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Auburn Regional Medical Center v. Sebelius

February 26, 2010

AUBURN REGIONAL MEDICAL CENTER, ET AL., PLAINTIFFS,
v.
KATHLEEN SEBELIUS, SECRETARY, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, DEFENDANT.



The opinion of the court was delivered by: John D. Bates United States District Judge

MEMORANDUM OPINION

The Secretary of the Department of Health and Human Services, through the Centers for Medicare and Medicaid Services ("CMS"), is responsible for providing payments known as "disproportionate share hospital" ("DSH") adjustments to hospitals that serve a significantly disproportionate share of low income patients, as set forth under the Medicare statute, Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq. Hundreds of Medicare providers have, collectively, filed twelve lawsuits in this district to obtain recalculation of their DSH payments as a result of findings made by the Provider Reimbursement Review Board on March 17, 2006, concerning systemic flaws in the data used by CMS and in the process used to assess the data. See Baystate Med. Ctr. v. Mutual of Omaha Ins. Co., Case Nos. 96-1822; 97-1579; 98-1827; 99-2061, Decision No. 2006-D20 (Mar. 17, 2006) (Pl.'s Mem., Ex. A) ("Baystate Board Decision"). Those findings were reviewed by this Court, and sustained in part, as set forth in an opinion issued on March 31, 2008. Baystate Med. Ctr. v. Leavitt, 545 F. Supp. 2d 20, amended in part, 587 F. Supp. 2d 37 (D.D.C. 2008).

In this first of the post-Baystate lawsuits, seventeen Medicare providers seek judicial relief from allegedly erroneous DSH payment determinations for fiscal years 1987-1994. Plaintiffs filed administrative appeals of those DSH determinations with the Board on September 12, 2006. See Compl. ¶ 52. They requested "equitable tolling" of the 180-day limitations period for filing such appeals, recognizing that, absent such tolling, their appeals would be barred by the 180-day deadline set forth in 42 U.S.C. § 1395oo(a). The Board dismissed their appeals as untimely, holding, inter alia, that it lacked authority to grant a request for equitable tolling. See In re Crowell & Moring 87-93 DSH Equitable Tolling Group, Case No. 06-2357G (Sept. 18, 2007) (Compl., Ex. B) ("In re Equitable Tolling Group, Board Decision"). Plaintiffs contend that the Board's decision was contrary to law and ask this Court to hold their administrative appeals timely. Compl. ¶¶ 59-60. In the alternative, they seek an order from this Court directing the Secretary to order the Medicare fiscal intermediaries "to make new DSH determinations for the FYs at issue . . . using correct . . . percentages" through a grant of mandamus or similar order under the Mandamus Act, 28 U.S.C. § 1361, the All Writs Act, 28 U.S.C. § 1651, or the federal question statute, 28 U.S.C. § 1331. Id. ¶¶ 61-64.

In response, defendants have moved to dismiss the complaint on the ground that plaintiffs' administrative appeals were untimely and hence, judicial review is not available under § 1395oo(f). Defendants further contend that plaintiffs are not entitled to mandamus relief under § 1361 or any other statute because they have failed to identify a non-discretionary duty owed to plaintiffs or otherwise satisfied the extraordinary requirements for mandamus relief. A hearing on defendant's motion was held on January 21, 2010. For the reasons explained below, the Court will grant defendant's motion to dismiss.*fn1

BACKGROUND

I. Statutory and Regulatory Background

Through a complex statutory and regulatory regime, the Medicare program reimburses qualifying hospitals for the services they provide to eligible elderly and disabled patients. See generally County of Los Angeles v. Shalala, 192 F.3d 1005, 1008 (D.C. Cir. 1999). The "operating costs of inpatient hospital services" are reimbursed under a prospective payment system ("PPS") -- that is, based on prospectively determined standardized rates -- but subject to hospital-specific adjustments. 42 U.S.C. § 1395ww(d); see generally In re Medicare Reimbursement Litig., 309 F. Supp. 2d 89, 92 (D.D.C. 2004), aff'd, 414 F.3d 7, 8-9 (D.C. Cir. 2005). One such adjustment is the "disproportionate share hospital" ("DSH") adjustment which requires the Secretary to provide an additional payment to each hospital that "serves a significantly disproportionate number of low-income patients." 42 U.S.C. § 1395ww(d)(5)(F)(i)(I). Whether a hospital qualifies for the DSH adjustment, and the amount of the adjustment it receives, depends on the "disproportionate patient percentage" determined by the Secretary under a statutory formula. 42 U.S.C. § 1395ww(d)(5)(F)(v)-(vii). This percentage is a "proxy measure for low income." See H. R. Rep. No. 99-241, at 16-17 (1985), reprinted in 1986 U.S.C.C.A.N. 579, 594-95.

