Case 1:20-cv-03485 Document 1 Filed 11/30/20 Page 1 of 43
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`THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLUMBIA
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`CENTRAL CALIFORNIA FOUNDATION FOR
`HEALTH d/b/a DELANO REGIONAL MEDICAL
`CENTER
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`1401 Garces Highway
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`Delano, California 93215
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`COMMUNITY HOSPITAL OF THE MONTEREY
`PENINSULA
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`PO Box HH
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`Monterey, California 93942
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`CONTRA COSTA HEALTH SERVICES d/b/a
`CONTRA COSTA REGIONAL MEDICAL CENTER
`50 Douglas Drive
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`Martinez, California 94553
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`COUNTY OF KERN d/b/a KERN MEDICAL CENTER
`1700 Mount Vernon Avenue
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`Kern, California 93306
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`COUNTY OF MONTEREY d/b/a NATIVIDAD
`MEDICAL CENTER
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`1441 Constitution Boulevard
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`Salinas, California 93906
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`COUNTY OF SAN JOAQUIN d/b/a SAN JOAQUIN
`GENERAL HOSPITAL
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`2615 Chester Avenue
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`Bakersfield, California 93301
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`COUNTY OF SANTA CLARA d/b/a
`SANTA CLARA VALLEY MEDICAL CENTER
`751 South Bascom Avenue
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`San Jose, California 95128
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`DIGNITY HEALTH d/b/a ARROYO GRANDE
`COMMUNITY HOSPITAL
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`345 South Halcyon Road
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`Arroyo Grande, California 93420
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`DIGNITY HEALTH d/b/a BAKERSFIELD
`MEMORIAL HOSPITAL
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`420 34th Street
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`Bakersfield, California 93301
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`Case No.
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`Case 1:20-cv-03485 Document 1 Filed 11/30/20 Page 2 of 43
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`DIGNITY HEALTH d/b/a CALIFORNIA HOSPITAL
`MEDICAL CENTER - LOS ANGELES
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`1401 South Grand Avenue
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`Los Angeles, California 90015
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`DIGNITY HEALTH d/b/a CHANDLER REGIONAL
`MEDICAL CENTER
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`1955 West Frye Road
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`Chandler, Arizona 85224
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`DIGNITY HEALTH d/b/a COMMUNITY HOSPITAL
`OF SAN BERNARDINO
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`1805 Medical Center Drive
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`San Bernardino, California 92411
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`DIGNITY HEALTH d/b/a DOMINICAN HOSPITAL
`1555 Soquel Drive
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`Santa Cruz, California 95065
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`DIGNITY HEALTH d/b/a FRENCH HOSPITAL
`MEDICAL CENTER
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`1911 Johnson Avenue
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`San Luis Obispo, California 93401
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`DIGNITY HEALTH d/b/a GLENDALE MEMORIAL
`HOSPITAL AND HEALTH CENTER
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`1420 South Central Avenue
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`Glendale, California 91204
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`DIGNITY HEALTH d/b/a MARIAN REGIONAL
`MEDICAL CENTER
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`1400 East Church Street
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`Santa Maria, California 93454
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`DIGNITY HEALTH d/b/a MERCY GENERAL
`HOSPITAL
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`4001 J Street
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`Sacramento, California 95819
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`DIGNITY HEALTH d/b/a MERCY GILBERT
`MEDICAL CENTER
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`3555 South Val Vista Drive
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`Gilbert, Arizona 85296
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`Case 1:20-cv-03485 Document 1 Filed 11/30/20 Page 3 of 43
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`DIGNITY HEALTH d/b/a MERCY HOSPITAL
`2215 Truxtun Avenue
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`Bakersfield, California 93301
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`DIGNITY HEALTH d/b/a MERCY HOSPITAL OF
`FOLSOM
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`1650 Creekside Drive
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`Folsom, California 95630
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`DIGNITY HEALTH d/b/a MERCY MEDICAL
`CENTER REDDING
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`2175 Rosaline Avenue
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`Redding, California 96001
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`DIGNITY HEALTH d/b/a MERCY SAN JUAN
`MEDICAL CENTER
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`6501 Coyle Avenue
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`Carmichael, California 95608
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`DIGNITY HEALTH d/b/a METHODIST HOSPITAL
`OF SACRAMENTO
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`7500 Hospital Drive
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`Sacramento, California 95823
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`DIGNITY HEALTH d/b/a NORTHRIDGE HOSPITAL
`MEDICAL CENTER
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`18300 Roscoe Boulevard
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`Northridge, California 91328
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`DIGNITY HEALTH d/b/a MERCY MEDICAL CENTER )
`301 East 13th Street
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`Merced, California 95341
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`DIGNITY HEALTH d/b/a SAINT FRANCIS
`MEMORIAL HOSPITAL
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`900 Hyde Street
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`San Francisco, California 94109
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`DIGNITY HEALTH d/b/a SIERRA NEVADA
`MEMORIAL HOSPITAL
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`155 Glasson Way
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`Grass Valley, California 95945
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`Case 1:20-cv-03485 Document 1 Filed 11/30/20 Page 4 of 43
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`DIGNITY HEALTH d/b/a ST. BERNARDINE
`MEDICAL CENTER
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`2101 North Waterman Avenue
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`San Bernardino, California 92404
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`DIGNITY HEALTH d/b/a ST. JOHNS REGIONAL
`HEALTH CENTER
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`1600 North Rose Avenue
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`Oxnard, California 93030
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`DIGNITY HEALTH d/b/a ST. JOSEPH'S HOSPITAL
`AND MEDICAL CENTER
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`350 West Thomas Road
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`Phoenix, Arizona 85013
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`DIGNITY HEALTH d/b/a ST. JOSEPH'S MEDICAL
