, CMS established the payments that would have been made under the initial hospice wage index, by calculating the labor-related payments for each of the four categories of hospice care using patient bills for the most recent complete fiscal year. Id. The resulting dollar amount was the target for the budget neutrality calculation. Id. Second, CMS would calculate payment rates separately for the labor-related payments using the hospice wage index set forth in the 1997 proposed rule (i.e., pre-adjustments). Id. The BNAF was calculated as the multiplier by which the labor-related payments using the 1997 proposed hospice wage index must be adjusted to equal the labor-related payments using the initial 1983 hospice wage index, taking into account the adjustments to hospice wage index values below, at or above 0.8 (as discussed above). Id. Finally, that resulting number-the BNAF-was applied, in certain circumstances, to adjust a hospice's wage index ...


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