UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
UNIVERSITY OF CHICAGO MEDICAL CENTER,
Plaintiff,
v. Case No. 16-cv-1276 (DLF)
XAVIER BECERRA, Secretary, U.S. Department of Health and Human Services,
Defendant.
MEMORANDUM OPINION
In this Medicare case, the University of Chicago Medical Center seeks review of a 2015
decision by the Provider Reimbursement Review Board. For the following reasons, the Court will
deny the petition for review.
I. BACKGROUND
A. Statutory and Regulatory Background
The federal Medicare statute funds health care for older Americans. See, e.g., Fischer v.
United States, 529 U.S. 667, 671 (2000). Under the statute, hospitals providing care can generally
recoup their reasonable costs from the federal government. See 42 U.S.C. § 1395g. Whether a
hospital’s costs are reasonable depends in part on a complicated statutory formula, see id.
§ 1395ww(d)(5)(B), the details of which are not important here.
The Secretary of the Department of Health and Human Services has promulgated
regulations that specify how hospitals may request reimbursement for their reasonable costs.
Under those regulations and by statute, hospitals “submit cost reports to contractors . . . known as fiscal intermediaries.” Sebelius v. Auburn Reg’l Med. Ctr., 568 U.S. 145, 150 (2013). If a hospital
“is dissatisfied with the intermediary’s reimbursement determination,” it can appeal it to the
Provider Reimbursement Review Board, a subcomponent of the Department. Id.; see 42 U.S.C.
§ 1395oo. Hospitals that disagree with the Board’s decisions can seek judicial review “in the
district court of the United States for the judicial district in which [they are] located . . . or in the
District Court for the District of Columbia.” 42 U.S.C. § 1395oo(f)(1).
The Board has “full power and authority to make rules and establish
procedures . . . necessary or appropriate to carry out” its responsibilities. Id. § 1395oo(e). Circa
2005—the time period relevant to this case—the Board’s rules and procedures required any
“request for [a] Board hearing” (i.e., any notice of appeal) to “identify the aspects of [a]
determination with which” an appellant was “dissatisfied” and “explain why the [appellant]
believe[d] the determination [was] incorrect in such particulars.” 42 C.F.R. § 405.1841 (2005);
Admin. Record (“AR”) at 6, Dkt. 49. The Board’s rules for appellants elaborated as follows:
Your hearing request must contain an identification and statement of the issue(s) you are disputing. . . . You must clearly and specifically identify your position in regard to the issues in dispute. For instance, if you are appealing an aspect of the disproportionate share (DSH) adjustment factor or calculation, do not define the issue as “DSH.” You must precisely identify the component of the DSH issue that is in dispute. For example: Were the Intermediary’s adjustments to the number of available beds for disproportionate share (DSH) qualification purposes proper?
Provider Reimb. Rev. Bd. Instructions (“PRRB Instr.”) Part I § B.II.a (2002). In addition, in 2008,
the Board promulgated a rule limiting appellants’ rights to add new issues to old appeals. As to
appeals then pending before the Board—again, the subset of appeals relevant to this case—the rule
required appellants to raise such issues to the Board on or before October 20, 2008. AR 6–7; 42
C.F.R. § 405.1835(c)(3) (2008); 73 Fed. Reg. 30190, 30236 (May 23, 2008).
2 B. Factual Background and Procedural History
This case involves a 2005 appeal to the Board. In 2002, the University of Chicago Medical
Center filed a Medicare reimbursement request with its fiscal intermediary. Compl. ¶ 20, Dkt. 1.
The record does not contain a copy of the Center’s request, but the parties agree that it included
reimbursement for over $2 million based on certain time the Center’s medical residents spent
conducting research tasks (“research time”); certain time they spent participating in lectures and
other teaching activities (“didactic time”); certain time they spent on paid vacation (“vacation
time”); certain time spent on clinical rotations (“clinical rotation time”); and certain additional
items carried forward from the prior fiscal year (“carry-forward”). Id. ¶¶ 37, 42; AR 5–7, 15. They
also agree that its reimbursement calculations presumed that the Center operated 417 reimbursable
adult and pediatric hospital beds. See AR 261, 422.1
In 2004, the Center’s fiscal intermediary issued a reimbursement determination. AR 180.