`CENTER OF STOCKTON
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`1800 North California Street
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`Stockton, California 95204
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`DIGNITY HEALTH d/b/a ST. MARY MEDICAL
`CENTER
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`1050 Linden Avenue
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`Long Beach, California 90813
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`DIGNITY HEALTH d/b/a ST. MARY'S MEDICAL
`CENTER
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`450 Stanyan Street
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`San Francisco, California 94117
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`DIGNITY HEALTH d/b/a ST. ROSE DOMINICAN
`HOSPITAL, ROSE DE LIMA CAMPUS
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`102 East Lake Mead Parkway
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`Henderson, Nevada 89015
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`DIGNITY HEALTH d/b/a ST. ROSE DOMINICAN
`HOSPITAL, SAN MARTIN CAMPUS
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`8280 West Warm Springs Road
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`Las Vegas, Nevada 89113
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`DIGNITY HEALTH d/b/a ST. ROSE DOMINICAN
`HOSPITAL, SIENA CAMPUS
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`3001 St. Rose Parkway
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`Henderson, Nevada 89052
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`Case 1:20-cv-03485 Document 1 Filed 11/30/20 Page 5 of 43
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`DOCTORS MEDICAL CENTER - SAN PABLO
`2000 Vale Road
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`San Pablo, California 94806
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`EL CAMINO HOSPITAL
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`2500 Grant Road
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`Mountain View, California 94040
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`ENLOE MEDICAL CENTER
`1531 Esplanade
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`Chico, California 95926
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`ESSENTIA HEALTH ST. MARY'S MEDICAL
`CENTER
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`407 East Third Street
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`Duluth, Minnesota 55805
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`INNOVIS HEALTH, LLC d/b/a ESSENTIA HEALTH
`FARGO
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`3000 32nd Avenue South
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`Fargo, North Dakota 58104
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`MISSION HOSPITAL REGIONAL MEDICAL CENTER )
`27700 Medical Center Road
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`Mission Viejo, California 92691
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`JOHN MUIR MEDICAL CENTER – CONCORD
`2540 East Street
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`Concord, California 94520
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`MARSHALL MEDICAL CENTER
`1100 Marshall Way
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`Placerville, California 95667
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`NORTHBAY MEDICAL CENTER
`4500 Business Center Drive Suite 244
`Fairfield, California 94534
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`NORTHBAY VACAVALLEY HOSPITAL
`1000 Nut Tree Road
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`Vacaville, California 95687
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`PALOMAR HEALTH d/b/a POMERADO HOSPITAL
`15615 Pomerado Road
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`Poway, California 92064
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`Case 1:20-cv-03485 Document 1 Filed 11/30/20 Page 6 of 43
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`PALOMAR MEDICAL CENTER d/b/a PALOMAR
`HEALTH DOWNTOWN CAMPUS
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`555 East Valley Parkway
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`Escondido, California 92025
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`PASADENA HOSPITAL ASSOCIATION, LTD d/b/a
`HUNTINGTON MEMORIAL HOSPITAL
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`100 W California Boulevard
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`Pasadena, California 91109
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`PETALUMA VALLEY HOSPITAL
`400 North McDowell Boulevard
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`Petaluma, California 94954
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`PRIME HEALTHCARE SERVICES RENO LLC d/b/a
`SAINT MARY'S REGIONAL MEDICAL CENTER
`235 W 6th Street
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`Reno, Nevada 89503
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`QUEEN OF THE VALLEY MEDICAL CENTER
`1000 Trancas Street
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`Napa, California 94558
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`SALINAS VALLEY MEMORIAL HEALTHCARE
`SYSTEM d/b/a SALINAS VALLEY
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`MEMORIAL HOSPITAL
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`450 East Romie Lane
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`Salinas, California 93901
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`SANTA ROSA MEMORIAL HOSPITAL
`1165 Montgomery Drive
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`Santa Rosa, California 95405
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`ST. JOSEPH HOSPITAL EUREKA
`2700 Dolbeer Street
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`Eureka, California 95501
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`ST. JOSEPH HOSPITAL OF ORANGE
`1100 West Stewart Dr ive
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`Orange, California 92868
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`ST. MARY MEDICAL CENTER
`18300 US Highway 18
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`Apple Valley, California 92307
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`Case 1:20-cv-03485 Document 1 Filed 11/30/20 Page 7 of 43
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`STANFORD HEALTH CARE – VALLEYCARE
`1111 East Stanley Boulevard
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`Livermore, California 94550
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`STANFORD HOSPITAL & CLINICS d/b/a
`STANFORD HEALTH CLINIC
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`1510 Page Mill Road
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`Palo Alto, California 94304
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`UNIVERSITY OF CALIFORNIA d/b/a
`UNIVERSITY OF CALIFORNIA SAN
`FRANCISCO MEDICAL CENTER
`505 Parnassus Avenue
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`San Francisco, California 94143
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`WASHINGTON TOWNSHIP HOSPITAL DISTRICT
`d/b/a WASHINGTON HOSPITAL
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`2000 Mowry Avenue
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`Fremont, California 94538
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`WILCOX MEMORIAL HOSPITAL
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`3-3420 Kuhio Highway
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`Lihue, Hawaii 96766
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`ZUCKERBERG SAN FRANCISCO GENERAL
`HOSPITAL & TRAUMA CENTER – ACUTE f/d/b/a
`SAN FRANCISCO GENERAL HOSPITAL
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`1001 Potrero Avenue
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`San Francisco, California 94110
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`Plaintiffs,
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`v.
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`ALEX M. AZAR, II Secretary,
`
`United States Department of
`
`Health and Human Services,
`
`200 Independence Avenue S.W.
`Washington, District of Columbia 20201,
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`7
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`

