Case 1:21-cv-02020 Document 1 Filed 07/26/21 Page 1 of 28
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`UNITED STATES DISTRICT COURT FOR
`THE DISTRICT OF COLUMBIA
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`HOSPITAL FOR SPECIAL SURGERY
`535 East 70th St.
`New York, NY 10021
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`and
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`Case No. 21-cv-2020
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`BANNER UNIVERSITY MEDICAL CENTER
`PHOENIX
`1111 E. McDowell Rd.
`Phoenix, AZ 85006
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`and
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`BANNER UNIVERSITY MEDICAL CENTER
`SOUTH CAMPUS
`2800 E. Ajo Way
`Tucson, AZ 85713
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`and
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`BANNER UNIVERSITY MEDICAL CENTER
`TUCSON
`1625 N. Campbell Ave.
`Tucson, AZ 85719
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`and
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`BARNES-JEWISH HOSPITAL
`One Barnes-Jewish Hospital Plz.
`Saint Louis, MO 63110
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`and
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`BRIDGEPORT HOSPITAL
`267 Grant St.
`Bridgeport, CT 06610
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`and
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`Case 1:21-cv-02020 Document 1 Filed 07/26/21 Page 2 of 28
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`MEMORIAL HERMANN TEXAS MEDICAL
`CENTER
`6411 Fannin St.
`Houston, TX 77030
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`and
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`METHODIST HEALTHCARE - MEMPHIS
`HOSPITALS
`1211 Union Ave.
`Memphis, TN 38104
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`and
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`MICHIGAN MEDICINE
`1500 E. Medical Center Dr.
`Ann Arbor, MI 48109
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`and
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`MILTON S. HERSHEY MEDICAL CENTER
`500 University Dr.
`Hershey, PA 17033
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`and
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`ST. JOSEPH’S REGIONAL MEDICAL CENTER
`703 Main St.
`Paterson, NJ 07503
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`and
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`TRUMAN MEDICAL CENTER HOSPITAL HILL
`2301 Holmes St.
`Kansas City, MO 64108
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`and
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`UNIVERSITY OF MISSOURI HEALTH CARE
`One Hospital Dr.
`Columbia, MO 65212
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`and
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`Case 1:21-cv-02020 Document 1 Filed 07/26/21 Page 3 of 28
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`Plaintiffs,
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`YALE NEW HAVEN HOSPITAL
`20 York St.
`New Haven, CT 06510
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`vs.
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`XAVIER BECERRA
`Secretary of the United States Department of
`Health and Human Services
`200 Independence Ave., S.W.
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`Washington, DC 20201
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`Defendant.
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`COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF AND SUMS DUE
`UNDER THE MEDICARE ACT
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`INTRODUCTION
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`1.
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`This is a civil action brought to obtain judicial review of agency decisions
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`regarding Medicare reimbursements rendered by Xavier Becerra (the “Secretary” or
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`“Defendant”) in his official capacity as the Secretary of the United States Department of Health
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`and Human Services. Plaintiffs are hospitals that participate in the Medicare program and
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`qualify for direct graduate medical education (“DGME”) payments for training medical
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`residents. Plaintiffs seek an order setting aside the Secretary’s regulation at 42 C.F.R. §
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`413.79(c)(2)(iii), which unlawfully reduces Plaintiffs’ DGME payments by decreasing the
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`number of residents that Plaintiffs may claim during a fiscal year.
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`2.
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`Plaintiffs operate approved medical training programs for physician interns,
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`residents, and fellows (collectively, “residents”). Plaintiffs receive Medicare DGME payments,
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`which are calculated, in part, based on the number of full-time equivalent (“FTE”) residents that
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`train at each hospital. If a resident’s training time exceeds the number of years designated as the
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`“initial residency period” (“IRP”), the resident’s time is weighted at 0.5, which means that the
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`Case 1:21-cv-02020 Document 1 Filed 07/26/21 Page 4 of 28
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`hospital may only count one-half of the resident’s time that exceeds the IRP. Also, the number
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`of FTEs that a hospital may claim for payment in any given year is generally capped at the
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`number of unweighted FTEs that it trained in its 1996 fiscal year.
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`3.
