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Rogue Valley Medical Center v. Sebelius

March 16, 2010


The opinion of the court was delivered by: Paul L. Friedman United States District Judge


Plaintiff hospital brings suit for declaratory and injunctive relief in the nature of mandamus, asking the Court to compel defendant, the Secretary of Health and Human Services, through the Centers for Medicare and Medicaid Services ("CMS") to reopen a final payment decision issued by the Secretary's payment agent and to recalculate the Secretary's reimbursement of plaintiff for services it rendered.*fn2 In addition, plaintiff purports to represent a putative class of hospitals and seeks class relief as well as relief on its individual claims. This matter currently is before the Court on defendant's motion to dismiss. After careful consideration of the parties' papers and the entire record in the case, the Court will grant defendant's motion to dismiss.*fn3


A. Statutory Framework for Medicare Reimbursement

The Medicare Act, Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq., creates a federally funded health insurance program for the elderly and disabled. Part A of the Medicare Act reimburses hospitals for the operating costs of certain inpatient services. See 42 U.S.C. § 1395ww. In order to obtain this reimbursement, eligible hospitals file cost reports with their "fiscal intermediaries," see 42 C.F.R. § 413.20, usually insurance companies serving as the Secretary's agents for the purpose of reimbursing health care providers. See 42 C.F.R. § 421.3; In re Medicare Reimbursement Litig., 414 F.3d 7, 8 (D.C. Cir. 2005), cert. denied, 547 U.S. 1054 (2006). The intermediaries audit the hospitals' cost reports and then issue Notice of Program Reimbursements ("NPRs") in which they determine the amount owed by the Secretary to the hospitals for the fiscal year at issue. See 42 C.F.R. § 405.1803(a). Hospitals may appeal the NPR to the Provider Reimbursement Review Board (the "PRRB") within 180 days. See 42 U.S.C. § 1395oo(a). The PRRB may reverse, affirm, or modify the intermediary's decision; subsequently, the Secretary similarly may reverse, affirm or modify the PRRB's decision. See 42 U.S.C. §§ 1395oo(d), (f)(1). Hospitals still dissatisfied with the final decision may seek judicial review by filing suit in the appropriate United States District Court. See 42 U.S.C .§ 1395oo(f); In re Medicare Reimbursement Litig., 414 F.3d at 8.

An intermediary's determination of the NPR that is not appealed to the PRRB typically is "final and binding" unless it is reopened by the intermediary. See 42 C.F.R. § 405.1807. The intermediary "may" reopen an NPR determination "with respect to findings on matters at issue in such determination" if either the intermediary or the hospital files a motion within three years. See 42 C.F.R. § 405.1885(a).*fn4 The intermediary is required to reopen and revise an NPR if, within three years, the HCFA provided notice to the intermediary that the decision was "inconsistent with the applicable law." 42 C.F.R. § 405.1885(b).

B. Reimbursement Based on an "Expansion Population"

Reimbursement to hospitals varies based on hospital-specific factors, see 42 U.S.C. § 1395ww(d)(5); those hospitals that serve a "significantly disproportionate number of low-income patients" receive increased reimbursements known as "disproportionate share" ("DSH") adjustments. 42 U.S.C. § 1395ww(d)(5)(F)(i)(I). Congress enacted legislation that established detailed criteria for determining hospital eligibility and the extent of any DSH adjustment. See 42 U.S.C. § 1395ww(d)(5)(F); In re Medicare Reimbursement Litig., 414 F.3d at 9. Whether a hospital qualifies for a DSH adjustment for a particular cost period and the size of any adjustment depends in part on the number of days spent in hospitals by patients who "were eligible for medical assistance [Medicaid]" but who were not entitled to Medicare. 42 U.S.C. § 1395ww(d)(5)(F)(vi)(II). Generally, the more Medicaid inpatient days that a hospital has, the larger its DSH adjustment will be.

Oregon, where the plaintiff hospital is located, has a non-standard Medicaid plan known as a Section 1115 waiver program or "demonstration project." See Am. Compl. ¶¶ 16-18, 23. A demonstration project is a plan for which some of the regulations imposed on Medicaid plans are waived in order to "enable States to try new or different approaches to the efficient and cost-effective delivery of health care services, or to adapt their programs to the special needs of particular areas or groups of recipients." 42 C.F.R. § 430.25; see also 42 U.S.C. § 1315; Cookeville Reg'l Med. Ctr. v. Leavitt, 531 F.3d 844, 845 (D.C. Cir. 2008), cert. denied, 129 S.Ct. 1524 (2009). Patients who participate in Section 1115 waiver programs who would not otherwise have been eligible for Medicaid are known as the "expansion population." The costs of providing care to this expansion population are treated as federally reimbursable expenditures "to the extent and for the period prescribed by the Secretary." 42 U.S.C. § 1315(a)(2)(A). Until January 2000, the Secretary excluded the expansion population's inpatient days from its DSH calculation. See Cookeville Reg'l Med. Ctr. v. Leavitt, 531 F.3d at 846.

In December 1999, the Secretary issued a program memorandum which reiterated the previous policy, but allowed intermediaries to include the expansion population in the DSH calculation for certain hospitals. See Program Memorandum Intermediaries, Trans. No. A-99-62 (Dec. 1999) ("PM A-99-62"). On January 20, 2000, the Secretary issued an interim final rule to revise the policy and allow the inclusion of expansion population inpatient days in the DSH calculation. See Medicaid Inpatient Disproportionate Share Hospital (DSH) Adjustment Calculation, 65 Fed. Reg. 3136 (Jan. 20, 2000) ("Expansion Population Rule"). This rule by its terms was given prospective effect only. See id. at 3136. After litigation and additional congressional action, the court of appeals found that because the Secretary always had the discretion to exclude the expansion population from the DSH adjustment, it was permissible for the Secretary to decide that the change in policy issued January 20, 2000 apply only prospectively. See Cookeville Reg'l Med. Ctr. v. Leavitt, 531 F.3d at 846-49.

On September 27, 1997, the plaintiff hospital's fiscal intermediary issued an NPR for the cost reporting period ending in 1995. See Am. Compl. ¶ 25. This NPR did not include the expansion population in the eligible days determination for plaintiff's DSH adjustment. See id. Based on the Expansion Population Rule issued on January 20, 2000, plaintiff seeks an order of mandamus to require the fiscal intermediary to reopen plaintiff hospital's 1995 cost report pursuant to 42 C.F.R. § 405.1885(b) and to add the expansion population to the calculation of the DSH adjustment.*fn5

The Secretary now moves to dismiss on the grounds that the statute of limitations has passed, that the decision in Cookeville is dispositive on plaintiff's claims, and that plaintiff has not met the requirements for mandamus jurisdiction. As explained below, the Court concludes that the decision in Cookeville makes clear that plaintiff cannot meet the requirements for mandamus jurisdiction. The Court therefore need not reach the question of whether plaintiff's claim also fails because the statute of limitations has run.


A. Standard for Relief in the Nature ...

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