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`Case 1:20-cv-03485 Document 1 Filed 11/30/20 Page 8 of 43
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`COMPLAINT FOR JUDICIAL REVIEW AND DECLARATORY
`AND INJUNCTIVE RELIEF UNDER THE MEDICARE ACT
`
`NATURE OF ACTION
`
`1.
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`This case concerns the proper treatment in the calculation of the Medicare Part A
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`disproportionate share hospital (“DSH”) payment of inpatient hospital days for patients who were
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`enrolled in Medicare Advantage plans under Part C of the Medicare Act. The Court of Appeals
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`has now ruled against the agency in three actions challenging the agency’s repeated attempts to
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`apply its Part C days policy change first adopted in 2004 to deny Medicare DSH payments to
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`hospitals. See Northeast Hosp. Corp. v. Sebelius, 657 F.3d 1, 16–17 (D.C. Cir. 2011) (finding
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`application of 2004 rule to prior periods impermissibly retroactive); Allina Health Services v.
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`Sebelius, 746 F.3d 1102, 1105 (D.C. Cir. 2014) (“Allina I”) (vacating 2004 rule because it was not
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`a logical outgrowth of proposed rule); Allina Health Servs. v. Price, 863 F.3d 937, 943–44 (D.C.
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`Cir. 2017) (“Allina II”) (holding that the agency must undertake notice-and-comment rulemaking
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`before the policy of the 2004 vacated rule can take effect). But the agency refuses to acquiesce in
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`those decisions or in the Supreme Court’s recent decision in Allina II affirming the Court of
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`Appeals’ decision. Azar v. Allina Health Servs., 139 S. Ct. 1804 (2019). Instead, the agency has
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`continued to apply the Part C days policy adopted in the now-vacated 2004 rule in violation of
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`these decisions, including in the payment determinations at issue for the plaintiff hospitals in this
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`case, in a recently issued proposed rule seeking to re-adopt the same 2004 policy retroactively, and
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`in a ruling that would leave undisturbed the payment determinations from which hospitals have
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`appealed and, as construed by the agency’s administrative Board, not permit further administrative
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`or judicial review of those determinations. The agency’s continued attempts to apply the 2004
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`policy should be rejected because they are procedurally invalid, as the Court of Appeals has now
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`8
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`Case 1:20-cv-03485 Document 1 Filed 11/30/20 Page 9 of 43
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`twice ruled, fail any test of reasoned decision-making, and are inconsistent with congressional
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`intent in adopting the Medicare DSH statute.
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`JURISDICTION AND VENUE
`
`2.
`
`This action arises under the Medicare Act, Title XVIII of the Social Security Act,
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`42 U.S.C. § 1395 et seq.
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`3.
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`4.
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`5.
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`Jurisdiction is proper under 42 U.S.C. § 1395oo(f)(l).
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`Venue is proper in this judicial district under 42 U.S.C. § 1395oo(f)(l).
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`PARTIES
`
`The plaintiff hospitals in this action and hospital fiscal years (or portions thereof)
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`at issue are as follows:
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`(1)
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`(2)
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`(3)
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`(4)
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`(5)
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`(6)
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`(7)
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`(8)
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`(9)
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`Central California Foundation for Health d/b/a Delano Regional Medical Center,
`Provider No. 05-0608, fiscal year ending December 31, 2013;
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`Community Hospital of the Monterey Peninsula, Provider No. 05-0145, fiscal
`year ending December 31, 2013;
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`Contra Costa Health Services d/b/a Contra Costa Regional Medical Center,
`Provider No. 05-0276, fiscal year ending June 30, 2013;
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`County of Kern d/b/a Kern Medical Center, Provider No. 05-0315, fiscal year
`ending June 30, 2013;
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`County of Monterey d/b/a Natividad Medical Center, Provider No. 05-0248, fiscal
`year ending June 30, 2013;
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`County of San Joaquin d/b/a San Joaquin General Hospital, Provider No. 05-
`0167, fiscal years ending June 30, 2012 and June 30, 2013;
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`County of Santa Clara d/b/a Santa Clara Valley Medical Center, Provider No. 05-
`0038, fiscal years ending June 30, 2009 and June 30, 2013;
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`Dignity Health d/b/a Arroyo Grande Community Hospital, Provider No. 05-0016,
`fiscal year ending June 30, 2011;
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`Dignity Health d/b/a Bakersfield Memorial Hospital, Provider No. 05-0036, fiscal
`year ending June 30, 2011;
`
`
`
`9
`
`