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`The regulation at 42 C.F.R. § 413.79(c)(2)(iii) is contrary to the Medicare statute
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`because it calculates a hospital’s DGME payments using a weighted FTE cap rather than an
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`unweighted FTE cap. 42 U.S.C. § 1395ww(h)(4)(F). The effect of the unlawful regulation is to
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`impose on Plaintiffs a weighting factor on residents that are within their IRP or, viewed
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`differently, results in a reduction of greater than 0.5 for many residents who are beyond the IRP,
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`which prevents Plaintiffs from claiming DGME reimbursement up to their full FTE caps
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`authorized by statute. Thus, the calculations of the current-year, prior-year, and penultimate-year
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`weighted DGME FTEs (all three of which are elements of a hospital’s DGME calculation in a
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`given year) and the FTE caps are contrary to the statutory provision at 42 U.S.C. § 1395ww(h),
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`and, as a result, Plaintiffs’ DGME payments are unlawfully understated.
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`4.
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`The Secretary’s application of this regulation violates the Administrative
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`Procedure Act, 5 U.S.C. § 551 et seq. (the “APA”); is contrary to the Medicare statute; is
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`arbitrary, capricious, and an abuse of discretion; and is otherwise contrary to law. Accordingly,
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`Plaintiffs asks this Court to reverse the Secretary’s decisions and to order the Secretary to
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`recalculate Plaintiffs’ DGME payments as required by statute.
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`JURISDICTION AND VENUE
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`5.
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`This action arises under Title XVIII of the Social Security Act, 42 U.S.C. § 1395
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`et seq. (the “Medicare statute”), which establishes the Medicare program, and the APA.
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`6.
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`This Court has jurisdiction under 42 U.S.C. § 1395oo(f)(1), which grants
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`Medicare providers the right to obtain expedited judicial review (“EJR”) of any action involving
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`Case 1:21-cv-02020 Document 1 Filed 07/26/21 Page 5 of 28
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`“a question of law or regulations relevant to the matters in controversy” when the Secretary’s
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`Provider Reimbursement Review Board (the “Board”) “determines . . . that it is without authority
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`to decide the question, by a civil action commenced within sixty days of the date on which
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`notification of such determination is received.” The Board granted EJR to Plaintiffs in decisions
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`dated May 28, 2021, and June 22, 2021. Accordingly, this action is timely filed within the sixty-
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`day limitations period established at 42 U.S.C. § 1395oo(f)(1).
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`7.
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`Venue in this Court is proper under 42 U.S.C. § 1395oo(f)(1).
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`PARTIES
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`8.
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`Plaintiff Hospital for Special Surgery is an academic medical center located in
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`New York, New York. Hospital for Special Surgery participates in the Medicare program and
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`has been assigned Medicare Provider Number 33-0270. Hospital for Special Surgery operates
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`graduate medical education programs and receives Medicare DGME payments. Hospital for
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`Special Surgery contests the Medicare reimbursement decision for its fiscal years ending
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`December 31, 2016 and December 31, 2018.
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`9.
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`Plaintiff Banner University Medical Center Phoenix (“BUMCP”) is an academic
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`medical center located in Phoenix, Arizona. BUMCP participates in the Medicare program and
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`has been assigned Medicare Provider Number 03-0002. BUMCP operates graduate medical
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`education programs and receives Medicare DGME payments. BUMCP contests the Medicare
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`reimbursement decision for its fiscal year ending December 31, 2016.
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`10.
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`Plaintiff Banner University Medical Center South Campus (“BUMCSC”) is an
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`academic medical center located in Tucson, Arizona. BUMCSC participates in the Medicare
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`program and has been assigned Medicare Provider Number 03-0111. BUMCSC operates
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`Case 1:21-cv-02020 Document 1 Filed 07/26/21 Page 6 of 28
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`graduate medical education programs and receives Medicare DGME payments. BUMCSC
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`contests the Medicare reimbursement decision for its fiscal year ending December 31, 2016.
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`11.
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`Plaintiff Banner University Medical Center Tucson (“BUMCT”) is an academic
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`medical center located in Tucson, Arizona. BUMCT participates in the Medicare program and
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`has been assigned Medicare Provider Number 03-0064. BUMCT operates graduate medical
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`education programs and receives Medicare DGME payments. BUMCT contests the Medicare
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`reimbursement decision for its fiscal year ending December 31, 2016.
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`12.
