United States District Court, District of Columbia
A. HOWELL, CHIEF JUDGE.
plaintiffs, seventy-five long-term care hospitals
(“LTCHs”) located in twenty-six states, sought
reimbursement from the Department of Health and Human
Services (“HHS”) for unpaid co-insurance and
deductible obligations (“bad debts”) of patients
eligible for both Medicare and Medicaid (“dual-eligible
patients”). The plaintiffs' Motion for Summary
Judgment, ECF No. 66, was granted and HHS's Cross-Motion
for Summary Judgment, ECF No. 67, was denied. See Select
Specialty Hosp.-Denver, Inc. v. Azar, 391 F.Supp.3d 53,
70 (D.D.C. 2019). Now, HHS seeks reconsideration of that
decision under Federal Rules of Civil Procedure 59(e) and
60(b). See Def.'s Mot. for Reconsid. of the
Court's Aug. 22, 2019 Mem. Op. (“Def.'s
Mot.”), ECF No. 78. Plaintiffs ask for an order
amending the judgment to include an award of prejudgment
interest under 42 U.S.C. § 1395oo(f)(2). See
Pls.' Mot. for Prej. Interest (“Pls.'
Mot.”), ECF No. 77. For the reasons set forth below,
the defendant's motion is denied and the plaintiffs'
motion is granted.
statutory, regulatory, procedural, and factual background for
this case were provided in the earlier opinion. See
Select Specialty, 391 F.Supp.3d at 56-66. Still, some
background bears repeating here.
Statutory and Regulatory Background
debts” are defined in the Medicare context as
“amounts considered to be uncollectible from accounts
and notes receivable that were created or acquired in
providing services.” 42 C.F.R. § 413.89(b)(1).
Medicare providers may be reimbursed by the Centers for
Medicare and Medicaid Services (“CMS”), which
administers the Medicare program, for “allowable”
bad debts. Id. § 413.89(d). A bad debt cannot
be “allowable” unless “[t]he provider [is].
. . able to establish that reasonable collection efforts were
made.” Id. § 413.89(e) (outlining four
criteria that determine whether a debt is allowable). For
dual-eligible patients' bad debts, providers can satisfy
this reasonable collection requirement by showing (1) that
the patient has “been determined eligible for
Medicaid” and (2) that “no source other than the
patient, ” including Medicaid, “would be legally
responsible for the patient's medical bill.”
Provider Reimbursement Manual, Part I (“PRM-I”)
§ 312. The second obligation is at issue here.
fulfill this obligation, CMS currently requires that all
providers “bill the patient or entity legally
responsible for the patient's bill.” H-AR at 584
(Joint Signature Memorandum 370 (“JSM 370”) (Aug.
10, 2004)). “[W]ith respect to
‘dual-eligibles, '” current CMS guidance
further states that “in those instances where the state
owes none or only a portion of the dual-eligible
patient's deductible or co-pay, the unpaid liability for
the bad debt is not reimbursable to the provider by Medicare
until the provider bills the State, and the State refuses
payment (with a State Remittance advice).” Id.
insists that the must-bill policy and the more specific
remittance advice (“RA”) requirement are both
longstanding. See Def.'s Mot. at 2. Prior to
2007, however, the LTCH plaintiffs had been reimbursed for
their dual-eligible patients' bad debts without first
billing state Medicaid programs and obtaining an RA. See
Select Specialty, 391 F.Supp.3d at 55, 60-62. These
steps were viewed as unnecessary because states were not
liable for inpatient care of dual-eligible patients by LTCHs.
Id. at 55. Indeed, none of the plaintiffs were
enrolled in their state Medicaid programs as providers prior
to 2007, id. at 60, and some states would not allow
these LTCHs to enroll, id. at 61.
2007, Medicare administrative contractors suddenly began
denying plaintiffs' requests for reimbursement for
dual-eligible bad debts, citing plaintiffs' failure to
present RAs. In July and August 2007, one set of
plaintiffs, the Select I plaintiffs, had their
reimbursement requests for dual-eligible patients' bad
debts in fiscal year 2005, totaling $438, 693, denied by
their contractor, Wisconsin Physicians Service Corporation
(“WPS”) (formerly known as “Mutual of
Omaha”). See Select Specialty, 391 F.Supp.3d
at 61 (citing S1-AR at 674). A second set of plaintiffs, the
Select II plaintiffs, had various such requests for
fiscal years 2006-2010, totaling $19, 317, 678, denied by
contractors WPS and Novitas Solutions, Inc.