`

`Case 1:20-cv-03485 Document 1 Filed 11/30/20 Page 10 of 43
`
`(10) Dignity Health d/b/a California Hospital Medical Center - Los Angeles, Provider
`No. 05-0149, fiscal year ending June 30, 2011;
`
`(11) Dignity Health d/b/a Chandler Regional Medical Center, Provider No. 03-0036,
`fiscal years ending June 30, 2006 and June 30, 2011;
`
`(12) Dignity Health d/b/a Community Hospital of San Bernardino, Provider No. 05-
`0089, fiscal year ending June 30, 2011;
`
`(13) Dignity Health d/b/a Dominican Hospital, Provider No. 05-0242, fiscal year
`ending June 30, 2011;
`
`(14) Dignity Health d/b/a French Hospital Medical Center, Provider No. 05-0232,
`fiscal year ending June 30, 2011;
`
`(15) Dignity Health d/b/a Glendale Memorial Hospital and Health Center, Provider
`No. 05-0058, fiscal years ending June 30, 2006 and June 30, 2011;
`
`(16) Dignity Health d/b/a Marian Regional Medical Center, Provider No. 05-0107,
`fiscal year ending June 30, 2011;
`
`(17) Dignity Health d/b/a Mercy General Hospital, Provider No. 05-0017, fiscal years
`ending June 30, 2006 and June 30, 2012;
`
`(18) Dignity Health d/b/a Mercy Gilbert Medical Center, Provider No. 03-0119, fiscal
`year ending June 30, 2011;
`
`(19) Dignity Health d/b/a Mercy Hospital, Provider No. 05-0295, fiscal year ending
`June 30, 2011;
`
`(20) Dignity Health d/b/a Mercy Hospital of Folsom, Provider No. 05-0414, fiscal
`years ending June 30, 2011 and June 30, 2012;
`
`(21) Dignity Health d/b/a Mercy Medical Center, Provider No. 05-0444, fiscal years
`ending June 30, 2006, June 30, 2011, and June 30, 2012;
`
`(22) Dignity Health d/b/a Mercy Medical Center Redding, Provider No. 05-0280,
`fiscal years ending June 30, 2011 and June 30, 2012;
`
`(23) Dignity Health d/b/a Mercy San Juan Medical Center, Provider No. 05-0516,
`fiscal years ending June 30, 2006 and June 30, 2011;
`
`(24) Dignity Health d/b/a Methodist Hospital of Sacramento, Provider No. 05-0590,
`fiscal year ending June 30, 2006;
`
`(25) Dignity Health d/b/a Northridge Hospital Medical Center, Provider No. 05-0116,
`fiscal years ending June 30, 2011 and June 30, 2012;
`
`
`
`10
`
`

