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Little Co. of Mary Hospital v. Leavitt

December 10, 2008

LITTLE COMPANY OF MARY HOSPITAL, PLAINTIFF,
v.
MICHAEL O. LEAVITT, SECRETARY, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, DEFENDANTS.



The opinion of the court was delivered by: Wayne R. Andersen District Judge

MEMORANDUM, OPINION AND ORDER

This case is before the court on the parties' cross-motions for summary judgment. For the following reasons, plaintiff Little Company of Mary Hospital's motion for summary judgment is denied and defendant Secretary Michael Leavitt's motion for summary judgment is granted.

BACKGROUND

The facts of the case are not in dispute. Plaintiff, Little Company of Mary Hospital, seeks review of a final agency decision made by the Secretary of the Department of Health and Human Services (the "Secretary"), acting through the Medicare Provider Reimbursement Review Board ("PRRB"), pursuant to the Medicare Act, Title XVIII of the Social Security Act, (codified as amended at 42 U.S.C. §§ 1395 et seq. (2000)), and the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 551 et seq, (2006). Plaintiff is an acute care inpatient hospital and is certified as a "provider of services" under the Medicare program. Plaintiff is entitled to reimbursement for inpatient and outpatient services under the Medicare program.

In order to receive reimbursement under the Medicare program, a participating provider must file a cost report annually with an assigned Medicare fiscal intermediary, which typically is a private insurance company that acts as the agent of the Secretary. After auditing the provider's cost report, the fiscal intermediary issues a final determination of the total amount of reimbursement owing in an initial notice of program reimbursement ("NPR"). A dissatisfied provider can appeal the fiscal intermediary's NPR determination to the PRRB, an administrative review panel, within 180 days under a provision of the Medicare Act, 42 U.S.C. § 1395oo(a). Under the Secretary's regulations, a dissatisfied provider also can request the fiscal intermediary to reopen the determination within three years. 42 C.F.R. § 405.1885 (2008). If a determination is reopened per 42 C.F.R § 405.1885, any revision on the amount of program reimbursement "shall be considered a separate and distinct determination." 42 C.F.R. § 405.1889 (2008).

The present case involves a disproportionate share hospital payment adjustment, which is given to providers that serve a significantly disproportionate share of low-income patients. The disproportionate share hospital payment adjustment is determined under a multi-faceted statutory formula. See 42 U.S.C. § 1395ww(d)(5)(F); see also 42 C.F.R. § 412.106 (disproportionate share hospital payment regulation). In order to qualify for disproportionate share hospital payment adjustments, a provider must meet a specified minimum "disproportionate patient percentage." The two components of this percentage are the Medicaid Low Income Proxy (hereinafter "Medicaid fraction"), which is calculated by the fiscal intermediary, and the Medicare Proxy, of which the Supplemental Security Income ("SSI") fraction is a part. The Secretary, not the fiscal intermediary, calculates the SSI fraction used in the Medicare Proxy.

On September 12, 2000, the fiscal intermediary in the instant case, AdminiStar Federal, Inc. (the "Intermediary"), issued the initial NPR to Plaintiff for the fiscal year ending June 30, 1998. This NPR included a disproportionate share hospital payment adjustment. The Intermediary subsequently reopened the initial NPR and then issued a revised NPR on July 18, 2002. Plaintiff did not appeal the initial NPR or revised NPR within 180 days of their respective dates of issuance. On September 5, 2003, Plaintiff submitted a request to the Intermediary regarding two issues in the revised NPR. The first request focused on the Medicaid fraction of the disproportionate share hospital payment, and the second reopening request addressed the SSI fraction of the disproportionate share hospital payment.

In response to the reopening request, the Intermediary issued a notice of reopening on November 10, 2004 that was limited to Plaintiff's first reopening request -- the Medicaid fraction of the disproportionate share hospital payment. The notice of reopening made no reference to Plaintiff's second request -- the SSI fraction of the disproportionate share hospital payment. On November 17, 2004, the Intermediary issued a second revised NPR adjusting the Medicaid fraction of the disproportionate share hospital payment but did not address the SSI fraction.

On January 26, 2005, Plaintiff filed an appeal with the PRRB challenging the Intermediary's second revised NPR. Plaintiff challenged both the Medicaid fraction that was revised by the Intermediary in the second revised NPR as well as the SSI fraction that was not addressed in the second revised NPR. The Intermediary challenged the PRRB's jurisdiction over the SSI component of the appeal arguing that the PRRB did not have jurisdiction to review the SSI component.

On February 15, 2006, the PRRB ruled in the Intermediary's favor. The PRRB ruled that pursuant to 42 C.F.R. § 405.1889 a provider's post-reopening appeals are "issue specific" inasmuch as the provider may appeal only the specific matter that was reopened and revised. Since the SSI fraction was not reopened or revised by the Intermediary, the PRRB dismissed Plaintiff's appeal of the SSI fraction for lack of jurisdiction. The PRRB found that it had jurisdiction over Plaintiff's appeal of the Medicaid fraction because the Intermediary reopened and changed that aspect of the disproportionate share hospital payment in the November 17, 2004 NPR.

Plaintiff now challenges the lawfulness of the PRRB's February 15, 2006 final decision dismissing Plaintiff's appeal for lack of jurisdiction relating to the SSI fraction. Plaintiff contends that the PRRB's decision to reject jurisdiction was arbitrary and capricious and in violation of the APA, 5 U.S.C. § 706(2). Defendant argues that the PRRB's decision did not violate the APA and should be upheld.

DISCUSSION

Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate when the pleadings and the evidence demonstrate that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). In assessing a motion for summary judgment, the court must view all facts and reasonable inferences in the light most favorable to the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Bay v. Cassens Transport Co., 212 F.3d 969, 972 (7th Cir. 2000). When there are cross-motions for summary judgment, the court should "construe the evidence and all ...


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