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Summer Hill Nursing Home LLC v. Sebelius

January 4, 2010

SUMMER HILL NURSING HOME LLC, PLAINTIFF,
v.
KATHLEEN SEBELIUS,*FN1 SECRETARY, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Rosemary M. Collyer United States District Judge

MEMORANDUM OPINION

On March 25, 2009, the Court granted Summer Hill Nursing Home LLC summary judgment, finding the decision of the Secretary of the Department of Health and Human Services denying Summer Hill's claim for Medicare reimbursement of "bad debts" to have been arbitrary and capricious under the Administrative Procedure Act ("APA"), 5 U.S.C. § 706(2)(A), because the Secretary failed to explain why Summer Hill's belated submission of "remittance advices" from New Jersey Medicaid refusing to pay the debts was insufficient to establish that the debts were actually uncollectible when claimed.*fn2 Summer Hill now moves for costs and attorneys' fees pursuant to the Equal Access to Justice Act ("EAJA"), 28 U.S.C. § 2412. See Pl.'s Mot. for Fees & Expenses ("Pl.'s Mot.") [Dkt. # 24]. For the reasons explained herein, the motion will be granted in part and denied in part.

I. FACTS

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.*fn3 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"*fn4 relating to uncollectible deductible and co-insurance amounts for "dual eligible"*fn5 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*fn6 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]."*fn7 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, alleging that the Secretary's denial of its claim for Medicare reimbursement was arbitrary and capricious under the APA, which applies pursuant to 42 U.S.C. § 1395oo(f)(1). In a Memorandum Opinion, the Court held that the Secretary's denial of Summer Hill's claim for Medicare reimbursement was arbitrary and capricious because the Secretary failed to explain how the must bill policy was violated in this case. See Summer Hill Nursing Home LLC v. Johnson, 603 F. Supp. 2d 35, 38 (D.D.C. 2009). The Court reasoned that "[a]bsent is any explanation why Summer Hill's subsequent receipt of remittance advices was insufficient to establish that the debts were actually uncollectible when claimed." Id. at 39. Because the Secretary did not explain how the must bill policy was violated in light of Summer Hill's subsequent receipt of remittance advices, the Court found that the Secretary's decision provided no basis upon which the Court could conclude that the decision was the product of reasoned decision-making. See id. (quoting Tourus Records, Inc. v. DEA, 259 F.3d 731, 737 (D.C. Cir. 2001)).

II. LEGAL STANDARDS

A. Costs

Costs are governed by Subsection 2412(a)(1) of EAJA. It provides: a judgment for costs, as enumerated in Section 1920 of this title, but not including the fees and expenses of attorneys, may be awarded to the prevailing party in any civil action brought by or against the United States or any agency or any official of the United States acting in his or her official capacity . . . . A judgment for costs when taxed against the United States shall . . . be limited to reimbursing in whole or in part the prevailing party for the costs incurred by such party in the litigation.

28 U.S.C. § 2412(a)(1). Costs allowable under 28 U.S.C. § 1920 may be recovered against the United States under Subsection 2412(a)(1) to the extent that the costs relate to a litigant's obtaining "the functional equivalent of a final judgment against the government that entitles him to some relief." In re Turner, 14 F.3d 637, 641 (D.C. Cir. 1994).

B. Attorneys' Fees

1. Mandatory Fees

Mandatory fees are governed by Subsection 2412(d)(1)(A) of EAJA. It provides: a court shall award to a prevailing party . . . fees and other expenses . . . incurred by that party in any civil action . . . including proceedings for judicial review of agency action, brought by or against the United States . . . unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust. 28 U.S.C. § 2412(d)(1)(A). "Substantially justified" means "justified in substance or in the main - that is, justified to a degree that could satisfy a reasonable person. That is no different from . . . [having] a reasonable basis both in law and in fact." Pierce v. Underwood, 487 U.S. 552, 565 (1988) (quotation marks and citations omitted); see also F.J. Vollmer Co., Inc. v. Magaw, 102 F.3d 591, 595 (D.C. Cir. 1996) (same). Only fees attributable to civil actions brought by or against the United States - defined to include "any agency and any official of the United States acting in his or her official capacity" - may be awarded under Subsection 2412(d)(1)(A). Id. ...


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