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Affinity Healthcare Services, Inc. v. Sebelius

July 1, 2010


The opinion of the court was delivered by: Ricardo M. Urbina United States District Judge

Re Document No. 8



The plaintiffs are a group of fifteen hospice care providers participating in Medicare, a federal program administered by the Department of Health and Human Services ("HHS"). They commenced this action pursuant to the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 553 et seq., challenging HHS's demands for repayment of funds distributed to the plaintiffs purportedly in excess of the lawful cap on such distributions. The plaintiffs contend that the regulation pursuant to which HHS calculated the repayment amounts conflicts with the governing statute and must be set aside. The matter is now before the court on the plaintiffs' motion for a temporary restraining order seeking to enjoin HHS from collecting on the subject repayment demands or relying on the challenged regulation to demand further repayment from the plaintiffs. Upon consideration of the parties' submissions, the court denies the plaintiffs' motion.


A. The Statutory and Regulatory Framework

Medicare provides health insurance to the elderly and disabled by entitling eligible beneficiaries to have payment made on their behalf for the care and services rendered by health care providers. See 42 U.S.C. §§ 1395 et seq. Among other services, the program covers hospice care for individuals who are "terminally ill,"*fn1 reimbursing hospices for services such as nursing care, physical or occupational therapy, home health aide services, medical supplies and counseling. Id. § 1395x(dd)(1). An individual remains entitled to hospice care benefits so long as he or she is certified as being "terminally ill."*fn2 See id. § 1395d(d)(1) (establishing that reimbursement for hospice care may be provided "during two period of 90 days each and an unlimited number of subsequent period of 60 days each during the individual's lifetime").

The Medicare statute, however, places a cap on the total amount that Medicare may distribute to a hospice provider in a single fiscal year (November 1 through October 31). See id. § 1395f(i)(2)(A). Payments made to a hospice care provider in excess of the statutory cap are considered overpayments that must be refunded by the hospice care provider. Id.

More specifically, the statute provides that the total yearly payment to a hospice provider may not exceed the product of the annual "cap amount"*fn3 and the "the number of [M]edicare beneficiaries in the hospice program in that year." Id. For purposes of this calculation, the "number of [M]edicare beneficiaries" in a hospice program in an accounting year is equal to the number of individuals who have made an election under subsection (d) of this section with respect to the hospice program and have been provided hospice care by (or under arrangements made by) the hospice program under this part in the accounting year, such number reduced to reflect the proportion of hospice care that each such individual was provided in a previous or subsequent accounting year or under a plan of care established by another hospice program.

Id. § 1395f(i)(2)(C) (emphasis added). Thus, the Medicare statute directs HHS to account for the fact that an individual may receive care in more than one fiscal year by requiring HHS to count that individual as a beneficiary in each year in which he or she receives hospice care benefits, with that number proportionally reduced to reflect care provided in previous or subsequent years. Id.

To implement these statutory cap provisions, HHS promulgated a reimbursement regulation governing the calculation of the statutory cap amount. See 42 C.F.R. § 418.309. In pertinent part, the regulation provides that the "number of beneficiaries" portion of the statutory cap calculation includes [t]hose Medicare beneficiaries who have not previously been included in the calculation of any hospice cap and who have filed an election to receive hospice care . . . from the hospice during the period beginning on September 28 (35 days before the beginning of the cap period) and ending on September 27 (35 days before the end of the cap period).

Id. § 418.309(b) (emphasis added). The regulation does not provide for the proportional allocation of beneficiaries across years of service. See id.

B. The Plaintiffs' Claims

The plaintiffs are fifteen Medicare-certified hospice care providers to whom HHS issued cap repayment demands for fiscal years 2006 and 2007. See generally Compl. They challenge these repayment demands on the grounds that 42 C.F.R. § 418.309, the regulation pursuant to which the demands were calculated, conflicts with 42 U.S.C. § 1395f(i)(2), the statutory provision the regulation purports to implement. See generally id. The plaintiffs assert that whereas the Medicare statute requires HHS to allocate the cap amount across years of service by proportionally adjusting the "number of beneficiaries" in any given year to reflect hospice services provided to an individual in previous and subsequent years, the reimbursement regulation provides that an individual is counted as a beneficiary only in a single year, depending on when he or she first elects hospice benefits. See id. ¶¶ 49-53. The plaintiffs allege that as a result, "unused cap amounts in one fiscal year are 'trapped' in the prior ...

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