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St. Michael's Medical Center v. Johnson

March 19, 2009


The opinion of the court was delivered by: Deborah A. Robinson United States Magistrate Judge


Plaintiffs' Motion for Summary Judgment (Document No. 18), and Defendant's Motion for Summary Judgment (Document No. 20) are pending for consideration by the undersigned. Upon consideration of the pleadings (Document Nos. 1, 11); the pending motions; the memoranda in support thereof and in opposition thereto (Document Nos. 21, 22, 23, 26, 27); the administrative record (see Document No. 5) and the entire record herein, the undersigned recommends that both motions be denied without prejudice, and that this action be remanded for further administrative proceedings consistent with the instant Report and Recommendation.


The Parties' Contentions Plaintiffs are twenty-two hospitals "from multiple urban Metropolitan Statistical Areas (as defined by the Executive Office of Management and Budget)." Complaint, ¶ 4. Plaintiffs "ask the Court to decide questions of law that the Board found that it did not have the authority to decide, and to determine thereby the merits of their claims for additional Medicare payments[]" (id. at 3-4) (unnumbered paragraph); however, Plaintiffs characterize their action as one "seeking additional payments from the Medicare program under its prospective payment system because of an incorrectly calculated wage index for the Providers for federal fiscal year 2001 (October 1, 2000 - September 30, 2001) which includes Provider fiscal years ending September 30, 2001 and December 31, 2001." Complaint, ¶ 6. As relief, Plaintiffs ask, inter alia, "[t]hat this Court require that the wages, fringe benefits, and hours of all reclassified hospitals located in the Providers' Metropolitan Statistical Area be included in the computation of the wage index for the Plaintiffs for federal fiscal year 2001 which would result in an increase of collective reimbursement of approximately $23,956,069[.]" Id. at 14 (unnumbered paragraph).

Defendant, the Secretary of Health and Human Services, in his Answer, asks that the court "affirm[] the validity of the challenged agency action[]" and enter judgment dismissing this action with prejudice. Answer (Document No. 11) at 5 (unnumbered paragraph).

Statutory and Regulatory Framework

This action arises under Title XVIII of the Social Security Act, more commonly known as the Medicare Act, a statutory scheme by which Congress established a federally funded health insurance program for the elderly and disabled. See 42 U.S.C. §§ 1395 et seq. The program is administered by Centers for Medicare and Medicaid Services ("CMS"), formerly the Health Care Financing Administration ("HCFA"),*fn1 at the direction of the Secretary of the United States Department of Health and Human Services ("Secretary"). At issue in this action are provisions of the program which govern the cost reimbursements to providers of service ("Providers") rendering inpatient medical services. See 42 U.S.C. § 1395ww. Specifically, the controverted statute provides:

[T]he Secretary shall adjust the proportion (as estimated by the Secretary from time to time of hospitals' costs which are attributable to wages and wage-related costs, of the [diagnostic-related group] prospective payment rates computed under subparagraph (D) for area differences in hospital wage level by a factor (established by the Secretary reflecting the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level.

42 U.S.C. § 1395ww(d)(3)(E).


Motions for Summary Judgment Pursuant to Rule 56 of the Federal Rules of Civil Procedure, summary judgment shall be granted if the pleadings on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). Material facts are those that "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). There is a genuine issue of material fact "if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Id. In considering a motion for summary judgment, all evidence and inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). "Additionally, 'in ruling on cross-motions for summary judgment, the court shall grant summary judgment only if one of the moving parties is entitled to judgment as a matter of law upon material facts that are not genuinely disputed.'" American Cargo Transport, Inc. v. Natsios, 429 F. Supp. 2d 139, 145 (D.D.C. 2006)(quoting Petchem, Inc. v. United States, 99 F. Supp. 2d 50, 54 (D.D.C. 2000)) (citations omitted). "In a case involving review of a final agency action under the Administrative Procedure Act, 5 U.S.C. § 706, however, the standard set forth in Rule 56(c) does not apply because of the limited role of a court in reviewing the administrative record." Baystate Med. Ctr. v. Leavitt, 545 F. Supp. 2d 20, 34-35 (D.D.C. 2008) (citations omitted).

Judicial Review of Secretary's Decision Pursuant to the Administrative Procedure Act

Judicial review of Medicare reimbursement disputes is governed by the standards set forth in the Administrative Procedure Act ("APA"). 42 U.S.C. § 1395oo(f)(1); see also 5 U.S.C. § 706. To the extent necessary, "the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action." 5 U.S.C. § 706. Further, "[t]he reviewing court shall... hold unlawful and set aside agency action, findings, and conclusions found to be without observance of procedure required by law, unsupported by substantial evidence, arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." 5 U.S.C. § 706(2)(A). "Generally, an agency's decision is arbitrary and capricious 'if the agency... entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.'" Johnson v. U.S. Dep't of Educ., 580 F. Supp. 2d 154, 157 (D.D.C. 2008) (quoting Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)) (internal citations omitted). "As long as an agency has examined the relevant data and articulated a satisfactory explanation for its action[,] including a rational connection between the facts found and the choice made, courts will not disturb the agency's action." Heartland Reg'l Med. Ctr. v. Leavitt, 511 F. Supp. 2d 46, 51 (D.D.C. 2007) (citing Motor Veh. Mfrs. Ass'n, 463 U.S. at 43). The scope of review of an agency decision accordingly is narrow, and a federal court is not to substitute its judgment for that of the agency. See Orion Reserves Ltd. P'ship v. Salazar, 553 F.3d 697, 706 (D.C. Cir. 2009) (citations omitted). When reviewing an administrative decision, "the burden of showing that the agency action violates the APA standards falls on the provider." Heartland, 511 F. Supp. 2d at 51(citing Diplomat Lakewood Inc. v. Harris, 613 F.2d 1009, 1018 (D.C. Cir. 1979)) (citation omitted).

"The Supreme Court set forth a two-step approach to determine whether an agency's interpretation of a statute is valid under the APA. Quantum Entertainment, Ltd v. U.S. Dep't of the Interior, No. CIV.A.07-1295, 2009 WL 401871, at *4 (D.D.C. Feb. 19, 2009) (citing Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984)). Application of the "Chevron deference" standard "requires the court to first look to 'whether Congress has spoken to the precise question at issue.' If so, the court ends its inquiry. But, if the statute is ambiguous or silent, the second step requires the court to defer to the agency's position, as long as it is 'based on a permissible construction of the statute.'" Id. (internal citation omitted). The Secretary's interpretation of his own regulations is entitled to "substantial deference[,]" and "must be given controlling weight unless it is plainly erroneous or inconsistent with the regulation." Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994) (citation omitted). "Where the regulations involve ...

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