Health v. Price

243 F. Supp. 3d 43, 2017 WL 1066562
CourtDistrict Court, District of Columbia
DecidedAugust 21, 2017
DocketCivil Action No. 15-804 (RDM)
StatusPublished
Cited by7 cases

This text of 243 F. Supp. 3d 43 (Health v. Price) is published on Counsel Stack Legal Research, covering District Court, District of Columbia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Health v. Price, 243 F. Supp. 3d 43, 2017 WL 1066562 (D.D.C. 2017).

Opinion

MEMORANDUM OPINION

RANDOLPH D. MOSS, United States District Judge

This case is before the Court on plaintiff Dignity Health’s motion for summary judgment, Dkt. 13, and the government’s cross-motion for summary judgment, Dkt. 15. Dignity challenges the Secretary of Health and Human Services’s calculation of the Medicare “wage index,” which is used to adjust Medicare payment rates to reflect differences in wage costs between different geographic areas, for the Santa Cruz area in 2004. Another hospital in the area failed to provide documentation to support its wage rates for the time period in question, leading to lower Medicare reimbursement rates for all hospitals in the area, including Dignity. Dignity’s, complaint asserts a single count, challenging the accuracy of the wage data the Secretary relied on in formulating the wage index. Dkt. 1 at 8-10 (Compl. ¶¶ 35-45). For the reasons explained below, the Court concludes that Dignity lacks Article III standing. The Court will, accordingly, dismiss the complaint for lack of subject matter jurisdiction and will deny both Dignity’s motion for summary judgment, Dkt. 13, and the Secretary’s cross-motion for summary judgment, Dkt. 15, as moot.

I. BACKGROUND

A. Statutory and Regulatory Background

Medicare is a federally funded nationwide health insurance program for people aged sixty-five or older, those with disabilities, and those with end-stage renal disease. See 42 U.S.C. §§ 1395 et seq. For acute-care inpatient services, Medicare reimbursement operates under the Prospective Payment System (“PPS”). Id. § 1395ww(d); see also Shands Jacksonville Med. Ctr. v. Burwell, 139 F.Supp.3d 240, 244-45 (D.D.C. 2015). That system compensates hospitals on the basis' of a pre-established formula tied to the national average cost of treating a given ailment or condition, rather than on the basis of the actual costs incurred in treating patients. See 42 U.S.C. § 1395ww(d). Congress intended for this system to “reform the financial incentives hospitals face and [to] promote efficiency in the provision of services.” Anna Jacques Hosp. v. Burwell, 797 F.3d 1155, 1158 (D.C. Cir. 2015) (alterations and citation omitted). The system thus aims to avoid rewarding hospitals for operating at higher-than-average cost.

At the same time, however, the system was not intended to penalize hospitals for operating in high-cost areas. Wages and wage-related costs, in particular, “are a significant component of the Medicare payment that qualifying hospitals receive,” and those costs “vary widely across the country.” Regents of the Univ. of Gal. v. Burwell, 155 F.Supp.3d 31, 37 (D.D.C. 2016) (citation omitted), aff'd mem., No. 16-5098 (D.C. Cir. March 2, 2017). In rec[46]*46ognition of this reality, Congress directed the Secretary of Health and Human Services to adjust the “proportion” of PPS payments attributable to “wages and wage-related costs” for “area differences in hospital wage levels[.]” 42 U.S.C. § 1395ww(d)(3)(E)(i). To do so, the Secretary must compute a “factor” that “re-flectes] the relative hospital wage level in the geographic area of the hospital compared to the national average,” id. which is commonly referred to as the “wage index,” Se. Ala. Med. Ctr. v. Sebelius, 572 F.3d 912, 914-15 (D.C. Cir. 2009). In most cases, the geographic area for which a wage index is calculated corresponds to one of the “metropolitan statistical areas” (“MSAs”) defined by the Office of Management and Budget. 42 C.F.R. §§ 412.63(b), 412.64(b). The wage index is a ratio of costs in a geographic area to national average costs. A wage index of 1.0 means a given area is average; an index above 1.0 indicates higher than average wage costs, and thus a correspondingly higher ■ payment level through the PPS, and an index below 1.0 means a lower than average cost area, with lower PPS payments. See Anna Jacques Hosp., 797 F.3d at 1159. Because there are typically multiple hospitals in any MSA, each hospital’s wage data affects the ultimate wage index for all hospitals in. the area, and thus data errors or omissions by one hospital can lower (or increase) PPS rates for other hospitals in its area.

The Centers for Medicare and Medicaid Services (“CMS”), the component of the Department of Health and Human Services responsible for administering Medicare, calculates the wage index each year “on the basis of a survey.” 42 U.S.C. § 1395ww(d)(3)(E)(i). To gather the necessary information, CMS requires hospitals to submit their cost data to their “fiscal intermediaries,”—third party organizations, usually insurance companies, under contract with CMS to handle much of the direct administration of Medicare.2 See Regents of the Univ. of Cal., 155 F.Supp.3d at 38. Because it takes time for hospitals to complete and submit their cost reports, the wage index for any given year typically reflects costs actually incurred a few years before. See, e.g., 2005 IPPS Final Rule, 69 Fed. Reg. 48916, 49049 (Aug. 11, 2004) (calculating fiscal year 2005 wage index based on fiscal year 2001 data); Regents of the Univ. of Cal., 155 F.Supp.3d at 38.

The process of calculating the annual wage index begins with the cost data— including total salaries and total paid hours—that hospitals must file annually with their fiscal intermediaries on Worksheet S-3. See Regents of the Univ. of Cal., 155 F.Supp.3d at 38; Parkview Med. Assocs. L.P. v. Shalala, 94-cv-1941, 1997 WL 470107, at *2 (D.D.C. Aug. 13, 1997). The fiscal intermediaries conduct a “desk review” of that data to determine, among other things, whether the percentage cost increase reported by a hospital exceeds certain predetermined (but confidential) “edit thresholds.” CMS, Program Memorandum; Intermediaries, Annual Desk Review Program for Hospital Wage Data: Cost Reporting Periods Beginning on or after October 1, 1999, through September 30, 2000 (For FY 2004 Wage Index) (Oct. 4, 2002), Dkt. 21-1 at 352-54. If any items “fall outside the established [edit] threshold[ ],” the fiscal intermediary must “address” those items and, where “necessary,” make “adjustments.” Id. at 353. “If adjustments are necessary,” the fiscal intermediary “must communicate them to the affected hospitals” and must provide them with “an opportunity to respond.” Id. The fiscal [47]*47intermediary is also required to inform the relevant state hospital association if any hospital fails to respond to issues raised in the desk review process and to alert the association that “a hospital’s failure to respond to matters raised by the [fiscal intermediary] can result in lowering an area’s wage index value.” Id. The fiscal intermediary must complete its review and transmit the relevant data—including any adjustments—to CMS by mid-November. Id. at 352.

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Bluebook (online)
243 F. Supp. 3d 43, 2017 WL 1066562, Counsel Stack Legal Research, https://law.counselstack.com/opinion/health-v-price-dcd-2017.