The disproportionate patient percentage is the sum of two fractions, commonly referred to as the Medicaid fraction (often called the Medicaid Low Income Proxy) and the Medicare fraction (the Medicare Low Income Proxy). 42 U.S.C. § 1395ww(d)(5)(F)(vi); Jewish Hospital, Inc. v. Secretary of Health and Human Servs., 19 F.3d 270, 272 (6th Cir. 1994). The Medicare fraction -- the focus of this litigation -- reflects the number of hospital inpatient days attributable to Medicare Part A patients who are also entitled to Supplemental Security Income ("SSI") benefits at the time of their hospital stays, and, hence, is often referred to as the SSI fraction or SSI percentage. See Baystate, 545 F. Supp. 2d at 22-23. A detailed description of the data underlying the SSI fraction and the methodology used by CMS is set forth in this Court's Baystate decision.*fn2 See 545 F. Supp. 2d at 23-24. It is sufficient to state here that calculation of the numerator of the SSI fraction requires use of voluminous SSI data from the Social Security Administration, and that CMS has taken on sole responsibility for computation of the SSI fraction. Id. (citing 51 Fed. Reg. 31454, 31459 (Sept. 3, 1986) (DSH final rule)).

Medicare payments are initially determined by a "fiscal intermediary" -- typically an insurance company that acts as the Secretary's agent for purposes of reimbursing health care providers. See 42 C.F.R. §§ 421.1, 421.3, 421.100-.128.*fn3 A fiscal intermediary is required by regulation to apply the SSI fraction computed by CMS. See id. § 412.106(b)(2) and (b)(5). The intermediary sets forth the total payment -- including any DSH payment -- due to a provider for a particular fiscal year in a Notice of Program Reimbursement ("NPR"). Id. § 405.1803.

A provider dissatisfied with the amount of the award may request a hearing before the Provider Reimbursement Review Board ("PRRB" or "Board"), an administrative body composed of five members appointed by the Secretary. 42 U.S.C. § 1395oo(a), (h). Section 1395oo(a)(3) provides that such appeals must be filed "within 180 days after notice of the intermediary's final determination." The PRRB has the authority to affirm, modify, or reverse the final determination of the intermediary, and the Secretary may then reverse, affirm, or modify the Board's decision within 60 days thereafter. Id. § 1395oo(d) and (f). Providers may obtain judicial review of "any final decision of the Board" or the Secretary's reversal, affirmance, or modification thereof, by commencing a civil action within 60 days of receipt of any final decision. Id. § 1395oo(f).

The Secretary has, by regulation, authorized the Board to grant an extension of the 180-day administrative appeal period "for good cause shown," if a request for extension is filed not "more than 3 years after the date the notice of the intermediary's determination is mailed to the provider." 42 C.F.R. § 405.1841(b). The regulation prohibits the Board from extending the 180-day deadline for administrative appeals if the request is submitted after that three-year period. Id.

Apart from the administrative appeal process, a provider also may obtain administrative relief from an intermediary's determination by requesting a "reopening." In most instances, a request for reopening must be submitted within three years of the date of the intermediary determination or Board decision at issue, but in cases of "fraud or similar fault of any party to the determination," the three-year deadline does not apply. See 42 C.F.R. § 405.1885(a), (d); see generally Monmouth Med. Ctr. v. Thompson, 257 F.3d 807, 809 (D.C. Cir. 2001). The regulations provide that reopening is discretionary in some circumstances and mandatory in others. 42 C.F.R. § 405.1885(a)-(b), (d). Hospitals may not seek judicial review of an intermediary's denial of a motion to reopen because a refusal to reopen is not a "final determination . . . as to the amount" reviewable by the Board under § 1395oo(a)(1), but rather is a refusal to make a new determination. Your Home Visiting Nurse Servs., Inc. v. Shalala, 525 U.S. 449, 453 (1999); accord, Monmouth, 257 F.3d at 811.