`

`Case 1:20-cv-03485 Document 1 Filed 11/30/20 Page 11 of 43
`
`(26) Dignity Health d/b/a Saint Francis Memorial Hospital, Provider No. 05-0152,
`fiscal years ending June 30, 2011 and June 30, 2012;
`
`(27) Dignity Health d/b/a Sierra Nevada Memorial Hospital, Provider No. 05-0150,
`fiscal year ending June 30, 2011;
`
`(28) Dignity Health d/b/a St. Bernardine Medical Center, Provider No. 05-0129, fiscal
`year ending June 30, 2011;
`
`(29) Dignity Health d/b/a St. Johns Regional Health Center, Provider No. 05-0082,
`fiscal year ending June 30, 2012;
`
`(30) Dignity Health d/b/a St. Joseph's Hospital and Medical Center, Provider No. 03-
`0024, fiscal years ending June 30, 2006 and June 30, 2011;
`
`(31) Dignity Health d/b/a St. Joseph's Medical Center of Stockton, Provider No. 05-
`0084, fiscal years ending June 30, 2006 and June 30, 2011;
`
`(32) Dignity Health d/b/a St. Mary Medical Center, Provider No. 05-0191, fiscal years
`ending June 30, 2006 and June 30, 2011;
`
`(33) Dignity Health d/b/a St. Mary's Medical Center, Provider No. 05-0457, fiscal year
`ending June 30, 2011;
`
`(34) Dignity Health d/b/a St. Rose Dominican Hospital, Rose De Lima Campus,
`Provider No. 29-0012, fiscal years ending June 30, 2011 and June 30, 2012;
`
`(35) Dignity Health d/b/a St. Rose Dominican Hospital, San Martin Campus, Provider
`No. 29-0053, fiscal year ending June 30, 2011;
`
`(36) Dignity Health d/b/a St. Rose Dominican Hospital, Siena Campus, Provider No.
`29-0045, fiscal year ending June 30, 2011;
`
`(37) Doctors Medical Center - San Pablo, Provider No. 05-0079, fiscal year ending
`December 31, 2013;
`
`(38) El Camino Hospital, Provider No. 05-0308, fiscal year ending June 30, 2013;
`
`(39) Enloe Medical Center, Provider No. 05-0039, fiscal year ending June 30, 2013;
`
`(40) Essentia Health St. Mary's Medical Center, Provider No. 24-0002, fiscal year
`ending June 30, 2010;
`
`(41)
`
`(42)
`
`Innovis Health, LLC d/b/a Essentia Health Fargo, Provider No. 35-0070, fiscal
`year ending June 30, 2010;
`
`John Muir Medical Center - Concord, Provider No. 05-0496, fiscal year ending
`December 31, 2012;
`
`
`
`11
`
`

`

`Case 1:20-cv-03485 Document 1 Filed 11/30/20 Page 12 of 43
`
`(43) Mission Hospital Regional Medical Center, Provider No. 05-0567, fiscal year
`ending June 30, 2009;
`
`(44) Marshall Medical Center, Provider No. 05-0254, fiscal year ending October 31,
`2013;
`
`(45) Northbay Medical Center, Provider No. 05-0367, fiscal year ending December 31,
`2001;
`
`(46) Northbay VacaValley Hospital, Provider No. 05-0680, fiscal year ending
`December 31, 2001;
`
`(47) Palomar Health d/b/a Pomerado Hospital, Provider No. 05-0636, fiscal year
`ending June 30, 2013;
`
`(48) Palomar Medical Center d/b/a Palomar Health Downtown Campus, Provider No.
`05-0115, fiscal year ending June 30, 2012;
`
`(49) Pasadena Hospital Association, Ltd d/b/a Huntington Memorial Hospital,
`Provider No. 05-0438, fiscal years ending December 31, 2012 and December 31,
`2013;
`
`(50) Petaluma Valley Hospital, Provider No. 05-0136, fiscal year ending June 30,
`2010;
`
`(51) Prime Healthcare Services Reno LLC d/b/a Saint Mary's Regional Medical
`Center, Provider No. 29-0009, fiscal year ending December 31, 2006;
`
`(52) Queen of the Valley Medical Center, Provider No. 05-0009, fiscal year ending
`June 30, 2010;
`
`(53) Salinas Valley Memorial Healthcare System d/b/a Salinas Valley Memorial
`Hospital, Provider No. 05-0334, fiscal years ending June 30, 2008 and June 30,
`2009;
`
`(54) Santa Rosa Memorial Hospital, Provider No. 05-0174, fiscal year ending June 30,
`2010;
`
`(55) St. Joseph Hospital Eureka, Provider No. 05-0006, fiscal year ending June 30,
`2010;
`
`(56) St. Joseph Hospital of Orange, Provider No. 05-0069, fiscal year ending June 30,
`2010;
`
`(57) St. Mary Medical Center, Provider No. 05-0300, fiscal year ending June 30, 2010;
`
`(58) Stanford Health Care - ValleyCare, Provider No. 05-0283, fiscal year ending
`June 30, 2013;
`
`
`
`12
`
`