The determination denied the Center’s reimbursement requests for research time, didactic time,
vacation time, clinical rotation time, and carry-forward. See, e.g., AR 3. Further, it calculated
the Center’s total allowable reimbursement starting from the assumption that it operated 417
reimbursable adult and pediatric beds. AR 422; see AR 393.
In 2005, the Center appealed to the Board. AR 243. Its appeal papers read as follows:
The [Center] is dissatisfied with the Intermediary’s determination . . . as to the total number of [its] full-time equivalent (FTE) residents used for purposes of calculating [its] indirect medical education (“IME”) payments. The [Center] contends that the Intermediary’s determination is contrary to 42 U.S.C. § 1395ww(d)(5)(B) because it fails to include time spent by residents performing research and training required as part of their approved residency programs.
1 Each of these variables is an input into the Medicare reimbursement formula mentioned above. See 42 U.S.C. § 1395ww(d)(5)(B). Again, the details of the formula are not important to this case. 3 AR 1079. In 2006, it added another issue to its appeal: “Improper inclusion of beds from the
Clinical Research Center.” AR 1068. The Center argued that—in fact—it operated eight fewer
reimbursable hospital beds than was presupposed, entitling it to approximately $700,000 more in
reimbursement under the applicable statutory formula. AR 1068, 1072.
In 2012, the Center filed a position paper before the Board. AR 355. The position paper
sought reimbursement for didactic time, vacation time, clinical rotation time, and carry-forward as
well as research time. See AR 356. In response, the fiscal intermediary objected that the Center
forfeited the issues besides research time by failing to raise them with the Board before October
20, 2008. AR 357. It also objected that the Center forfeited its reimbursable-beds issue by failing
to raise it in its initial reimbursement request to the fiscal intermediary. See AR 394.
The Board disposed of the Center’s claims in three decisions: one dated May 14, 2014;
another dated July 16, 2015; and another dated February 4, 2016. AR 1–16, 89.2 As to the Center’s
resident-time claims, the Board sided with the Center in part and its fiscal intermediary in part.
Initially, it found that the Center “did not properly and timely appeal [its] didactic and vacation
time” claims, its clinical rotations claim, and its carry-forward claims. AR 6. It explained that the
Center “first specifically addressed” those claims “when it filed its preliminary position paper” in
2012, after its “October 20, 2008 deadline.” AR 7. As a result, the Board deemed those claims
forfeited and dismissed them. Id.; accord AR 15–16. “Upon further review,” however, the Board
found that the Center “did include ‘training time’ in its initial appeal” and reinstated the Center’s
didactic time claims accordingly. AR 89.
2 In a letter dated April 27, 2016 closing the Center’s appeal, the Board indicated that it had decided some of the Center’s claims on “February 6, 2016.” AR 1. But the decision in question is stamped “February 4, 2016,” not February 6. AR 14. The discrepancy does not make a substantive difference. 4 As to the Center’s beds claim, the Board sided with the Center’s fiscal intermediary.
The Board started by observing that circuit courts have split on whether, and under what
circumstances, hospitals may appeal claims to the Board without first presenting them to a fiscal
intermediary. AR 7–12 (comparing Little Co. of Mary Hosp. & Health Care Ctrs. v. Shalala, 165
F.3d 1162 (7th Cir. 1999), to Loma Linda Univ. Med. Ctr. v. Leavitt, 492 F.3d 1065 (9th Cir. 2007),
and MaineGeneral Med. Ctr. v. Shalala, 205 F.3d 493 (1st Cir. 2000)). It then opted to follow the
Seventh Circuit’s position on the issue for purposes of this case, explaining the Center resided in
Chicago and that—in the event of a conflict among circuits—the Board “generally has applied as
controlling precedent the law of the Circuit in which [an appellant] is located.” AR 12 & n.39.
Consistent with the Board’s understanding of the law in the Seventh Circuit, the Board went on to
dismiss the Center’s beds claim as forfeited because the Center had not first raised it with its fiscal
intermediary and because raising the beds claim with the Center’s fiscal intermediary prior to
appeal “would not have been clearly futile.” AR 7; see also AR 7–12 (discussing Mary Hosp.,
165 F.3d at 1165).
“Even if the Seventh Circuit decisions were not controlling precedent,” the Board added,
it “would reach the same result.” AR 12. At minimum, the Board explained, it had discretion to
deem claims forfeited when a health care provider did not present them to its fiscal intermediary
first. Id. (citing cases). And the Board had “consistently declined to exercise [its] discretion . . . to
hear appeals” in such cases, at least “when reimbursement . . . was not precluded by a specific law,
regulation, CMS Ruling or manual instruction” such that presentation to the intermediary would
have been futile. Id.
