United States District Court, District of Columbia
KNAPP MEDICAL CENTER, et al. Plaintiffs,
SYLVIA MATTHEWS BURWELL, in her official capacity as Secretary of the Department of Health & Human Services Defendant.
ROSEMARY M. COLLYER United States District Judge.
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
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
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. 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).
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). 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. §
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. ¶
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.
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
• 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,
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 ...