II. Factual Background

Plaintiffs are various hospitals who participated in the Medicare program at various times between fiscal years 1987 through 1994. Compl. ¶¶ 4-11. Each hospital received a Notice of Program Reimbursement setting forth its DSH payment determination, which typically occurs within two to three years of the end of a fiscal year. Id. ¶¶ 50-51, 53; see Baystate Med. Ctr., 545 F. Supp. 2d at 42.*fn4 None of the plaintiffs filed an administrative appeal within 180 days of receipt of the NPRs. Compl. ¶ 53.

On March 17, 2006, over ten years after the fiscal years at issue, the PRRB addressed whether there were systemic flaws in the data underlying the DSH payment determinations in the context of resolving the claims of Baystate Medical Center -- a nonparty to this case -- which had lodged a timely appeal of its DSH payments for fiscal years 1993 through 1996. 545 F. Supp. 2d at 26-30. Baystate had alleged that certain categories of SSI eligibility records were omitted from the data tapes used by CMS to calculate the SSI fraction of the DSH percentage and that the patient identifiers used by CMS resulted in undercalculation of the SSI fraction. Id. The Board found, inter alia, that several categories of SSI eligibility data had been omitted from the CMS calculations, that the "match process" used by CMS to determine the number of SSI eligible Medicare beneficiaries was flawed, and that these omissions and flaws tended to deflate the overall DSH payment. Id. The Board thus remanded the case to the intermediary for recalculation of Baystate's DSH payment. Id. at 30. The Board's findings subsequently underwent additional administrative and judicial review, resulting in this Court's decision in the Baystate litigation, which left the Board's findings concerning the omissions in data and flaws in the match process largely intact. See 545 F. Supp. 2d at 40-55.*fn5

On September 12, 2006, about three months after the Board's Baystate decision, plaintiffs appealed their DSH payment determinations to the Board on the ground that the determinations were made using an understated SSI fraction. Compl. ¶ 52. They acknowledged that each of their appeals was filed more than three years after the NPRs had been issued. Id. ¶ 53. However, plaintiffs asked the Board to find the appeals timely under the principle of equitable tolling. Id. ¶ 54. They contended that equitable tolling applied because the hospitals' failure to file an appeal within 180 days of issuance of the NPRs was the result of CMS's refusal to inform the hospitals that their SSI percentages were incorrectly understated for the fiscal years at issue, citing the Board's Baystate decision. Id. ¶ 55. In their view, then, the appeals were timely because they were filed within 180 days of the Board's Baystate decision. Id. ¶¶ 54-56.

On September 18, 2007, the Board held that it lacked jurisdiction over the hospitals' appeals because they were not timely filed. See In re Equitable Tolling Group, Board Decision at 3. The Board reasoned that it had only the powers granted to it by statute and regulation, which limited its authority to hear an administrative appeal to requests filed within 180 days of the date of the final determination (42 U.S.C. § 1395oo(a)) or requests demonstrating "good cause" for a late appeal within three years after the intermediary's determination was mailed to the provider (42 C.F.R. § 405.1841(b)). Id. The Board determined that "[g]ood cause for late filing cannot be considered in these cases because the cases [were] filed more than three years after the issuance of the NPRs . . . . " Id. at 2. The Board further concluded that it did not have "general equitable powers," but instead was limited to the equitable powers granted by § 405.1841(b), as well as the reopening regulation, § 405.1885. Id. Therefore, the Board held the appeals untimely. Id. at 3. The Secretary declined to review the Board's decision. See Compl., Ex. B. Plaintiffs then brought this action seeking judicial review pursuant to § 1395oo(f) or, in the alternative, a judicial order directing the Secretary to order the Medicare fiscal intermediaries "to make new DSH determinations for the FYs at issue . . . using correct SSI percentages" through a grant of mandamus. Plaintiffs also contend that their challenges may be reviewed directly under the federal question statute if judicial review is not available elsewhere.