`

`Case 1:20-cv-03485 Document 1 Filed 11/30/20 Page 13 of 43
`
`(59) Stanford Hospital & Clinics d/b/a Stanford Health Care, Provider No. 05-0441,
`fiscal year ending August 31, 2009;
`
`(60) University of California d/b/a University of California San Francisco Medical
`Center, Provider No. 05-0454, fiscal year ending June 30, 2010;
`
`(61) Washington Township Hospital District d/b/a Washington Hospital, Provider No.
`05-0195, fiscal year ending June 30, 2013;
`
`(62) Wilcox Memorial Hospital, Provider No. 12-0014, fiscal year ending June
`30, 2009; and
`
`(63) Zuckerberg San Francisco General Hospital & Trauma Center – Acute,
`f/d/b/a San Francisco General Hospital, Provider No. 05-0228, fiscal year
`ending June 30, 2009.
`
`6.
`
`The defendant is Alex M. Azar, in his official capacity as Secretary of the United
`
`States Department of Health and Human Services (“Secretary”), the federal agency that
`
`administers the Medicare program. References to the Secretary herein are meant to refer to him,
`
`to his subordinates, and to his official predecessors or successors as the context requires.
`
`7.
`
`The Centers for Medicare & Medicaid Services (“CMS”) is the component of the
`
`Secretary’s agency with responsibility for day-to-day operation and administration of the Medicare
`
`program. CMS was formerly known as the Health Care Financing Administration. References to
`
`CMS herein are meant to refer to the agency and its predecessors.
`
`LEGAL AND REGULATORY BACKGROUND
`
`Medicare Payment Determinations and Appeals
`
`8.
`
`Part A of the Medicare Act covers “inpatient hospital services.” 42 U.S.C.
`
`§ 1395d(a)(l). Since 1983, the Medicare program has paid most hospitals for the operating costs
`
`of inpatient hospital services under the prospective payment system (“PPS”). 42 U.S.C.
`
`§ 1395ww(d); 42 C.F.R. Part 412. Under PPS, Medicare pays predetermined, standardized
`
`amounts per discharge, subject to certain payment adjustments. Id. One of the PPS payment
`
`adjustments is the DSH payment. See 42 U.S.C. § 1395ww(d)(5)(F); 42 C.F.R. § 412.106.
`
`
`
`13
`
`

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`Case 1:20-cv-03485 Document 1 Filed 11/30/20 Page 14 of 43
`
`9.
`
`After the close of each fiscal year, a hospital is required to file a “cost report” with
`
`a Medicare Administrative Contractor designated by the agency. 42 C.F.R. §§ 413.20, 413.24.
`
`10.
`
`The Medicare Administrative Contractor analyzes a hospital’s cost report and
`
`issues a year-end determination, called a Notice of Program Reimbursement (“NPR”), as to the
`
`amount of Medicare program reimbursement due the hospital for services furnished to Medicare
`
`patients during the fiscal year covered by the cost report. See 42 C.F.R. § 405.1803; see also In re
`
`Medicare Reimbursement Litig., 309 F. Supp. 2d 89, 92 (D.D.C. 2004), aff’d, 414 F.3d 7 (D.C. Cir.
`
`2005).
`
`11.
`
`A hospital may appeal a Medicare Administrative Contractor’s determination as to
`
`the total amount of Medicare program reimbursement due the hospital for the fiscal year covered
`
`by a cost report to the agency’s Provider Reimbursement Review Board (“Board”). See 42 U.S.C.
`
`§ 1395oo(a)(1)(A); 42 C.F.R. §§ 405.1835–405.1877.
`
`12.
`
`A hospital has the right to a hearing before the Board if it is dissatisfied with the
`
`contractor’s payment determination in a Notice of Program Reimbursement as to the total amount
`
`of program reimbursement due to the hospital for its cost reporting period. 42 U.S.C.
`
`§ 1395oo(a)(1); see also 42 C.F.R. §§ 405.1835; 405.1837. The statute further requires a minimum
`
`amount in controversy and that the appeal be filed timely. 42 U.S.C. § 1395oo(a).
`
`13.
`
`A final decision by the Board, including a jurisdictional dismissal, is subject to
`
`judicial review. 42 U.S.C. § 1395oo(f)(1); 42 C.F.R. §1877(a).
`
`14.
`
`In 2008, CMS amended the appeal regulation to purport to restrict appeal rights
`
`with respect to a revised determination to reach “[o]nly those matters that are specifically revised
`
`in [the] revised determination or decision.” 42 C.F.R. § 405.1889(b)(1).
`
`
`
`14
`
`

