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Franciscan St. Margaret Health v. Azar

United States District Court, District of Columbia

September 17, 2019

FRANCISCAN ST. MARGARET HEALTH et al., Plaintiffs,
v.
ALEX M. AZAR II, Defendant.

          MEMORANDUM OPINION

          Timothy J. Kelly United States District Judge

         Plaintiffs, two hospitals that receive reimbursement from the federal government for serving Medicare patients, sought to challenge their adjustments for a given fiscal year before the Provider Reimbursement Review Board, the administrative body that hears such appeals. But instead of filing their own appeal, they requested that it reinstate a closed common-issue group appeal filed by another hospital and add them to it. The Board declined to reinstate the appeal because the issue raised by Plaintiffs was not the same as that in the group appeal. In this lawsuit, Plaintiffs allege that the Board's decision was arbitrary and capricious under the Administrative Procedure Act. The parties have filed cross-motions for summary judgment. Finding no reason to set aside the Board's determination under the APA, the Court will deny Plaintiffs' motion and grant Defendant's.[1]

         I. Background

         A. Statutory and Regulatory Scheme

         Plaintiffs Franciscan St. Margaret Health and Franciscan St. Anthony Memorial Health Centers are hospitals entitled to reimbursement from the federal government for serving patients enrolled in Medicare and Medicaid under Title XVIII of the Social Security Act (“Medicare Act”), 42 U.S.C. § 1395 et seq. The statutory and regulatory scheme governing these reimbursements is well-trod ground in this Circuit.

         1. Reimbursement Under the Medicare Act

         In another case reviewing an administrative decision about a hospital's reimbursement for serving low-income patients, the D.C. Circuit explained:

Hospitals receive reimbursement based on prospectively determined national and regional rates, not on the actual amount they spend, and they also receive payment adjustments for some hospital-specific factors. See [42 U.S.C] § 1395ww(d)(2) & (d)(5)(F)(i)(I). The adjustment at issue in this case is the “disproportionate share hospital” (DSH) adjustment, under which the government pays more to hospitals that “serve[] a significantly disproportionate number of low-income patients.” Id. § 1395ww(d)(5)(F)(i)(I). This provision is based on Congress's judgment that low-income patients are often in poorer health, and therefore costlier for hospitals to treat.

Catholic Health Initiatives Iowa Corp. v. Sebelius, 718 F.3d 914, 916 (D.C. Cir. 2013) (alteration in original).

         The DSH adjustment is the sum of “two fractions, often called the ‘Medicare fraction and the ‘Medicaid fraction.'” Id. “The Medicare and Medicaid fractions represent two distinct and separate measures of low income-SSI (i.e., welfare) and Medicaid, respectively-that when summed together, provide a proxy for the total low-income patient percentage.” Id. “SSI” refers to the supplementary security income benefits available under Medicare. Id. The Medicare fraction is sometimes referred to as the “SSI fraction.” See Sebelius v. Auburn Reg'l Med. Ctr., 568 U.S. 145, 150 (2013).

         The D.C. Circuit has summarized the formulas for determining each of these two fractions that, together, comprise a hospital's DSH adjustment:

Medicare fraction
Medicaid fraction

Numerator

Patient days for patients "entitled to benefits and "entitled to SSI benefits"

Patient days for patients "eligible for [Medicaid]'" but not 'entitled to benefits under part A"

Denominator

Patient days for patients "entitled to benefits under part A"

Total number of patient days under part A"

Northeast Hosp. Corp. v. Sebelius, 657 F.3d 1, 3 (D.C. Cir. 2011).

         2.The Provider ...


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