Parkview Medical Associates, L.P. v. Shalala

158 F.3d 146, 332 U.S. App. D.C. 336, 1998 U.S. App. LEXIS 26586, 1998 WL 726250
CourtCourt of Appeals for the D.C. Circuit
DecidedOctober 20, 1998
DocketNo. 97-5262
StatusPublished
Cited by14 cases

This text of 158 F.3d 146 (Parkview Medical Associates, L.P. v. Shalala) 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
Parkview Medical Associates, L.P. v. Shalala, 158 F.3d 146, 332 U.S. App. D.C. 336, 1998 U.S. App. LEXIS 26586, 1998 WL 726250 (D.C. Cir. 1998).

Opinion

WILLIAMS, Circuit Judge:

ParkView Medical Associates closed its purchase of a hospital in Vicksburg, Mississippi on November 1, 1990 and renamed the hospital ParkView Regional Medical Center.1 Because of the purchase, the hospital filed one report on its wages for the last four months under the prior ownership (the first four months of its July 1 to June 30 reporting year), and another for the first eight months of the new ownership (thus closing out the reporting year). Had it filed a single report for the full twelve-month period, it would have qualified for reclassification as “urban” rather than “rural,” and would thus have been entitled to more generous Medicare reimbursement. ParkView sued the Secretary of Health and Human Services, claiming that the rules that brought about denial of reclassification were arbitrary and capricious. Although the application of those rales in this case has produced a seeming anomaly, ParkView has not shown the regulations to be arbitrary or capricious, and we accordingly affirm the district court’s grant of summary judgment for the defendant.

Under Part A of Medicare, most hospitals are reimbursed for their services to patients through a “fiscal intermediary,” a private organization that acts as a go-between under agreement with the Secretary. See 42 U.S.C. § 1395h. A hospital receives a predetermined amount per patient discharged in each particular “diagnosis related group,” an amount set annually by the Secretary. See id. § 1395ww(d).

Because hospital costs tend to be higher in urban areas than in rural, the Secretary’s reimbursement rates vary with a hospital’s geographic area. First, the rates are in part based on the “average standardized amount,” a figure calculated separately for “large urban,” “urban,” and “rural” areas. See id. § 1395ww(d)(3)(D). Second, the rates are also in part based on the “wage index” for a particular area, or the relative wage level for that area compared to the national wage level. See id. § 1395ww(d)(3)(E). Hospitals are initially classified according to actual location, but they may apply for reclassification into a nearby area for purposes of using that other area’s standardized amount or wage index. See id. § 1395ww(d)(10). Such applications are made to the Medicare Geographic Classification Review Board, which resolves the claims under guidelines set out by the Secretary. Its decisions are appealable to the Secretary. See Id.

In September of 1993, ParkView sought reclassification for wage index purposes from the rural Mississippi area to the urban Jackson, Mississippi area during federal fiscal year 1995. In order to qualify for such reclassification, a hospital must show— among other things — that its “average hourly wage is at least 108 percent of the average hourly wage of hospitals in the area in which the hospital is located.” 42 C.F.R. § 412.230(e)(l)(iii). The data used for this comparison are the “data from the HCFA hospital wage survey used to construct the wage index in effect for prospective payment purposes during the fiscal year prior to the fiscal year for which the hospital requests reclassification,” id. § 412.230(e)(2)®, i.e., the data for the hospital itself that the Secretary used in creating her wage index. As ParkView requested reclassification for 1995, it had to meet the 108% test with the data used to construct the fiscal year 1994 wage [148]*148index, which the Secretary had just finalized and was about to put into effect.2

ParkView Medical Associates had purchased the hospital on November 1, 1990. A hospital that experiences a change in ownership must file a terminating cost report at the end of the seller’s ownership, see id. § 413.24(f)(1), and has the option of changing its cost reporting period for the future, see id. § 413.i24(f)(3). ParkView kept its old cost reporting period: July 1 to June 30. It thus filed two consecutive short-period reports: a four-month report for July 1,1990 to October 31, 1990 and an eight-month report for November 1, 1990 to June 30, 1991 — the normal end of its reporting period.

But this brought ParkView up against another rule. The 1994 index was to be based on “data for hospital cost reporting periods beginning on or after October 1, 1989 and before October 1, 1990 (FY 1990).” 58 Fed. Reg. 46,293 (1993). Unfortunately for Park-View, the beginning date of its eight-month report was a month after the end of the October-to-October window; thus the report was not included in the 1994 wage index calculation. The result: ParkView could not use the data from the eight-month report to show that it satisfied the 108% test for reclassification. See 42 C.F.R. § 412.230(e)(2)(i). If calculated from a combination of the two short-period reports’ data, the average hourly wage would have been 119.6589% of the local average. Apparently because of seasonal fluctuations, however, calculations based on only the four-month data fell short of the 108% criterion by a hair — 107.5948%. The Medicare Geographic Classification Review Board accordingly denied ParkView’s request for 1995 reclassification, and the Secretary affirmed the denial.

Judicial review of the denial itself is barred. See 42 U.S.C. § 1395ww(d)(10)(C)(iii)(II) (“The decision of the Secretary shall be final and shall not be subject to judicial review.”). But this bar leaves hospitals free to challenge the general rules leading to denial. See Universal Health Servs. v. Sullivan, 770 F.Supp. 704, 710-12 (D.D.C.1991); see also Athens Community Hosp. v. Shalala, 21 F.3d 1176 (D.C.Cir.1994) (striking down adjacency rule governing reclassifications). But cf. Skagit County Public Hosp. Dist. No. 2 v. Shalala, 80 F.3d 379, 386-87 (9th Cir.1996) (finding review precluded if challenge brought “only to achieve reversal of the reclassification decision”). Among those rules, ParkView does not question the requirement of 42 C.F.R. § 412.230(e)(2)© that to satisfy the 108% requirement a hospital must use the data that had been used in constructing the wage index. Its attack on the Secretary’s strict reliance on data from cost reports starting within the October-to-October window for those purposes, then, is necessarily an attack on the construction of the 1994 wage index.3

We first note that the Secretary had good general reasons for many of the elements in her data collection method for this index. By using data for periods for which reports were already filed with fiscal intermediaries and audited, rather than a single uniform period, she avoided any need for Procrustean adjustments of existing data or for generation of entirely new data. See 58 Fed.Reg. 46,302 (1993) (“We believe that the FY 1990 data is much more accurate than any we have used previously.... [Those] data have been subjected to comprehensive edits and revisions, both before and after the publication of the proposed rule.”). Similarly, the use of a fixed one-year time window (in this case the federal fiscal year), within which the [149]

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Bluebook (online)
158 F.3d 146, 332 U.S. App. D.C. 336, 1998 U.S. App. LEXIS 26586, 1998 WL 726250, Counsel Stack Legal Research, https://law.counselstack.com/opinion/parkview-medical-associates-lp-v-shalala-cadc-1998.