The Center petitioned for review. Dkt. 1; see 42 U.S.C. § 1395oo(f)(1).
5 II. LEGAL STANDARDS
Under Rule 56 of the Federal Rules of Civil Procedure, the Court may grant summary
judgment when “there is no genuine dispute as to any material fact and [a party] is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). In challenges to agency action under the
Administrative Procedure Act (“APA”), “[t]he entire case on review is a question of law.”
Marshall Cnty. Health Care Auth. v. Shalala, 988 F.2d 1221, 1226 (D.C. Cir. 1993). The Court
“sits as an appellate tribunal,” id. at 1225, and asks whether the agency’s decision was (1)
“arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law[,]” (2) “in
excess of statutory jurisdiction, authority, or limitation[],” or (3) “without observance of procedure
required by law,” 5 U.S.C. § 706(2).
Challenges to the Board’s decisions proceed under the APA. 42 U.S.C. § 1395oo(f)(1).
“Accordingly,” the Court may “set aside the Board’s decision only if it is ‘arbitrary, capricious, an
abuse of discretion, or not otherwise in accordance with law,’ or unsupported by substantial record
evidence.” HCA Health Servs. of Okla., Inc. v. Shalala, 27 F.3d 614, 616 (D.C. Cir. 1994) (quoting
5 U.S.C. § 706(2)).
The Court defers to the Board’s reasonable reading of its own regulations, see Kisor v.
Wilkie, 139 S. Ct. 2400, 2414–18 (2019), and to its discretionary decisions so long as they are
reasonable and reasonably explained, see Motor Vehicle Mfrs. Ass’n of U.S., Inc., v. State Farm
Mut. Auto. Ins. Co., 463 U.S. 29, 46–57 (1983). Although the Court “may not supply a reasoned
basis for the [Board’s] action that the [Board] itself has not given,” it must “uphold a decision of
less than ideal clarity if the [Board’s] path may reasonably be discerned.” State Farm, 463 U.S.
at 43 (first quoting SEC v. Chenery Corp., 332 U.S. 194, 196 (1947), and then quoting Bowman
Transp. Inc. v. Arkansas-Best Freight Syst., 419 U.S. 281, 286 (1974)).
6 III. DISCUSSION
The Board dismissed the Center’s vacation time, clinical-rotations time, and carry-forward
claims because—in its view—the Center forfeited them by failing to raise them with the Board
before October 20, 2008. AR 6. It also dismissed the Center’s bed-count claim (which dealt with
the eight beds the Center alleged were not reimbursable) because the Center had not raised it with
its fiscal intermediary before presenting it to the Board. AR 7–12. Neither dismissal was arbitrary,
capricious, an abuse of discretion, or contrary to law. Accordingly, the Court will affirm both
decisions and enter summary judgment against the Center.
A. Forfeiture of Certain Resident Time Claims
The Board’s rules, like most appellate tribunals’ rules, provide that appellants must raise
their arguments early or forfeit them. Cf. IMAPizza, LLC v. At Pizza Ltd., 965 F.3d 871, 876 (D.C.
Cir. 2020) (applying similar rule on appeal to the D.C. Circuit). In 2005, when the Center first
took its appeal, Board regulations required “request[s] for . . . Board hearing[s]” to “identify the
aspects of [a] determination with which” an appellant was “dissatisfied” and to “explain why the
[appellant] believe[d] the determination” was “incorrect in such particulars.” 42 C.F.R.
§ 405.1841 (2005). Courts review the Board’s forfeiture findings for reasonableness. See, e.g.,
Evangelical Cmty. Hosp. v. Becerra, No. 21-cv-1368, 2022 WL 4598546, at *5–6 (D.D.C. Sept.
30, 2022); cf. Kisor, 139 S. Ct. at 2414.