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`Plaintiff Barnes-Jewish Hospital is an academic medical center located in Saint
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`Louis, Missouri. Barnes-Jewish Hospital participates in the Medicare program and has been
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`assigned Medicare Provider Number 26-0032. Barnes-Jewish Hospital operates graduate
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`medical education programs and receives Medicare DGME payments. Barnes-Jewish Hospital
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`contests the Medicare reimbursement decision for its fiscal year ending December 31, 2016.
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`13.
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`Plaintiff Bridgeport Hospital is an academic medical center located in Bridgeport,
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`Connecticut. Bridgeport Hospital participates in the Medicare program and has been assigned
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`Medicare Provider Number 07-0010. Bridgeport Hospital operates graduate medical education
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`programs and receives Medicare DGME payments. Bridgeport Hospital contests the Medicare
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`reimbursement decision for its fiscal year ending September 30, 2016.
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`14.
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`Plaintiff Memorial Hermann Texas Medical Center is an academic medical center
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`located in Houston, Texas. Memorial Hermann Texas Medical Center participates in the
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`Medicare program and has been assigned Medicare Provider Number 45-0068. Memorial
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`Hermann Texas Medical Center operates graduate medical education programs and receives
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`Medicare DGME payments. Memorial Hermann Texas Medical Center contests the Medicare
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`Case 1:21-cv-02020 Document 1 Filed 07/26/21 Page 7 of 28
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`reimbursement decision for its fiscal years ending June 30, 2016; June 30, 2018; and June 30,
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`2019.
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`15.
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`Plaintiff Methodist Healthcare - Memphis Hospitals is an academic medical
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`center located in Memphis, Tennessee. Methodist Healthcare - Memphis Hospitals participates
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`in the Medicare program and has been assigned Medicare Provider Number 44-0049. Methodist
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`Healthcare - Memphis Hospitals operates graduate medical education programs and receives
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`Medicare DGME payments. Methodist Healthcare - Memphis Hospitals contests the Medicare
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`reimbursement decision for its fiscal years ending December 31, 2016 and December 31, 2017.
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`16.
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`Plaintiff Michigan Medicine is an academic medical center located in Ann Arbor,
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`Michigan. Michigan Medicine participates in the Medicare program and has been assigned
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`Medicare Provider Number 23-0046. Michigan Medicine operates graduate medical education
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`programs and receives Medicare DGME payments. Michigan Medicine contests the Medicare
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`reimbursement decision for its fiscal years ending June 30, 2016; June 30, 2017; June 30, 2018;
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`and June 30, 2019.
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`17.
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`Plaintiff Milton S. Hershey Medical Center is an academic medical center located
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`in Hershey, Pennsylvania. Milton S. Hershey Medical Center participates in the Medicare
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`program and has been assigned Medicare Provider Number 39-0256. Milton S. Hershey Medical
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`Center operates graduate medical education programs and receives Medicare DGME payments.
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`Milton S. Hershey Medical Center contests the Medicare reimbursement decision for its fiscal
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`years ending June 30, 2016 and June 30, 2017.
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`18.
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`Plaintiff St. Joseph’s Regional Medical Center is an academic medical center
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`located in Paterson, New Jersey. St. Joseph’s Regional Medical Center participates in the
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`Medicare program and has been assigned Medicare Provider Number 31-0019. St. Joseph’s
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`7
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`Case 1:21-cv-02020 Document 1 Filed 07/26/21 Page 8 of 28
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`Regional Medical Center operates graduate medical education programs and receives Medicare
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`DGME payments. St. Joseph’s Regional Medical Center contests the Medicare reimbursement
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`decision for its fiscal year ending December 31, 2016.
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`19.
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`Plaintiff Truman Medical Center Hospital Hill is an academic medical center
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`located in Kansas City, Missouri. Truman Medical Center Hospital Hill participates in the
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`Medicare program and has been assigned Medicare Provider Number 26-0048. Truman Medical
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`Center Hospital Hill operates graduate medical education programs and receives Medicare
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`DGME payments. Truman Medical Center Hospital Hill contests the Medicare reimbursement
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`decision for its fiscal years ending June 30, 2016 and June 30, 2017.
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`20.
