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Affinity Healthcare Services, Inc. v. Sebelius

October 25, 2010

AFFINITY HEALTHCARE SERVICES, INC. D/B/A AFFINITY HOME HOSPICE SERVICES ET AL., PLAINTIFFS,
v.
KATHLEEN SEBELIUS, IN HER OFFICIAL CAPACITY AS SECRETARY OF THE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, DEFENDANT.



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

Re Document Nos. 16, 19, 26, 28

MEMORANDUM OPINION

GRANTING THE PLAINTIFFS'MOTION FOR SUMMARY JUDGMENT;DENYING THE DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT;DENYING AS MOOT THE DEFENDANT'S MOTION TO DISMISS THE ORIGINAL COMPLAINT;DENYING AS MOOT THE PLAINTIFFS'RENEWED MOTION FOR A TEMPORARY RESTRAINING ORDER

I. INTRODUCTION

The plaintiffs are a group of 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 them purportedly in excess of the lawful cap on such distributions.

The matter is now before the court on the parties' cross-motions for summary judgment. The plaintiffs contend that the cap regulation applied by HHS is unlawful because its formula for calculating a hospice's reimbursement cap conflicts with the terms of the governing statute. The defendant, the Secretary of HHS, defends the lawfulness of the reimbursement cap regulation and contends that the court lacks jurisdiction over most of the plaintiffs' claims because they failed to satisfy the amount in controversy requirement, as necessary to establish the agency's jurisdiction over the challenge. For the reasons discussed below, the court grants the plaintiffs' motion for summary judgment and denies the defendant's cross-motion for summary judgment.

II. BACKGROUND

A. Framework for Review of Medicare Reimbursement Disputes

Medicare provides health insurance to the elderly and disabled by entitling eligible beneficiaries to have payments made on their behalf for the care and services rendered by health care providers. See 42 U.S.C. §§ 1395 et seq. Providers are reimbursed for the care they provide to Medicare beneficiaries by insurance companies, known as "fiscal intermediaries," that have contracted with the Centers for Medicare and Medicaid Services ("CMS") to aid in administering the Medicare program. See id. § 1395h. Fiscal intermediaries determine the amount of reimbursement due to providers under the Medicare statute and applicable regulations. See id. § 1395kk-1.

If the provider is dissatisfied with a fiscal intermediary's determination, and the "amount in controversy is $10,000 or more,"*fn1 the provider may appeal that determination to the Provider Reimbursement Review Board ("PRRB") within 180 days of its issuance. Id. § 1395oo(a). A decision of the PRRB constitutes a final agency ruling, unless reviewed by the CMS Administrator, to whom the HHS Secretary has delegated the authority to review PRRB rulings. Id. § 1395oo(f)(1); see also 42 C.F.R. § 405.1875. If the Administrator exercises its authority to reverse, affirm or modify a PRRB ruling, the provider may seek judicial review of the Administrator's determination in a civil action. 42 U.S.C. § 1395oo(f)(1).

If the intermediary's action involves a question of law that the PRRB lacks the authority to address, the Medicare statute provides that the PRRB may grant expedited judicial review ("EJR") of that question. See id. Specifically, the statute states that "[p]roviders shall . . . have the right to obtain judicial review of any action of the fiscal intermediary which involves a question of law or regulations relevant to the matters in controversy whenever the Board determines . . . that it is without authority to decide the question, by a civil action commenced within sixty days of the date on which notification of such determination is received." Id. The statute further provides that such a determination by the PRRB "shall be considered a final decision and not subject to review by the [Administrator]." Id.

B. The Hospice Care Reimbursement Cap

Among other services, Medicare covers hospice care for individuals who are "terminally ill,"*fn2 reimbursing hospices for services such as nursing care, physical or occupational therapy, home health aide services, medical supplies and counseling. 42 U.S.C. § 1395x(dd)(1). An individual remains entitled to hospice care benefits so long as he or she is certified as "terminally ill." See id. § 1395d(d)(1) (establishing that reimbursement for hospice care may be provided "during two periods of 90 days each and an unlimited number of subsequent periods 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.

C. The Plaintiffs' Challenge to the HHS Cap Repayment Regulation

The plaintiffs are a group of Medicare-certified hospice care providers to whom HHS issued cap repayment demands for fiscal years 2006 and 2007. See generally Am. Compl.*fn4

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. ¶¶ 49-59. The plaintiffs allege that as a result, "unused cap amounts in one fiscal year are 'trapped' in the prior year, regardless of whether the ...


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