The Board acted reasonably in finding that the Center forfeited its vacation time, clinical-
rotations time, and carry-forward claims by failing to identify them “in [their] particulars” before
October 20, 2008. 42 C.F.R. § 405.1841 (2005). The Center’s initial appeal materials complained
that its fiscal intermediary had not reimbursed it for “time spent by residents performing research
and training required as part of their approved residency programs.” AR 60. Nowhere did they
7 mention vacations, clinical rotations, or carry-forward time. As a result, they gave the Board (and
the Center’s fiscal intermediary) essentially no notice that the Center planned to put those items at
issue in its appeal—the very kind of “sandbagging” that forfeiture rules seek to prevent. Shatsky
v. Palestine Liberation Org., 955 F.3d 1016, 1031 (D.C. Cir. 2020). It follows that the Center
forfeited each of those items, or at least that the Board could reasonably have thought so. Cf.
Gentiva Health Servs., Inc. v. Becerra, 31 F.4th 766, 775 (D.C. Cir. 2022) (affording “considerable
deference” to the Board’s decisions (quoting Marymount Hosp., Inc. v. Shalala, 19 F.3d 658, 661
(D.C. Cir. 1994))).
An example from the Board’s 2005 rules confirms this conclusion. In 2005, the Board’s
rules warned appellants to “clearly and specifically identify [their] position[s] in regard to the
issues” they sought to appeal. PRRB Instr. Part I § B.II.a; AR 6. The rules then offered an example
relating to Medicare’s “disproportionate share hospital (DSH)” adjustment, which offers
“enhanced Medicare payments” to hospitals “serving an ‘unusually high percentage of low-income
patients.’” Becerra v. Empire Health Found., 597 U.S. 424, 429 (2022) (quoting Auburn Regional
Med. Ctr., 568 U.S. at 150) (cleaned up). Per the example, if a hospital “appeal[ed] an aspect of
[its] disproportionate share . . . calculation,” it could not “define the issue as ‘DSH.’” PRRB Instr.
Part I § B.II.a. Instead, it needed to challenge the precise item under review, for instance its
intermediary’s “adjustments to the number of available beds for disproportionate share (DSH)
qualification purposes.” Id. Just so here, indeed more so here. If the Center sought review of its
fiscal intermediary’s vacation, clinical-rotation, and carry-forward determinations, it was obliged
to mention those items “clearly and specifically.” Id. Instead, it entirely omitted them.
An example from the Eastern District of New York confirms it too. In Lutheran Medical
Center v. Burwell, a hospital filed an appeal alleging that its fiscal intermediary “incorrectly
8 calculated [its] number of intern and resident full-time equivalents for graduate medical education
purposes.” No. 14-cv-731, 2016 WL 3882896, *2 (E.D.N.Y. Jul. 13, 2016). Later, the hospital
clarified that its appeal included intern and resident count-related issues carried forward from prior
fiscal years. Id. The Board found that the hospital forfeited the carry-forward issues by failing to
raise them in its initial appeal papers—even though those papers did mention intern and resident-
count issues in general terms—and the District Court for the Eastern District of New York
affirmed. Id. at *4. Likewise in this case. By referring generally to “time spent by residents
performing research and training,” AR 60, the Center’s appeal papers did not alert the Board to its
additional vacation time, clinical rotation time, and carry-forward arguments.3
The Center’s counterarguments fail. At the outset, it is not true that the Board “did not rely
on any statute or notice-and-comment regulation” in deeming the Center’s claims forfeited. Pl.’s
Mem. in Supp. of Summ. J. at 27, Dkt. 41-1. The Board relied on 42 C.F.R. § 405.1841 (2005), a
notice-and-comment regulation which codified its forfeiture rules. AR 6.
The Center adds that neither 42 C.F.R. § 405.1841 nor the Board’s own rules specifically
required vacation time, clinical-rotations time, and carry-forward claims “to be appealed as
separate ‘issues’” in 2005, when the Center took its appeal. Pl.’s Mem. in Supp. of Summ. J. at
28. But that is irrelevant. As a general matter, both the regulation and the Board’s rules required
appellants to identify their claims “clearly and specifically.” PRRB Instr. Part I § B.II.a (2002).
That language is clear and unequivocal. Cf. United States v. Swift & Co., 158 F. Supp. 551, 555
(D.D.C. 1958) (“It is a fundamental rule of statutory interpretation that a statute general in its
3 Unlike the hospital in Lutheran Medical, the Center mentioned its carry-forward issues in its initial briefing before the Board. Compare 2016 WL 3882896, at *2–3, with AR 357. But that distinction does not make a difference under the Board’s rules and regulations, which say that a hospital must raise every issue for appeal in an initial hearing request to the Board. PRRB Instr. Part I § B.II.a (2002); 42 C.F.R. § 405.1841 (2005). 9 language is to be given general application.” (quoting United States v. Nat’l City Lines, 80 F. Supp.
