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University of Colorado Health at Memorial Hospital v. Burwell

United States District Court, District of Columbia

February 19, 2016

SYLVIA M. BURWELL, Secretary, United States Department of Health and Human Services, Defendant. Re Document No. 53



Granting Defendant’s Motion for Clarification, Construed as a Motion for Reconsideration


Plaintiffs, a group of thirty-five acute care hospitals, have challenged several regulations promulgated by the Department of Health and Human Services (“HHS”) implementing the Outlier Payment System. Plaintiffs previously moved to compel HHS to produce a variety of materials that, Plaintiffs claimed, were properly part of the administrative record. In a November 9, 2015 Memorandum Opinion the Court granted in part and denied in part that motion. See generally Mem. Op., ECF No. 47; Univ. of Colo. Health at Mem’l Hosp. v. Burwell, __ F.Supp.3d __, 2015 WL 6911261 (D.D.C. Nov. 9, 2015). Specifically, the Court concluded that Plaintiffs had identified reasonable, non-speculative grounds to believe that five categories of materials had been considered by HHS but were not included in the administrative record. See Mem. Op. at 17-38. Accordingly, the Court ordered HHS to supplement the administrative record with those materials. See Nov. 9, 2015 Order, ECF No. 46.

HHS has now moved for clarification of the Court’s order. HHS contends that, with respect to two of the items the Court ordered produced, “the Secretary does not possess materials that are responsive to those items that have not already been included in the administrative records.” Def.’s Mot. for Clarification at 2 (“Def.’s Mot.”), ECF No. 53. The agency has filed a more detailed Declaration from the Centers for Medicare & Medicaid Services’ (“CMS”) Director of the Division of Acute Care, Hospital and Ambulatory Policy Group explaining where those items can be found in the administrative rulemaking records. See Def.’s Mot. Ex. A (“Second Cheng Decl.”). Upon consideration of the motion-which the Court will construe as a motion for reconsideration-and Plaintiffs’ opposition thereto, the Court will grant the motion.[1]


This Court has already explained the factual and regulatory background in detail, and assumes familiarity with the Court’s prior Memorandum Opinion. See Mem. Op. at 2-11. Briefly stated, the Inpatient Prospective Payment System (“IPPS”) reimburses hospitals under Medicare based on a “standardized amount, ” which represents the average operating cost for inpatient hospital services, regardless of the particular costs a hospital incurs in treating an individual patient. See Cape Cod Hosp. v. Sebelius, 630 F.3d 203, 205 (D.C. Cir. 2011). But, recognizing that “health-care providers would inevitably care for some patients whose hospitalization would be extraordinarily costly or lengthy, ” Congress created the Outlier Payment Program. Cnty. of Los Angeles v. Shalala, 192 F.3d 1005, 1009 (D.C. Cir. 1999). The program permits a hospital to recoup an additional payment, called an “outlier payment, ” if the costs incurred during the care of a particular patient exceed a certain fixed dollar amount. Id. The fixed dollar amount-referred to as the “fixed loss threshold”-“serves as the cutoff point triggering eligibility for outlier payments.” Banner Health v. Sebelius, 945 F.Supp.2d 1, 8 (D.D.C. 2013).

HHS sets the fixed loss threshold annually, by regulation, to govern hospitals’ eligibility for outlier payments during the upcoming fiscal year. Congress has provided that the aggregate amount of outlier payments in any one fiscal year “may not be less than 5 percent nor more than 6 percent of the total payments projected or estimated to be made” under the IPPS program for that year. 42 U.S.C. § 1395ww(d)(5)(A)(iv). To ensure that its selected fixed loss threshold meets this statutory mandate, HHS “simulate[s] payments” that will be made under the IPPS program during the upcoming fiscal year using data of the charges hospitals incurred in actual cases two years previously, after omitting inaccurate data and adjusting those charges for inflation. See, e.g., Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2008 Rates, 72 Fed. Reg. 47, 130, 47, 419 (Aug. 22, 2007) [hereinafter “FY 2008 Final Rule”]. The agency also projects a hospital-specific “cost-to-charge ratio” or “CCR, ” which represents the average differential between the charges that a particular hospital lists on a patient’s invoice and the actual costs that particular hospital incurs in treating a patient. See Dist. Hosp. Partners, L.P. v. Burwell, 786 F.3d 46, 49-50 (D.C. Cir. 2015). To simulate charges for the upcoming fiscal year, HHS also adjusts those CCRs for anticipated inflation, applying what is called a “CCR adjustment factor.” See, e.g., FY 2008 Final Rule, 72 Fed. Reg. at 47, 418. Using the inflated charges and CCRs, HHS simulates payments to determine the fixed loss threshold at which, it anticipates, outlier payments will equal “5.1 percent of total IPPS payments” during the fiscal year. See, e.g., id. at 47, 419. During each of its annual rulemakings, HHS also uses more recent data to update its estimate of the outlier payments it has made during the prior two fiscal years. See, e.g., id. at 47, 420.