STANDARD OF REVIEW

"[I]n passing on a motion to dismiss, whether on the ground of lack of jurisdiction over the subject matter or for failure to state a cause of action, the allegations of the complaint should be construed favorably to the pleader." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); see Leatherman v. Tarrant Cty. Narcotics and Coordination Unit, 507 U.S. 163, 164 (1993); Phillips v. Bureau of Prisons, 591 F.2d 966, 968 (D.C. Cir. 1979). Therefore, the factual allegations must be presumed true, and plaintiff must be given every favorable inference that may be drawn from the allegations of fact. Scheuer, 416 U.S. at 236; Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C. Cir. 2000). However, the Court need not accept as true "a legal conclusion couched as a factual allegation," nor inferences that are unsupported by the facts set out in the complaint. Trudeau v. Federal Trade Comm'n, 456 F.3d 178, 193 (D.C. Cir. 2006) (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)).

Under Rule 12(b)(1), the party seeking to invoke the jurisdiction of a federal court --plaintiffs here -- bears the burden of establishing that the court has jurisdiction. See US Ecology, Inc. v. U.S. Dep't of Interior, 231 F.3d 20, 24 (D.C. Cir. 2000); see also Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F. Supp. 2d 9, 13 (D.D.C. 2001) (a court has an "affirmative obligation to ensure that it is acting within the scope of its jurisdictional authority."); Pitney Bowes, Inc. v. United States Postal Serv., 27 F. Supp. 2d 15, 19 (D.D.C. 1998). "'[P]laintiff's factual allegations in the complaint . . . will bear closer scrutiny in resolving a 12(b)(1) motion' than in resolving a 12(b)(6) motion for failure to state a claim." Grand Lodge, 185 F. Supp. 2d at 13-14 (quoting 5A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1350 (2d ed. 1987)). Additionally, a court may consider material other than the allegations of the complaint in determining whether it has jurisdiction to hear the case, as long as it still accepts the factual allegations in the complaint as true. See Jerome Stevens Pharm., Inc. v. FDA, 402 F.3d 1249, 1253-54 (D.C. Cir. 2005); EEOC v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624-25 n.3 (D.C. Cir. 1997); Herbert v. Nat'l Acad. of Scis., 974 F.2d 192, 197 (D.C. Cir. 1992).

In reviewing a motion to dismiss pursuant to Rule 12(b)(6), the Court is mindful that all that the Federal Rules of Civil Procedure require of a complaint is that it contain "'a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)); accord Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curiam). Although "detailed factual allegations" are not necessary to withstand a Rule 12(b)(6) motion to dismiss, to provide the "grounds" of "entitle[ment] to relief," a plaintiff must furnish "more than labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555-56; see also Papasan v. Allain, 478 U.S. 265, 286 (1986). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. ___, 129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 570); Atherton v. District of Columbia Office of the Mayor, 567 F.3d 672, 681 (D.C. Cir. 2009). A complaint is plausible on its face "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949.

In resolving a motion to dismiss an action for relief in the nature of mandamus, courts have characterized the issue as involving both a jurisdictional and a merits inquiry because, in determining whether the court has jurisdiction to compel an agency or official to act, the court must consider the merits question of whether a legal duty is owed to the plaintiff under the relevant statute. See In re Cheney, 406 F.3d 723, 729 (D.C. Cir. 2005) (en banc) (noting that to the extent a court considers whether a statute creates a duty, "mandamus jurisdiction under [28 U.S.C.] § 1361 merges with the merits"). Whether a motion to dismiss a mandamus action should be considered pursuant to Rule 12(b)(1) or Rule 12(b)(6) is a matter on which there are "conflicting signals,"*fn6 but In re Cheney indicates that the better course is to consider the matter a merits issue, both in the court's characterization of the jurisdictional and merits inquiries as "merged" and in the purposeful manner in ...


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