734, 741 (S.D. Cal. 1948))). And in this case, the Board reasonably determined that the Center’s
attempt to appeal its vacation time, clinical-rotations time, and carry-forward claims fell short of
what its rules required. Further, although the Board could have written its rules more explicitly, it
did not need to do so. Administrative agencies are free to set general standards by regulation and
then flesh those standards out in case-by-case adjudication. See NLRB v. Bell Aerospace Co., 416
U.S. 267, 290–94 (1974).
For similar reasons, this is not a case in which “the regulated party . . . was not on notice
of [the] agency’s” legal position before it appeared for a hearing. Univ. of Tex. M.D. Anderson
Cancer Ctr. v. Sebelius, 650 F.3d 685, 688 (D.C. Cir. 2011) (cleaned up). In M.D. Anderson, the
Board “sprung” a new “requirement” on a hospital after a hearing concluded. Id. But see Bell
Aerospace, 416 U.S. at 294 (“[T]he Board is not precluded from announcing new principles in an
adjudicative proceeding.”). Here, by contrast, the Board at most applied an old standard to new
facts—a routine facet of agency adjudication. Doing so did not “deprive[]” the Center “of fair
notice” as to its obligations. Fabi Constr. Co. v. Sec’y of Labor, 508 F.3d 1077, 1088 (D.C. Cir.
2007).
The reality that the Board applied an old rule to the Center also defeats the Center’s reliance
on 42 U.S.C. § 1395hh(a)(1) and FCC v. Fox Televisions Stations Inc., 556 U.S. 502 (2009).
Section 1395hh(c)(1) says that the Department of Health and Human Services must publish all its
“manual instructions, interpretative rules, statements of policy, and guidelines of general
applicability” regarding Medicare payments in the Federal Register. 42 U.S.C. § 1395hh(c)(1).
Here, however, the Board’s decision was an application of an old rule rather than a new “manual
instruction[], interpretative rule[], statement[] of policy, [or] guideline[] of general applicability.”
10 Id. Similarly, although Fox holds that an agency may not change its prior policies in an
adjudication without explaining itself, the Center has not identified any change in policy meriting
explanation. At most, the Board applied an old policy to facts it had not previously considered.
Cf. Bell Aerospace, 416 U.S. at 294–95.
Nor does it help the Center that, in 2008, the Board promulgated new rules describing
“resident count” as a “common example[]” of an “issue” that healthcare providers might appeal.
Provider Reimb. Rev. Bd. Rules 8.1 (2008). For one thing, those same rules make clear that “each
contested component” of a fiscal intermediary’s reimbursement determination must be “appealed
as a separate issue and described as narrowly as possible,” a framing that favors the Board. Id.
(emphasis added). For another, in this case, the Center did not just appeal its fiscal intermediary’s
“resident count” full stop. Rather, it specifically appealed its fiscal intermediary’s handling of
resident research and training time. AR 60. The natural inference was that the Center’s appeal
did not cover other resident-related issues. Cf. O’Melveny & Myers v. FDIC, 512 U.S. 79, 86–87
(1994) (discussing the maxim that “[i]nclusio unius, exclusio alterius”).
The Center also says that it raised issues related to its carry-forward claims in other appeals
before the Board. But the Board’s forfeiture rules do not contain an exception for claims raised
in other appeals, and for good reason. Each appeal before the Board is a separate proceeding in
which hospitals may pursue separate legal theories. Likewise, it does not matter that the Board
reached conclusions in the Center’s other appeals that have obvious implications for this appeal.
Under the Board’s rules, a hospital’s reimbursement amounts do not “automatically adjust” to
accommodate the results of prior appeals. Lutheran Med. Ctr., 2016 WL 3882896, at *4. Instead,
to preserve a claim with respect to a particular appeal, a hospital must identify that claim in its
initial appeal papers requesting a hearing for that appeal. See 42 C.F.R. § 405.1841(a)(1) (2005).