(“Novitas”), beginning in June 2007. Id.
(citing S2-AR at 457 (Stipulations ¶ 9)). The third
plaintiff, the Hillcrest plaintiff, had
dual-eligible bad debts reimbursement requests denied for the
first time by WPS in December 2008; this plaintiff was
ultimately denied $568, 803 in reimbursements for
dual-eligible bad debts for fiscal years 2007 and 2008.
Id. (citing H-AR at 555-57, 565-67; H-Answer
three sets of plaintiffs appealed the contractors'
denials to the Provider Reimbursement Review Board
(“PRRB”), which reversed those denials in part.
See Id. at 64-65 (citing Select Specialty
'05 Medicare Dual Eligible Bad Debts Grp. v. Wisc.
Physicians Serv., PRRB 2010-D25 (Apr. 13, 2010);
Select Specialty Medicare Dual Eligible Bad Debts CIRP
Grps. v. Novitas Solutions, Inc., PRRB 2016-D22 (Sept.
27, 2016); Hillcrest Specialty Hosp. v. Novitas
Solutions, Inc., PRRB 2018-D3 (Nov. 6, 2017)). The CMS
Administrator, whom the Secretary has given authority to hear
appeals from the PRRB, reinstated the contractors'
decisions to deny the plaintiffs' dual-eligible bad debt
reimbursements for failure to submit RAs. Id. at 65
(citing S1-AR at 2-19; S2-AR at 1-22; H-AR at 2-29).
The Instant Litigation
first set of plaintiffs, the Select I plaintiffs,
appealed the Administrator's decision about their
reimbursements to this Court, see Complaint,
Select I, Civ. No. 10-1356
(“S1-Compl.”), ECF No. 1, which granted partial
summary judgment to the plaintiffs and remanded the case to
the Administrator “for reconsideration of the limited
issue of whether Plaintiffs were justified in relying on
CMS' prior failure to enforce the must-bill policy with
respect to dual-eligible reimbursement claims from
non-participating Medicaid providers, ” Cove
Assocs. Joint Venture v. Sebelius, 848 F.Supp.2d 13, 30
(D.D.C. 2012). The Administrator affirmed the previous denial
of reimbursements to the Select I plaintiffs,
see Select Specialty, 391 F.Supp.3d at 65-66 (citing
S1S-AR at 3-9), and the Select I plaintiffs'
case in this Court was then reopened and eventually
consolidated with the Select II and
Hillcrest plaintiffs' cases, see Minute
Order (Jan. 10, 2019).
granting the plaintiffs' motion for summary judgment and
denying the defendant's cross-motion, see Select
Specialty, 391 F.Supp.3d at 56, the Court held that CMS
was required by the Medicare Act, 42 U.S.C. §
1395hh(a)(2), to conduct notice and comment rulemaking before
subjecting the non-Medicaid participating plaintiffs to the
must-bill and RA requirements, Select Specialty, 391
F.Supp.3d at 67. Section 1395hh(a)(2) requires CMS to give
notice and an opportunity to comment when
“establish[ing] or chang[ing] a substantive legal
standard governing the scope of benefits.” 42 U.S.C.
§ 1395hh(a)(2). A “substantive legal standard,
” as defined by the D.C. Circuit, “at a minimum
includes a standard that ‘creates, defines, and
regulates the rights, duties, and powers of
parties.'” Allina Health Servs. v. Price,
863 F.3d 937, 943 (D.C. Cir. 2017) (quoting Black's
Law Dictionary (10th ed. 2014)). On this definition, the
provision “distinguish[es] a substantive from a
procedural legal standard, ” and requires that
CMS conduct notice and comment rulemaking for changes to the
former but not to the latter type of standard. Azar v.
Allina Health Servs., 139 S.Ct. 1804, 1811
record evidence in this case demonstrated that
“CMS's application of the must-bill and RA
requirements to the plaintiffs beginning in 2007 was a change
in policy.” Select Specialty, 391 F.Supp.3d at
62. That change was substantive rather than procedural
because “CMS changed not just the steps that existing
LTCHs must take, vis-à-vis CMS, to be reimbursed, but
also changed whether such entities must form contracts with
third parties, the state Medicaid programs.”
Id. at 69. Given that the change was substantive,
“without satisfying the notice-and-comment obligation
of § 1395hh(a)(2), CMS could not, and indeed cannot,
impose the must-bill policy and RA requirement on the
plaintiffs for the period when they were
non-Medicaid-participating providers.” Id.
Thus, summary ...