`

`Case 1:20-cv-03485 Document 1 Filed 11/30/20 Page 15 of 43
`
`Expedited Judicial Review
`
`15.
`
`The Medicare statute authorizes the Board to determine that it is without authority
`
`to decide a question of law or regulations relevant to a matter in controversy in an appeal before
`
`the Board and to grant the right to expedited judicial review. 42 U.S.C. § 1395oo(f)(1). Pursuant
`
`to the Secretary’s regulations, the Board is bound by agency rules and rulings, like the 2004 rule
`
`at issue. 42 C.F.R. § 405.1867. Accordingly, the statute allows a hospital to request a Board
`
`determination as to its authority to decide a question of law or regulations and to initiate an action
`
`in this Court if the Board determines that expedited judicial review is appropriate or fails to make
`
`a determination as to its authority within 30 days after receipt of a request for such a determination.
`
`See 42 U.S.C. § 1395oo(f)(1); Clarian Health W., LLC v. Hargan, 878 F.3d 346, 354 (D.C. Cir.
`
`2017) (“The expedited judicial review provision makes it clear that ‘if the Board fails to render [a]
`
`determination’ on its authority within 30 days, ‘the provider may bring a civil action . . . with
`
`respect to the matter in controversy contained in such request for a hearing.’”); Allina II, 863 F.3d
`
`at 941 (“A provider may bring suit in the district court even when the Board fails to make a timely
`
`determination of its authority to decide a case.”). Accord Methodist Hosp. of Memphis v. Sullivan,
`
`799 F. Supp. 1210, 1216 (D.D.C. 1992) rev’d on other grounds, Adm’rs of Tulane Educ. Fund v.
`
`Shalala, 987 F.2d 790 (D.C. Cir. 1993).
`
`16.
`
`The regulation implementing the expedited judicial review (“EJR”) statute, 42
`
`C.F.R. § 405.1842(f), sets forth an additional requirement for granting EJR, not found in the
`
`statute, that the Board have “jurisdiction to conduct a hearing on the specific matter at issue.”
`
`When presented with a request for EJR, the regulations require that the Board “must make a
`
`preliminary determination of the scope of its jurisdiction (that is, whether the hearing request was
`
`timely, and whether the amount in controversy has been met).” Id. § 405.1840(a)(2). The
`
`
`
`15
`
`

`

`Case 1:20-cv-03485 Document 1 Filed 11/30/20 Page 16 of 43
`
`regulation does not create any further conditions beyond those in the statute to establish
`
`jurisdiction for a Board appeal. See 42 C.F.R. §§ 405.1835, 405.1837. Under the EJR regulations,
`
`only after finding that the statutory requirements for jurisdiction have been met, as set forth in 42
`
`C.F.R. § 405.1840(a)(2), does the Board then proceed to determine if it has the authority to decide
`
`a legal question relevant to a matter at issue. Id. § 405.1842(e)(1).
`
`Medicare DSH Payment
`
`17.
`
`A hospital that serves a disproportionate share of low-income patients is entitled to
`
`an upward percentage adjustment to the standard PPS rates per discharge. See 42 U.S.C.
`
`§ 1395ww(d)(5)(F); see also 42 C.F.R. § 412.106. A hospital may qualify for a DSH adjustment
`
`based on its “disproportionate patient percentage.” See 42 U.S.C. §§ 1395ww(d)(5)(F)(i)(I) and
`
`(d)(5)(F)(v); 42 C.F.R. § 412.106(c)(1). The disproportionate patient percentage determines both
`
`a hospital’s qualification for the DSH payment and the amount of the payment. See 42 U.S.C.
`
`§§ 1395ww(d)(5)(F)(iv) and (vii)–(xiii); 42 C.F.R. § 412.106(d). The disproportionate patient
`
`percentage is defined as the sum of two fractions expressed as percentages. 42 U.S.C.
`
`§ 1395ww(d)(5)(F)(vi).
`
`18.
`
`The first fraction that is used to compute the DSH payment is commonly known as
`
`the “Medicaid fraction.” The statute defines the Medicaid fraction as:
`
`the fraction (expressed as a percentage), the numerator of which is the number of
`the hospital’s patient days for such period which consist of patients who (for such
`days) were eligible for medical assistance under a State plan approved under [the
`Medicaid statute, title XIX of the Social Security Act], but who were not entitled to
`benefits under part A of [the Medicare statute, title XVIII of the Social Security
`Act], and the denominator of which is the total number of the hospital’s patient
`days for such period.
`
`42 U.S.C. § 1395ww(d)(5)(F)(vi)(II) (emphasis added). As reflected in the italicized language
`
`above, the numerator of the Medicaid fraction consists of days for patients who were both eligible
`
`
`
`16
`
`