11 By analogy, to preserve an issue for appeal in the D.C. Circuit, a litigant must raise the issue in the
district court proceedings from which she plans to appeal. See, e.g., Murthy v. Vilsack, 609 F.3d
460, 465 (D.C. Cir. 2010). It is not enough to raise the issue in a different district court case, even
if the cases are closely related.
Finally, the Center argues that the Board could have deduced the true scope of its appeal
from the first sentence of its appeal notification—which expressed the Center’s “dissatis[faction]”
with its fiscal intermediary’s “determination . . . as to the total number of [its] full-time equivalent
(FTE) residents,” AR 60—and from the Center’s estimate that its appeal put more than $2 million
in Medicare payments in controversy. Not so. As to the first point, the Center’s appellate materials
did not end with their first sentence. They went on to specify the nature of the Center’s
“dissatis[faction]”: namely, “that the Intermediary’s determination [was] contrary to 42 U.S.C.
§ 1395ww(d)(5)(A) because it fail[ed] to include time spent by residents performing research and
training.” Id. As explained, that language implicitly excluded other grounds for appeal. And as
to the second point, the possibility that the Board might have been able to deduce the true scope
of the Center’s appeal from its estimate of the amount in controversy hardly shows that the Center
“clearly and specifically” put vacation time, clinical-rotation time, and carry-forward claims at
issue in its appeal.4 PRRB Instr. Part I § B.II.a (2002). Certainly, it was not arbitrary for the Board
to take such a position.
4 The Center’s complaint that the Board “ignored [a] declaration from Ms. Margarita Saucedo” discussing the nature of the Center’s $2 million estimate does not change this conclusion. Pl.’s Opp. to Def.’s Mot. to Dismiss at 19, Dkt. 47; see Pl.’s Mem. in Support of Summ. J. at 32–34. Even if Ms. Saucedo were correct that the Center’s $2 million figure incorporated items besides research and training time, it would not follow that the figure gave the Board adequate notice of the issues the Center had raised in its appeal.
Likewise, although the Board did not specifically reference Ms. Saucedo’s declaration in its decisional materials, it did not need to. Although the Court “may not supply a reasoned basis for 12 For all these reasons, the Board acted reasonably in dismissing the Center’s vacation time,
clinical-rotation time, and carry-forward claims as forfeited.
B. Failure to Present Eight-Bed Claim to Fiscal Intermediary
Independently, the Center challenges the Board’s dismissal of its bed-count claim.
The Board dismissed that claim (1) because it lacked authority to hear it under Seventh Circuit
precedent and (2) because, as a discretionary matter, it would have declined to hear it even if it
had authority to do so. AR 248–52. The Court will affirm the Board’s decision on the second
basis. Assuming without deciding that the Board had discretion to hear the Center’s bed-count
claim, it did not act arbitrarily or unlawfully in declining to hear it.
Section 1395oo of the Medicare Act describes the circumstances in which a hospital may
appeal a reimbursement decision to the Board. See Bethesda Hosp. Ass’n v. Bowen, 485 U.S. 399,
403 (1988). In relevant part, it says that a hospital “may obtain a hearing before the Board” if it
“is dissatisfied with a final determination of . . . its fiscal intermediary . . . as to the amount of total
program reimbursement due” to it. Id. (quoting 42 U.S.C. § 1395oo(a)). The Board has “the
power to affirm, modify, or reverse a final determination of [a] fiscal intermediary with respect to
a cost report”—e.g., a request for reimbursement—“and to make any other revisions on matters
covered by such cost report . . . even though such matters were not considered by the intermediary
in making such final determination.” 42 U.S.C. § 1395oo(d).
the [Board’s] action that the [Board] itself has not given,” it must “uphold a decision of less than ideal clarity if the [Board’s] path may reasonably be discerned.” State Farm, 463 U.S. at 43 (cleaned up). And in context, the Board clearly accepted the Center’s fiscal intermediary’s position that Saucedo’s declaration “[did] not even begin to meet the legal threshold to properly articulate an appealable issue before the [B]oard.” AR 39; see AR 36 (acknowledging the Center’s argument that “the calculation included in its initial appeal . . . ‘self-evidently and indisputably reflected’” the Center’s carryover arguments—the argument presented in Ms. Saucedo’s declaration—but concluding that those issues were nonetheless “not specifically raised” by the Center’s appeal materials). 13 The Courts of Appeals have split on what “dissatisfied” means—in particular, on whether
a hospital can be “dissatisfied” with an intermediary’s refusal to reimburse specific costs if the
hospital (1) did not request reimbursement for those costs from the intermediary and (2) such a
request would not have been futile under the applicable Medicare rules. AR 7–12 (citing cases);
see also Bethesda, 485 U.S. at 405 (holding that a hospital is “dissatisfied” when it did not request
reimbursement for costs because its request would have been futile). But it is generally accepted
that, under § 1395oo(d), the Board does not need to consider requests for reimbursement that a
hospital has not lodged with its fiscal intermediary. Rather, § 1395oo(d) grants the Board “the
power”—but not the obligation—to “make . . . revisions on matters covered” by a reimbursement
request “even though such matters were not considered by the intermediary.” 42 U.S.C.
