Baystate Franklin Med. Ctr. v. Azar

319 F. Supp. 3d 514
CourtCourt of Appeals for the D.C. Circuit
DecidedJuly 31, 2018
DocketCase No. 1:17-cv-00819 (TNM)
StatusPublished
Cited by2 cases

This text of 319 F. Supp. 3d 514 (Baystate Franklin Med. Ctr. v. Azar) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Baystate Franklin Med. Ctr. v. Azar, 319 F. Supp. 3d 514 (D.C. Cir. 2018).

Opinion

TREVOR N. MCFADDEN, U.S.D.J.

The U.S. Department of Health and Human Services reimburses hospitals for certain costs they incur in providing healthcare to Medicare beneficiaries. To pay the hospitals, the Department uses a Prospective Payment System ("PPS") to establish predetermined rates for each treatment type. The PPS features a "wage index," a multiplier that adjusts reimbursements to reflect regional variations in labor costs. See 42 U.S.C. § 1395ww. Hospitals submit annual cost reports to the Department, which are used to determine regional urban and rural wage rates. For each state, the rural rate acts as a "floor" ensuring that state hospitals receive at least that rate for their labor costs. See Pub. L. No. 105-33, § 4410 (1997).

Massachusetts-based Baystate Franklin Medical Center and its affiliates ("Baystate" or "Plaintiffs") challenge the Department's calculation of the wage index. The Department raised Baystate's 2017 index to the state's rural floor, as Plaintiffs' own labor costs were lower. Pl.'s Mem. in Supp. of Mot. for Summ. J. ("Pl.'s MSJ Mem.") 7, ECF No. 23-1. Remarkably, Nantucket Cottage Hospital ("Nantucket") is Massachusetts' only "rural" hospital as defined by 42 U.S.C. § 1395ww, and thus it sets the state's PPS reimbursement floor. Compl. 6, ECF No. 1. Nantucket erroneously reported some of its labor costs in 2015, causing its average hourly wage to be understated. Id. It failed to seek corrections to its data until more than seven months after a nationwide deadline for such requests. Def.'s Mem. in Supp. of Def.'s Cross Mot. for Summ. J. ("Def.'s Cross-MSJ. Mem.") 9, ECF No. 25-1. The Department denied Nantucket's untimely request and used the earlier submitted *517data to calculate the index. Id. at 10. As a result, Baystate received $19,907,000 less in 2017 reimbursements than it would have if Nantucket had timely submitted accurate data.

Baystate asserts that, as applied to Plaintiffs, the decision to use Nantucket's uncorrected data was arbitrary, capricious, and an abuse of discretion. Compl. 8. Baystate also challenges the Department's interpretation of 42 U.S.C. § 1395oo, the statute that establishes the Provider Reimbursement Review Board ("Board"). Plaintiffs contend that the Board must have the authority to grant relief when one hospital's claim is based on the inaccuracy of another's data.

Department Secretary Alex Azar1 (the "Secretary") disagrees. He alleges that using the uncorrected data was a reasonable exercise of the agency's discretion, as Nantucket missed a clearly articulated deadline and because of the Department's interests in finality and efficiency. Def.'s Cross-MSJ. Mem. 9, 16. The Secretary further argues that the Board's grant of expedited review and the instant case validate the Department's interpretation. Id.

Both parties seek summary judgment on the undisputed administrative record. I find that the Department's decision to require hospitals to correct their own wage data within program deadlines was reasonable, that Baystate's reimbursement was increased to reflect the region's labor costs as contemplated by the wage index statute, and that 42 U.S.C. § 1395oo does not obligate the Board to grant relief based on the inaccuracy of another hospital's data. I will therefore grant summary judgment for the Secretary.

I.

Medicare is a federally funded program that provides health insurance for the elderly, the disabled, and for people with end-stage renal disease. See 42 U.S.C. § 1395 et seq. A "complex statutory and regulatory regime governs [the] reimbursement" of healthcare providers who treat Medicare beneficiaries. Good Samaritan Hosp. v. Shalala , 508 U.S. 402, 404, 113 S.Ct. 2151, 124 L.Ed.2d 368 (1993). The Centers for Medicare and Medicaid Services (CMS), a division within the Department, administers the program and, through the PPS, the reimbursement of participating hospitals. See Anna Jacques Hosp. v. Burwell , 797 F.3d 1155, 1157 (D.C. Cir. 2015).

Wages and related costs are a "significant component" of these reimbursements, and these costs "vary widely across the country." Regents of the Univ. of Cal. v. Burwell , 155 F.Supp.3d 31, 37 (D.D.C. 2016). Accordingly, Congress mandates that the PPS rates attributable to labor costs be adjusted for "area differences in hospital wage levels." 42 U.S.C. § 1395ww(d)(3)(E)(i). The Department must compute a factor "reflecting the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level." Id. This factor is known as the "wage index." Se. Ala. Med. Ctr. v. Sebelius , 572 F.3d 912, 914-915 (D.C. Cir. 2009).

CMS calculates the wage index annually. Hospitals first submit their cost data to third party "fiscal intermediaries" (typically insurance companies), that then review the data for accuracy and to ensure that cost increases do not exceed predetermined "edit thresholds." See *518Dignity Health v. Price , 243 F.Supp.3d 43, 46 (D.D.C. 2017). If the fiscal intermediary believes corrections are necessary, it must provide the hospital with an opportunity to respond. Id.

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Bluebook (online)
319 F. Supp. 3d 514, Counsel Stack Legal Research, https://law.counselstack.com/opinion/baystate-franklin-med-ctr-v-azar-cadc-2018.