The opinion of the court was delivered by: Rosemary M. Collyer United States District Judge
This matter is before the Court on cross motions for summary judgment. Summer Hill Nursing Home LLC seeks judicial review of a decision of the Secretary of the Department of Health and Human Services denying its claim for Medicare reimbursement of "bad debts" it incurred. The Secretary denied Summer Hill's claim because he found that Summer Hill did not bill the New Jersey Medicaid program as is required by the agency's "must bill" policy. However, it is undisputed that after Summer Hill submitted its reimbursement claim but before the Secretary issued his decision, Summer Hill billed New Jersey Medicaid and received "remittance advices" from New Jersey Medicaid refusing to pay the debts. Because the Secretary ignored this fact in his analysis and failed to explain why Summer Hill's subsequent submission of remittance advices was insufficient to establish that the debts were actually uncollectible when claimed, the Court finds that the Secretary's decision was arbitrary and capricious. Accordingly, Summer Hill's motion for summary judgment will be granted and the Secretary's denied.
Summer Hill is a 120-bed nursing facility located in the State of New Jersey. It is a participating provider in both the federal Medicare program and New Jersey's Medicaid program.*fn2 On or about May 31, 2005, Summer Hill submitted its Medicare Cost Report for the fiscal year ending December 31, 2004 to the fiscal intermediary, claiming $170,537 in "bad debts"*fn3 relating to uncollectible deductible and co-insurance amounts for "dual eligible"*fn4 patients. On or about January 21, 2006, the intermediary disallowed $135,106 of Summer Hill's bad debt because Summer Hill "wrote off dual eligible bad debts prior to billing [New Jersey] Medicaid for the deductible and co-insurance amounts." AR 88. Summer Hill appealed the intermediary's disallowance to the Provider Reimbursement Review Board ("PRRB") on or about March 28, 2006.
Some time between receiving notice of the intermediary's disallowance and filing its appeal with the PRRB, Summer Hill billed New Jersey Medicaid for the bad debts and received remittance advices refusing to pay the debts. AR 100-141. On appeal before the PRRB, Summer Hill argued, inter alia, that the remittance advices show that it had complied with the agency's "must bill" policy*fn5 because they show that "for each of the 'bad debts' claimed . . . Medicaid has issued a Code 670, reflecting its determination that, because the Medicare payment exceeds the Medicaid allowable payment ceiling, no Medicaid payment is due." AR 84. The PRRB reversed the intermediary's disallowance, but did not decide the effect of Summer Hill's subsequent receipt of remittance advices because it found that the must bill policy "has no foundation in law in that it is beyond the requirements of the regulations and [Provider Reimbursement Manual]."*fn6 AR 77.
The Secretary reversed the PRRB's decision on December 20, 2007. Summer Hill had argued that the Secretary "need not reach the issues of whether the PRRB was correct in finding insufficient authority for a 'must bill' policy for full Medicaid patients or whether such a policy, if properly authorized, is appropriate" because "remittance advices were received by Summer Hill from New Jersey Medicaid which conclusively establishes the debts to be 'actually uncollectible when claimed.'" AR 16. However, the Secretary ignored that argument, finding that "[t]he bad debts claimed by the Provider were not worthless when written off" because "[t]he Provider did not bill the State and receive a remittance advice to meet the reasonable collection effort requirements of the regulation and manual provisions for the claims at issue in this case." AR 12.
As a result, Summer Hill brought this suit against the Secretary and the Administrator for the Centers for Medicare & Medicaid Services. Summer Hill asserts that the Secretary's denial of its claim for Medicare reimbursement was arbitrary and capricious under the Administrative Procedure Act ("APA"), 5 U.S.C. § 551 et seq., which applies pursuant to 42 U.S.C. § 1395oo(f)(1).
Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment must be granted when "the pleadings, depositions, answers to interrogatories, and admissions 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 a judgment as a matter of law." Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). Moreover, summary judgment is properly granted against a party who "after adequate time for discovery and upon motion . . . fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
In ruling on a motion for summary judgment, the court must draw all justifiable inferences in the nonmoving party's favor and accept the nonmoving party's evidence as true. Anderson, 477 U.S. at 255. A nonmoving party, however, must establish more than "the mere existence of a scintilla of evidence" in support of its position. Id. at 252. In addition, the nonmoving party may not rely solely on allegations or conclusory statements. Greene v. Dalton, 164 F.3d 671, 675 (D.C. Cir. 1999). Rather, the nonmoving party must present specific facts that would enable a reasonable jury to find in its favor. Id. at 675. If the evidence "is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50 (citations omitted).
Under the APA, "[a]gency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review." 5 U.S.C. § 704. The APA requires a reviewing court to set aside an agency action that is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." Id. § 706(2)(A); Tourus Records, Inc. v. Drug Enforcement Admin., 259 F.3d 731, 736 (D.C. Cir. 2001). "At a minimum, that standard requires the agency to examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made." Tourus Records, 259 F.3d at 736 (quotation marks and citations omitted); see also Pub. Citizen, Inc. v. Fed. Aviation Admin., 988 F.2d 186, 197 (D.C. Cir. 1993) ("The requirement that agency action not be arbitrary or capricious includes a requirement that the agency adequately explain its result."). An agency action is arbitrary or capricious if the agency has "entirely failed to consider an important aspect of the problem," or if it has "offered an explanation for its decision that runs counter to the evidence before the agency." Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983); see also County of Los Angeles v. Shalala, 192 F.3d 1005, 1021 (D.C. Cir. 1999) ("Where the agency has failed to provide a reasoned explanation, or where the record belies the agency's conclusion, [the court] must undo its action.").
In reviewing an administrative action such as the Secretary's decision at issue here, the role of the district court is to "sit as an appellate tribunal" and review the case as a matter of law. Marshall County Health Care Auth. v. Shalala, 988 F.2d 1221, 1226 (D.C. Cir. 1993). Such review is limited to the administrative record, and "not some new record made initially in the reviewing court." Camp v. Pitts, 411 U.S. 138, 142 (1973); accord Alliance for Bio-Integrity v. Shalala, 116 F. Supp. 2d 166, 177 (D.D.C. 2000).
The parties spend the bulk of their briefs arguing over the validity of the Secretary's must bill policy. However, the Court need not -- and does not -- reach that issue because the Secretary failed to explain how that policy was violated in this case. In his decision, the Secretary recounted that "the Provider asserted that the required remittance advices were received from [New Jersey] Medicaid which conclusively establishes the debts to be 'actually uncollectible when claimed' and therefore acknowledges the validity of the bad debts that were claimed." AR 5. In other words, the Secretary acknowledged Summer Hill's argument that upon receipt of remittance advices from New Jersey Medicaid refusing to pay the debts, it was in compliance with the spirit, if not the letter, of the must bill policy. Yet the Secretary ignored this ...