§ 1395oo(d); see, e.g., UMDNJ-Univ. Hosp. v. Leavitt, 539 F. Supp. 2d 70, 79 (D.D.C. 2008)
(“Congress empowered the Board to make such modifications and . . . to consider evidence not
put before [a] fiscal intermediary, but did not require it to do so.”).
When exercising its authority under § 1395oo(d), the Board has “consistently declined” to
hear claims that a hospital did not present to its fiscal intermediary unless presenting the claim to
the intermediary would have been futile. AR 12; see, e.g., Affinity Med. Ctr. v. BlueCross
BlueShield Ass’n, PRRB Dec. No. 2010-D15 (Mar. 11, 2010) (applying the policy in similar
circumstances). By preventing hospitals from lodging claims for reimbursement directly with the
Board, this “policy of presentment” aims to “prevent . . . end-run[s]” around fiscal intermediaries.
AR 9. As other courts in this district have explained, if the Board regularly considered issues that
hospitals did not raise before their fiscal intermediaries, it could “make the PRRB [a] tribunal of
original jurisdiction, eliminate a tier of review, and potentially slow the reimbursement process for
other providers.” UMDNJ, 539 F. Supp. 2d at 79.
14 Against this backdrop, the Board acted reasonably in declining to consider the Center’s
bed-count claim—i.e., its claim that its fiscal intermediary should have proceeded from the
premise that the Center operated 409 rather than 417 reimbursable adult and pediatric hospital
beds. The Center did not raise the same bed-count complaint with its fiscal intermediary that it
filed with the Board. See AR 422 (reporting 417 beds). “Only in hindsight did” the Center
“determine that it could (and should) have reported the[] [relevant] items differently, thereby
potentially increasing [its] reimbursement.” AR 12. But the Center’s “negligence in
understanding the Medicare regulations” and “uncertainty as to the interpretation of a regulation”
do not excuse its failure to raise the issue before the fiscal intermediary. Id. Nor does it mean
raising the issue before the fiscal intermediary would have been futile. The Board thus had good
reasons not to consider the Center’s bed-count contentions on their merits.
The Center responds that it did raise its bed-count claim with its fiscal intermediary—in
the language of the statute, that its bed-count claim counts as a “matter[] . . . considered by the
intermediary,” see 42 U.S.C. § 1395oo(d)—because it (incorrectly) told its fiscal intermediary that
it operated with 417 reimbursable beds. Not so. A “matter” consists of the “facts forming the
basis of [a] claim” or the “facts material to [an] issue.” “Matter,” Black’s Law Dictionary 978 (6th
ed. 1990). And by telling its fiscal intermediary that it operated with 417 reimbursable beds as
opposed to 409 beds, the Center did not present any facts to the Board “forming the basis of its
claim” that it operated with fewer than 417 beds. Id. In other words, although the Center made
reference to its bed count in the cost calculations it presented to its fiscal intermediary, the question
of whether the Center operated with fewer than 417 reimbursable beds was not a
“matter[] . . . considered by the intermediary in making [a] final determination” on the Center’s
reimbursement amount. 42 U.S.C. § 1395oo(d). By analogy, suppose the Center deducted $10
15 million in salary expense on its federal income tax return. See 26 U.S.C. § 162(a)(1). The Center
could not claim that its return really sought $12 million in salary expense deduction, even if (in
one sense) the return put the Center’s actual salary expenses at issue.
