Paladin Community Mental Health Center v. Sebelius

684 F.3d 527, 2012 WL 2161137, 2012 U.S. App. LEXIS 12155
CourtCourt of Appeals for the Fifth Circuit
DecidedJune 15, 2012
DocketNo. 11-50682
StatusPublished
Cited by9 cases

This text of 684 F.3d 527 (Paladin Community Mental Health Center v. Sebelius) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Paladin Community Mental Health Center v. Sebelius, 684 F.3d 527, 2012 WL 2161137, 2012 U.S. App. LEXIS 12155 (5th Cir. 2012).

Opinion

DeMOSS, Circuit Judge:

This appeal involves a challenge to the 2011 Medicare payment rate set by the Secretary of Health and Human Services (the “Secretary”) for partial hospitalization services. Paladin Community Mental Health Center and Sherry Osteen (collectively, “Paladin”) claim the Secretary’s use of both hospital-based and community mental health center cost data in establishing and adjusting the 2011 relative payment weights and ultimate payment rate was in excess of her statutory authority. Without first presenting an administrative claim, Paladin filed suit in district court, alleging jurisdiction was proper under 28 U.S.C. § 1331. After a hearing, the district court concluded that Congress expressly precluded judicial review of the Secretary’s payment rate decisions and dismissed the case for lack of subject matter jurisdiction. We affirm.

I.

A.

The Medicare Act establishes a health insurance program for elderly and disabled persons. See 42 U.S.C. § 1395 et seq. Medicare Part A provides coverage for inpatient hospital services and institutional care, see §§ 1395c to 1395Í-5, while Medicare Part B provides supplemental coverage for physician and outpatient department services. §§ 1395j to 1395w-4. Both hospitals and community mental health centers are eligible to receive Medicare Part B payments for certain qualifying outpatient services, including partial hospitalization program services. See §§ 1395x(s), 1395x(ff)(l)-(3). Paladin is a Medicare-certified community mental health center which provides partial hospitalization services to patients in and around Austin, Texas, and derives over 80% of its revenue from Medicare payments.

For years Medicare paid suppliers of partial hospitalization services based on their specific costs. However, in 1997, in an attempt to better control costs and encourage more efficient delivery of care, Congress directed the Secretary to establish an outpatient prospective payment [529]*529system where providers would be paid predetermined rates for partial hospitalization services. See § 1395Z(t)(l). In creating the new payment system, the Secretary was required to (i) develop a classification system for covered services and groups of services, and then (ii) “establish relative payment weights for covered [outpatient department] services ... based on median (or, at the election of the Secretary, mean) hospital costs” using recent cost data. § 1395i(t)(2)(A)-(C). In any given year, the ultimate payment rate for covered services was the product of a “conversion factor” and the various “relative payment weight[s,]” § 1395Z(t)(3)(C)-(D), adjusted geographically based on local labor costs and other factors. § 1395Z(t)(4).

In 2000, the Secretary established the outpatient prospective payment system using a “per diem” methodology and then calculated the initial relative payment weights and ultimate payment rate for partial hospitalization services. Thereafter, the Secretary was instructed to

review not less often than annually and revise the groups, the relative payment weights, and the wage and other adjustments described in paragraph (2) to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors.

§ lSOSZftXOXA).1 The Secretary was also instructed to maintain “[b]udget neutrality” year-to-year by ensuring that any increased expenditure for one payment component is offset by a decrease in another payment component so that total Medicare payments for partial hospitalization services equal what would have been paid under the pre-1997 system. See § 1395Z(t)(3)(A)-(B), (t)(9)(B).

Since 2000, the Secretary has used the annual review and adjustment process to help her refine the payment system. This process includes analyzing cost data provided by both hospitals and community mental health centers. In 2000 through 2002, 2009, and 2010, the Secretary used only hospital-based cost data to compute the relative payment weights and ultimate payment rate for covered services for all partial hospitalization service providers. However, in response to comments from community mental health centers, from 2003 through 2008 the Secretary used both hospital-based and community mental health center cost data in computing relative payment weights and the ultimate payment rate for all providers.2

B.

In July 2010, the Secretary sought comment on a proposed rule establishing the 2011 payment rate for partial hospitalization services. The proposed rule provided that the Secretary would compute separate partial hospitalization costs, relative payment weights, and ultimate payment rates for hospitals and community mental health centers based on their own respective cost data (i.e., hospital rates would reflect only their own data and community mental health center rates would reflect only their own data). The Secretary’s reasoning for this change was based on “the different cost structures of [community mental health centers] and hospital-based [partial hospitalization programs].” See 75 Fed. Reg. 71992 (November 24, 2010) (indicat[530]*530ing that over the years hospital costs had remained stable while community mental health center costs had declined, thereby resulting in underpayments to hospitals and overpayments to community mental health centers). During her consideration, the Secretary indicated that Congress had granted her the authority to revise the covered service groups and relative payment weights and make other adjustments by basing rates on (i) only hospital-based cost data, (ii) both hospital-based and community mental health center cost data, or (iii) only community mental health center cost data. Id.

Ultimately, in an attempt to prevent potential community mental health center closures caused by lower payment rates, the Secretary implemented a two-year transition into using only community mental health center cost data to calculate payment rates for community mental health centers. Id. at 71,993. The final rule for 2011, promulgated in November 2010, used (i) only hospital-based cost data to calculate the relative payment weights for hospital-based partial hospitalization services, and (ii) both hospital-based and community mental health center cost data to calculate the relative payment weights for community mental health center partial hospitalization services. Id.

C.

In December 2010, prior to implementation of the final rule and without first pursuing an administrative remedy, Paladin filed a complaint seeking injunctive relief and a declaration that the Secretary’s action was unlawful. Paladin argued that the Secretary “circumvented the clear instructions of Congress regarding utilization of hospital cost data as the sole metric for developing relative payment weights for partial hospitalization services for [community mental health centers].” The Secretary moved to dismiss for lack of subject matter jurisdiction and, alternatively, for failure to exhaust administrative remedies.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

U.S. Anesthesia Prts of TX v. HHS
126 F.4th 1057 (Fifth Circuit, 2025)
State of Texas v. DHS
Fifth Circuit, 2024
State of Mississippi v. Becerra
S.D. Mississippi, 2023
Yale New Haven Hosp. v. Becerra
56 F.4th 9 (Second Circuit, 2022)
American Hospital Association v. Alex Azar, II
967 F.3d 818 (D.C. Circuit, 2020)
American Hospital Association
District of Columbia, 2018
Am. Hosp. Ass'n v. Azar
348 F. Supp. 3d 62 (D.C. Circuit, 2018)
Pearl River Union Free School District v. Duncan
56 F. Supp. 3d 339 (S.D. New York, 2015)

Cite This Page — Counsel Stack

Bluebook (online)
684 F.3d 527, 2012 WL 2161137, 2012 U.S. App. LEXIS 12155, Counsel Stack Legal Research, https://law.counselstack.com/opinion/paladin-community-mental-health-center-v-sebelius-ca5-2012.