In their motion to compel, Plaintiffs sought, among other things, the formulas HHS used each fiscal year to calculate the fixed loss threshold and to update the agency’s estimates of the outlier payments made during the prior two fiscal years. See Mem. Op. at 23, 26. As this Court previously explained, HHS’s rulemaking notices’ “general descriptions make clear how HHS arrives at the two crucial variables necessary to its calculation of anticipated IPPS payments: the agency uses MedPAR files from two years prior, as inflated, to approximate the charges that providers will incur and the agency then uses adjusted CCRs to convert those charges to anticipated costs.” Id. at 24. But the Court noted that “[w]hat is not fully explained” in the rulemaking notices “is the mechanism by which HHS uses those two variables to simulate payments and produce a particular fixed loss threshold.” Id. The Court explained that “the payment calculation mechanism’s absence from the administrative record-or any detail about it-presents a patent obstacle to effective judicial review.” Id. at 24-25. Accordingly, the Court ordered HHS “to supplement the record with the formula or algorithm through which the agency simulates payments.” Id. at 25. And the Court further noted that, because the rulemakings also reference “simulations” that HHS used to compute the estimated outlier payments for previous fiscal years, “the Court assumes that these calculations are similar, if not identical, to those used to simulate payments prospectively when setting the fixed loss threshold.” Id. at 27. Thus, the Court similarly ordered HHS to supplement the administrative record with “the formulas used to calculate estimated outlier payments for prior fiscal years.” Id.

The Court did suggest, however, that “more specificity” might be “provided in the 2003 Payment Regulations.” Id. at 26. Those regulations substantially modified the HHS outlier payment methodology and do “describe an elaborate formula that ‘simulates the IPPS outlier payment for a case at a generic hospital.’” Id. (quoting Medicare Program; Change in Methodology for Determining Payment for Extraordinarily High-Cost Cases (Cost Outliers) Under the Acute Care Hospital Inpatient and Long-Term Care Hospital Prospective Payment Systems, 68 Fed. Reg. 34, 494, 34, 495 (June 9, 2003) [hereinafter “2003 Payment Regulations”]). The Court explained, however, that HHS’s briefing “d[id] not mention the 2003 regulation in connection with the alleged formulas that Plaintiffs seek.” Id. In addition, although the Court surmised that “it is perhaps conceivable that HHS employs this hospital-specific mechanism on a macro level to simulate anticipated payments across all providers (using the inflated charges and adjusted CCRs), ” the Court concluded that “the agency’s description in the Federal Register does not make any connection immediately clear.” Id.

HHS has now moved for clarification. The agency argues that the “the administrative rulemaking records that have already been produced contian [sic] all of the formulas that CMS used to calculate the fixed loss thresholds at issue as well as all of the formulas used to calculate estimated outlier payments for prior fiscal years during the rulemakings at issue.” Def.’s Mot. at 2. Therefore, HHS seeks clarification that “the Secretary is not obligated to supplement the administrative records by creating materials or otherwise producing materials that are not already in existence.” Id. at 1.


While HHS styles its motion as one for clarification, the Court construes it as a motion for reconsideration. “[T]here is no Federal Rule of Civil Procedure specifically governing ‘motions for clarification.’” United States v. Philip Morris USA, Inc., 793 F.Supp.2d 164, 168 (D.D.C. 2011). “The general purpose of a motion for clarification is to explain or clarify something ambiguous or vague, not to alter or amend.” Id. (quoting Resolution Trust Corp. v. KPMG Peat Marwick, et al., No. 92-1373, 1993 WL 211555, at *2 (E.D. Pa. June 8, 1993)). In this case, HHS’s motion does not ask the Court to further explain or clarify its November 9, 2015 order. Nor does HHS’s motion identify any “ambiguous” or “vague” portions of that order. Cf. Id. at 168 (noting that the defendants’ motion there did not identify portions of the order that were vague or ambiguous, and instead asked the court for “relief from a judgment or order under Rule 60(b)”).

Instead, HHS’s motion seeks to revisit the Court’s determination that the formulas the agency used to calculate the fixed loss threshold and to estimate prior outlier payments were absent from the administrative record, and its conclusion that Plaintiffs had therefore met their burden to “identify reasonable, non-speculative grounds for [their] belief that the documents were considered by the agency and not included in the record.” Marcum v. Salazar, 751 F.Supp.2d 74, 75 (D.D.C. 2010) (emphasis in original) (internal quotation mark omitted) (quoting Pac. Shores Subdivision Cal. Water Dist. v. U.S. Army Corps of Eng’rs, 448 F.Supp.2d 1, 6 (D.D.C. 2006)). HHS essentially asks this Court to alter its factual conclusion that the rulemaking notices do not fully detail the necessary formulas and that, therefore, other materials must exist which are properly part of the ...

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