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Knapp Medical Center v. Burwell

United States District Court, District of Columbia

June 28, 2016

KNAPP MEDICAL CENTER, et al. Plaintiffs,
v.
SYLVIA MATTHEWS BURWELL, in her official capacity as Secretary of the Department of Health & Human Services Defendant.

          OPINION

          ROSEMARY M. COLLYER United States District Judge.

         Plaintiff hospitals challenge a final decision by the Department of Health and Human Services to approve the expansion of a physician-owned hospital in Hidalgo County, Texas. The Court will not reach the merits because Congress has specifically foreclosed judicial review of these decisions. Defendants' motions to dismiss will be granted and the case dismissed.

         I. FACTS

         Plaintiffs Knapp Medical Center, McAllen Hospitals, L.P., and Cornerstone Regional Hospital, L.P. (Plaintiffs) are hospitals in Hidalgo County, Texas. Compl. [Dkt. 4] ¶¶ 2-4. They compete with Doctors Hospital at Renaissance, Ltd. (DHR), also in Hidalgo County. See id. The County is located in the Rio Grande Valley in Texas, across the Rio Grande River from Mexico. DHR is located in Edinburg, Texas in the middle of the county. See DHR Mot. to Dismiss (DHR Mot.) [Dkt. 17] at 5. Hidalgo County was designated a "medically underserved area" by the Department of Health and Human Services (HHS) in 1994. U.S. Dep't of Health & Human Services, Health Resources and Services Administration Data Warehouse (6/20/2016), http://datawarehouse.hrsa.gov/tools/analyzers/MuaSearchResults.aspx.[1]

         DHR is an acute care hospital with a Level III trauma facility. There are no Level I or Level II trauma centers in the area so that patients with greater needs must be transported long distances to such centers. DHR Mot. at 1. DHR is owned by the physicians who practice there, which presents particular issues under the Medicare Act, 42 U.S.C. § 1395 et seq. As relevant here, a physician-owned hospital must obtain permission from HHS before the hospital can expand. Compl. ¶¶ 15-16. This requirement arises from the Stark Law, codified at 42 U.S.C. § 1395nn, which generally forbids referrals by physicians to care facilities in which the physicians have a financial interest.[2] Obviously, when physicians own the hospital, self-referral is an immediate issue; the Stark Law allows a limited exception in such circumstances, 42 U.S.C. § 1395nn(d)(3), provided that the hospital meets the requirements of § 1395nn(i)(1).

         As amended by the Affordable Care Act of 2010, the Stark Law also closely oversees whether and when physician-owned hospitals may expand. Id. § 1395nn(i)(3).[3] It imposes no restrictions on the expansion of non-physician owned hospitals. With permission, physician-owned hospitals are permitted to expand up to 100%. Id. § 1395nn(i)(3)(C)(ii). HHS has established a process and regulations under which physician-owned hospitals may apply for authority to expand. Id. §§ 1395nn(i)(3)(A)(i), (iv); 42 C.F.R. § 411.362(c).

         DHR filed an application with HHS on March 20, 2014, seeking to expand by 100% to enable DHR to establish the infrastructure needed to support a Level 1 trauma center. See Compl. ¶ 24; DHR Mot. at 1. That application was never acted upon because HHS was in the middle of formal rulemaking on the issue. Compl. ¶ 24. HHS published an amended Final Rule on November 10, 2014. 79 Fed. Reg. 66, 770, 66, 987-97 (Nov. 10, 2014). Among other things, the new Rule expanded the universe of evidence that could be offered by applicant physician-owned hospitals that want to expand. The Final Rule went into effect on January 1, 2015. Compl. ¶ 25.

         DHR filed an "amended and restated" application on January 2, 2015. Id. ¶ 26. The application was published in the Federal Register on May 8, 2015 and made available on an HHS website. Id. ¶ 27. Interested parties filed a total of 21 comments on DHR's application. Id. ¶ 28. Several assailed DHR's eligibility under the statutory or regulatory criteria. After DHR's rebuttal was publicized, another round of public comments was received. Id. ¶¶ 29-30.

         HHS approved DHR's request to expand the hospital on September 11, 2015. Id. ¶ 31. Notice was published in the Federal Register on September 17, 2015. 80 Fed. Reg. 55, 851 (Sep. 17, 2015). After considering the information tendered by DHR and the public commenters, HHS made the following predicate findings:

• DHR is located in Hidalgo County, which has a percentage increase in population that is at least 150 percent of the percentage increase in Texas' population during the most recent 5-year period for which data was available as of the date that DHR submitted its request;
• DHR has an annual percentage of total inpatient admissions under Medicaid that is equal to or greater than the average percentage with respect to such admissions for all hospitals located in Hidalgo County during the most recent 12-month period for which data are available as of the date that DHR submitted its request;
• DHR certified and provided satisfactory documentation that it does not discriminate against beneficiaries of Federal health care programs and does not permit physicians practicing at the hospital to discriminate against such beneficiaries;
• DHR is located in Texas, which has an average bed capacity that is less than the national average bed capacity during the most recent fiscal year for which HCRIS, [4] as of the date that the hospital submitted its request, contained data from a sufficient number of hospitals to determine Texas' average bed capacity and the national average bed capacity; and
• DHR has an average bed occupancy rate that is greater than the average bed occupancy rate in Texas during the most recent fiscal year for which HCRIS, as of the date that DHR submitted its request, contained data from a sufficient number of hospitals to determine its ...

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