Scan Health Plan v. Department of Health and Human Services

CourtDistrict Court, District of Columbia
DecidedJune 3, 2024
DocketCivil Action No. 2023-3910
StatusPublished

This text of Scan Health Plan v. Department of Health and Human Services (Scan Health Plan v. Department of Health and Human Services) 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
Scan Health Plan v. Department of Health and Human Services, (D.D.C. 2024).

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

SCAN HEALTH PLAN,

Plaintiff,

v. Civil Action No. 1:23-cv-03910 (CJN)

DEPARTMENT OF HEALTH AND HUMAN SERVICES, et al.,

Defendants.

MEMORANDUM OPINION

Plaintiff SCAN Health Plan is a California-based nonprofit health organization that

provides health insurance to Medicare beneficiaries. SCAN claims that the government

improperly calculated its 2024 Star Rating—a quality assessment that affects both its federal

funding and how it is viewed by consumers. The Court agrees with SCAN that the only reasonable

interpretation of the relevant regulations requires a different calculation, and therefore grants

SCAN’s Motion for Summary Judgment and denies the government’s.

I. Background

A. The Regulations

Medicare is a federal health insurance program for seniors and people with disabilities. See

42 U.S.C. § 1395 et seq. Beneficiaries can receive coverage from the federal government directly

or by enrolling in private health insurance plans that are reimbursed by the government. See 42

U.S.C. §§ 1395c to 1395i-6, 1395j to 1395w-6, 1395w-21 to 1395w-28. The private option is

known as Medicare Advantage or Medicare Part C. See Parts of Medicare, Medicare.gov, https://

www.medicare.gov/basics/get-started-with-medicare/medicare-basics/parts-of-medicare (last

1 accessed June 2, 2024). Beneficiaries who choose either option may also choose to supplement

their benefits by enrolling in a prescription drug benefit plan known as Medicare Part D. See 42

U.S.C. § 1395w-101 et seq. Those Part D plans are also operated by private insurers. See id.

§ 1395w-101(a)(1).

The Centers for Medicare and Medicaid Services is the federal agency that runs the

Medicare program. About CMS, https://www.cms.gov/about-cms (last accessed June 2, 2024). As

part of its duties, CMS calculates and publishes something called a “Star Rating” for each private

Medicare plan. See 42 C.F.R. §§ 422.162(b), 423.182(b). Star Ratings are designed to provide

beneficiaries with information about a plan’s quality and to enable them and the agency to evaluate

a plan’s performance. See id. §§ 422.160(b), 423.180(b); see also ECF No. 20-1 (“Decl.”) ¶ 19

(noting that the agency “lists plans on its online Medicare Plan Finder tool in order of highest to

lowest Star Ratings” to “steer [beneficiaries] toward higher-rated plans”). CMS is also obligated

by statute to offer additional funding to plans with better Star Ratings. See 42 U.S.C. § 1395w-

23(o), 1395w-24(b)(1)(C). Those higher-rated plans can then use those extra funds to lower costs

for their beneficiaries or to provide them with additional benefits. See 85 Fed. Reg. 33,796,

33,855–56 (2020). The upshot is that Star Ratings are quite important for private Medicare plans.

Every October, CMS publishes new Star Ratings for the upcoming calendar year. ECF

No. 26 (“SCAN Mot.”) at 13; ECF No. 23 (“Gov. Mot.”) at 5. (So, for example, the agency

published the 2024 Star Ratings in October 2023). CMS calculates its Star Ratings not unlike the

way that a teacher might calculate final grades for his or her students. See SCAN Mot. At 10–12

(making this analogy).

First, CMS determines each plan’s raw scores on various quality “measure[s].” See 42

C.F.R. §§ 422.162(a), 422.166(a), 423.182(a), 423.186(a). To give just one example, Measure

2 C15 (“Plan All-Cause Readmissions”) is the “[p]ercent of plan members aged 18 and older

discharged from a hospital stay who were readmitted to a hospital within 30 days, either for the

same condition as their recent hospital stay or for a different reason.” CMS, Medicare 2024 Part

C & D Star Ratings Technical Notes (“2024 Technical Notes”) at 60 (March 13, 2024), https://

www.cms.gov/files/document/2024-star-ratings-technical-notes.pdf (last accessed June 2, 2024).

In the grading analogy, this is like a teacher’s giving students raw scores on a variety of homework

assignments, quizzes, essays, and exams.

Second, CMS converts each raw score into a star score. See 42 C.F.R. § 422.166(a),

423.186(a). The rating is on a five-star scale in whole-star increments. Id. §§ 422.166(a)(4),

423.186(a)(4). The key thing to understand about the conversion process is that it grades plans on

a curve. For the kind of measures at issue here, 1 CMS runs a statistical “clustering” analysis to

group the data set “such that the [raw scores] within a group are as similar as possible to each

other, and as dissimilar as possible to [raw scores] in any other group.” Id. §§ 422.162(a),

422.166(a), 423.182(a), 423.186(a). CMS then identifies the dividing lines—or “cut points”—

between the groups and assigns star scores accordingly. See id. §§ 422.166(a), 423.186(a). In the

grading analogy, this is like a teacher’s analyzing all students’ scores on a quiz; determining that

(for this particular quiz) a student needs to score at least 86% to receive an “A,” at least 78% to

receive a “B,” at least 71% to receive a “C,” and so forth; and then giving students the letter grades

that correspond to their raw scores. In the parlance of Star Ratings, 86%, 78% and 71% would be

the “cut points” reflecting the dividing lines between the different letter grades.

1 CMS has two types of measures: CAHPS measures (which are based on data from surveys) and non-CAHPS measures (which are based on data from other sources). See 42 C.F.R. §§ 422.162(a), 423.182(a). “Only non-CAHPS [measures] are at issue in this case.” SCAN Mot. at 12 n.5.

3 Third, CMS calculates a plan’s overall Star Rating by running a weighted average of all

measures. 42 C.F.R. § 422.166(c)(1), (d)(1); id. § 423.186(c)(1), (d)(1). The rating is again on a

five-star scale but in half-star increments. 42 C.F.R. § 422.166(c)(3), (d)(2)(iv); id.

§ 423.186(c)(3), (d)(2)(iv). In the grading analogy, this is like a teacher’s determining a student’s

final letter grade by calculating a weighted average of the student’s letter grades on the various

homework, quizzes, essays, and exams completed in the course.

This suit relates to two recent changes to the way that CMS calculates Star Ratings. The

first is what the Court will call the Guardrail Rule. “To increase the predictability of the cut

points,” 84 Fed. Reg. 15,680, 15,754 (2019), CMS decided in April 2019 to place a 5% cap on

how much cut points could change from year to year:

[CMS will apply] a guardrail so that the measure-threshold-specific cut points for non-CAHPS measures do not increase or decrease more than the value of the cap from one year to the next. The cap is equal to 5 percentage points for measures having a 0 to 100 scale (absolute percentage cap) or 5 percent of the restricted range for measures not having a 0 to 100 scale (restricted range cap).

Id.

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