`

`Case 1:20-cv-03485 Document 1 Filed 11/30/20 Page 17 of 43
`
`for medical assistance under the Medicaid statute and “not entitled to benefits under Part A” of the
`
`Medicare statute.
`
`19.
`
`The other fraction that is used to compute the DSH payment is the “Medicare part
`
`A/SSI fraction” or “SSI fraction.” The statute defines this fraction as:
`
`the fraction (expressed as a percentage), the numerator of which is the number of
`such hospital’s patient days for such period which were made up of patients who
`(for such days) were entitled to benefits under part A of [the Medicare statute] and
`were entitled to supplemental security income benefits (excluding any State
`supplementation) . . . , and the denominator of which is the number of such
`hospital’s patient days for such fiscal year which were made up of patients who (for
`such days) were entitled to benefits under part A of [the Medicare statute] . . . .
`
`42 U.S.C. § 1395ww(d)(5)(F)(vi)(I) (emphasis added). As the italicized language indicates, the
`
`Medicare Part A/SSI fraction consists solely of days for patients who were “entitled to benefits
`
`under Part A” of Medicare. The denominator includes all Medicare Part A days, whereas the
`
`numerator includes only those Part A days for patients who are also entitled to social security
`
`income (“SSI”) benefits under title XVI of the Social Security Act. The Medicare Part A/SSI
`
`fraction is computed for each federal fiscal year by the agency, and must be used to compute a
`
`hospital’s DSH payment for the cost reporting period beginning in the federal fiscal year. 42 C.F.R.
`
`§§ 412.106(b)(2)–(3). A hospital may elect to have the Medicare Part A/SSI fraction recalculated
`
`based on patient days in its own cost reporting period instead of the federal fiscal year. See id.;
`
`see also 42 U.S.C. § 1395ww(d)(5)(F)(vi), (vi)(I) (requiring calculation of Medicare Part A/SSI
`
`fraction based on cost reporting period); 51 Fed. Reg. 16,772, 16,777 (May 6, 1986) (stating that
`
`while the agency would rely on the federal fiscal year, it was “affording all hospitals the option to
`
`determine their number of patient days of those dually entitled to Medicare Part A and SSI for their
`
`own cost reporting periods”).
`
`
`
`17
`
`

`

`Case 1:20-cv-03485 Document 1 Filed 11/30/20 Page 18 of 43
`
`Medicare Part C
`
`20.
`
`Section 4001 of the Balanced Budget Act of 1997, Pub. Law No. 105-33, added a
`
`new Part C to the Medicare statute to establish a Medicare program that was originally called the
`
`Medicare+Choice (also known as “M+C”) program and is now called Medicare Advantage. A
`
`Medicare beneficiary can elect to receive Medicare benefits either through the original fee-for-
`
`service program under Medicare Parts A and B, or through enrollment in a Medicare Advantage
`
`plan under Medicare Part C. 42 U.S.C. § 1395w-21(a)(1); 42 C.F.R. § 422.50; see also 63 Fed.
`
`Reg. 34,968, 34,968 (June 26, 1998) (“Under section 1851(a)(1), every individual entitled to
`
`Medicare Part A and enrolled under Part B . . . may elect to receive benefits through either the
`
`existing Medicare fee-for-service program or a Part C M+C plan.”) (emphasis added).
`
`21.
`
`“Before 2004, [Defendant’s agency] had not treated Part C enrollees as ‘entitled to
`
`benefits under Part A.’” Allina II, 863 F.3d at 939 (quoting Northeast Hosp., 657 F.3d at 15); see
`
`also Allina I, 746 F.3d at 1106 (“Prior to 2003, the Secretary treated Part C patients as not entitled
`
`to benefits under Part A.”); Allina I, 904 F. Supp. 2d at 78–80; Northeast Hosp., 657 F.3d at 16–
`
`17. The DSH regulation prior to 2004 limited part-A-entitled days in the Medicare Part A/SSI
`
`fraction to patient days that were “covered,” or paid, by Medicare Part A. See 42 C.F.R.
`
`§ 412.106(b)(2)(i) (2003); 42 C.F.R. § 409.3 (defining “covered” as services for which payment is
`
`authorized). The agency said as much when adopting the pre-2004 regulation, explaining that the
`
`numerator of the Medicare Part A/SSI fraction included only “covered Medicare Part A inpatient
`
`days.” 51 Fed. Reg. 16,772, 16,777 (May 6, 1986) (emphasis added); see also 51 Fed. Reg. 31,454,
`
`31,460–61; Catholic Health Initiatives-Iowa Cor