Nor was Board’s decision not to hear the Center’s unpresented bed-count claim
inconsistent with its prior decision in Mayo Regional Hospital v. Blue Cross & Blue Shield
Association. PRRB Hearing Dec. 2002-D15 (Mar. 27, 2002). Although an agency must “treat
like cases alike,” Westar Energy, Inc. v. FERC, 473 F.3d 1239, 1241 (D.C. Cir. 2007), it need not
“grapple with every last one of its precedents, no matter how distinguishable,” Jicarilla Apache
Nation v. U.S. Dep’t of Int., 613 F.3d 1112, 1120 (D.C. Cir. 2010). And here, the distinction
between the Center’s case and Mayo Regional is “so plain that no inconsistency appears.” Bush-
Quayle ’92 Primary Comm., Inc. v. FEC, 104 F.3d 448, 454 (D.C. Cir. 1997). In Mayo Regional,
a hospital claimed certain costs for uncollectible Medicare debts (“bad debt”) on its cost report.
PRRB Hearing Dec. 2002-D15 at 17. It also claimed additional (“crossover”) bad debts as
“contractual allowances” on separate components of its cost report, Schedule G and Worksheet G.
Id. The Board elected to consider the additional bad debts, reasoning that the hospital’s decision
to list the bad debts as contractual allowances was acceptable “from an accounting standpoint” and
that “a contractual allowance loss could lead to cross-subsidization of payors.” Id. Here, by
contrast, the Center did not make a similar accounting choice and similar cross-subsidization
worries are not present. That makes Mayo Regional plainly inapposite.
Likewise, the Board’s decision to decline to hear the Center’s bed-count claim did not rest
on “inapplicable policy considerations.” Pl.’s Supp. Mem. at 8, Dkt. 50. As the cases the Board
cited in its decision explain, the Board has good reasons to exercise its power to “consider matters
not specifically raised before [an] intermediary . . . only sparingly.” St. Luke’s Hosp. v. Sec’y of
16 Health & Hum. Servs., 810 F.2d 325, 327 (1st Cir. 1987); see AR 10–11 (citing St. Luke’s). For
example, if the Board regularly passed upon questions not presented to a fiscal intermediary first,
it would encourage hospitals to submit sloppy cost reports to their fiscal intermediaries—
effectively “eliminat[ing] a tier of review” and “slow[ing] the reimbursement process for other
providers.” UMDNJ, 539 F. Supp. 2d at 79; see AR 11 (citing UMDNJ). Further, and in any
event, the Board’s decision to apply its presentment policy in prior cases gave it reasons to apply
that policy in this case for consistency’s sake.
Finally, the Board’s decision did not fall afoul of 42 U.S.C. § 1395hh(a)(2). Under
§ 1395hh(a)(2), the Board may not adopt a “rule, requirement, or other statement of policy . . . that
establishes or changes a substantive legal standard governing the scope of benefits, the payment
for services, or the eligibility of individuals . . . to furnish or receive services” under the Medicare
statute without notice-and-comment regulation. 42 U.S.C. § 1395hh(a)(2); see Azar v. Allina
Health Servs., 139 S. Ct. 1804, 1809 (2019). Because the Board did not adopt its presentment
policy through notice-and-comment rulemaking, it follows that the Board cannot rely on that
policy to the extent that it counts as a “(1) rule, requirement, or other statement of policy that (2)
establishes or changes (3) a substantive legal standard” governing (4) the items listed above. Allina
Health Servs. v. Price, 863 F.3d 937, 943 (D.C. Cir. 2017), aff’d, 139 S. Ct. at 1809. Here,
however, the Board’s presentment policy does not establish or change a substantive legal standard.
At most, it establishes a procedural standard—a standard explaining how the Board will exercise
its discretion in handling claims that a hospital failed to present before its fiscal intermediary.
Rules about the consequences of waiver and forfeiture are paradigmatically procedural. See, e.g.,
Morgan v. Sundance, Inc., 142 S. Ct. 1708, 1713 (describing rules of waiver and forfeiture as
“ordinary procedural rule[s]”).
17 For all these reasons, the Board acted reasonably in declining to adjudicate the Center’s
bed-count claims on their merits.
CONCLUSION
Accordingly, the Court denies the Center’s motion for summary judgment, grants the
Board’s motion for summary judgment, affirms the Board’s decision, and denies the Center’s
petition for review. A separate order accompanies this memorandum opinion.
________________________ June 26, 2024 DABNEY L. FRIEDRICH United States District Judge