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`Plaintiff University of Missouri Health Care is an academic medical center
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`located in Columbia, Missouri. University of Missouri Health Care participates in the Medicare
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`program and has been assigned Medicare Provider Number 26-0141. University of Missouri
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`Health Care operates graduate medical education programs and receives Medicare DGME
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`payments. University of Missouri Health Care contests the Medicare reimbursement decision for
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`its fiscal years ending June 30, 2016; June 30, 2017; and June 30, 2018.
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`21.
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`Plaintiff Yale New Haven Hospital is an academic medical center located in New
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`Haven, Connecticut. Yale New Haven Hospital participates in the Medicare program and has
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`been assigned Medicare Provider Number 07-0022. Yale New Haven Hospital operates graduate
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`medical education programs and receives Medicare DGME payments. Yale New Haven
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`Hospital contests the Medicare reimbursement decision for its fiscal year ending September 30,
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`2016.
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`8
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`Case 1:21-cv-02020 Document 1 Filed 07/26/21 Page 9 of 28
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`22.
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`Defendant Xavier Becerra is the Secretary of the Department of Health and
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`Human Services and is the federal officer responsible for administering the Medicare program
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`pursuant to the Social Security Act. Defendant is sued in his official capacity.
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`BACKGROUND
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`I.
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`The Medicare Program and Payment for Hospital Services
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`23. Medicare is a public health insurance program that generally furnishes health
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`benefits to participating individuals once they reach the age of 65. 42 U.S.C. § 1395c. The
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`Secretary has delegated much of the responsibility for administering the Medicare program to the
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`Centers for Medicare and Medicaid Services (“CMS”), which is a component of the Department
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`of Health and Human Services.
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`24.
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`Under the Medicare statute, an eligible Medicare beneficiary is entitled to have
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`payment made by Medicare on his or her behalf for, inter alia, inpatient and outpatient hospital
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`services provided by a hospital participating in the Medicare program as a provider of health care
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`services. Id. The Medicare program consists of four Parts: A, B, C, and D. Inpatient hospital
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`services are paid under Part A of the Medicare statute. Id. § 1395d. Physician, hospital
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`outpatient, and certain other services are paid under Medicare Part B. Id. § 1395k. Medicare
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`Part C is an optional managed care program that pays for services that would otherwise be
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`covered under Medicare Parts A and B. Id. §§ 1395w-21–1395w-29. Medicare Part D is an
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`optional insurance program for prescription drugs. Id. §§ 1395w-101–1395w-154. This action
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`concerns Medicare Part A.
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`II.
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`Direct Graduate Medical Education
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`25.
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`The Medicare statute reimburses hospitals for the direct costs of graduate medical
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`education. Id. § 1395ww(h). The DGME payment is calculated by multiplying a hospital’s
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`Case 1:21-cv-02020 Document 1 Filed 07/26/21 Page 10 of 28
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`“patient load” times its “approved amount.” Id. § 1395ww(h)(3)(A). The “patient load” is “the
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`fraction of the total number of inpatient-bed-days . . . during the period which are attributable to
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`patients with respect to whom payment may be made under [Medicare] part A.” Id. §
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`1395ww(h)(3)(C). The “approved amount” is the product of a hospital’s base-period per-
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`resident amount (“PRA”) and its weighted average number of FTE residents. Id. §
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`1395ww(h)(3)(B); 42 C.F.R. § 413.76(a). The weighted average number of FTEs is calculated
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`using the average of “the actual full-time equivalent resident counts for the cost reporting period
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`and the preceding two cost reporting periods.” 42 U.S.C. § 1395ww(h)(4)(G). The following is
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`the basic formula for calculating a hospital’s DGME payment:
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`PRA x (3-Year FTE Average) x (Medicare Patient Load) = DGME Payment
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`26.
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`The Medicare statute requires that residents who are training beyond their IRP are
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`weighted at 0.5, so that only half their time is counted. Id. § 1395ww(h)(4)(C)(iv). The IRP is
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`defined as the period necessary for board eligibility in the resident’s training program, not to
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`exceed five years. Id. § 1395ww(h)(5)(F). Most, though not all, residents who are training
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`beyond the IRP are participating in post-residency fellowship programs.
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`27.
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`For cost reporting periods beginning on or after October 1, 1997, Congress
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`established a cap on the number of unweighted DGME FTEs that a hospital may count, which is
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`set at each hospital’s number of unweighted FTEs during its most recent fiscal year that ended on
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`or before December 31, 1996. Id. § 1395ww(h)(4)(F). Thus, a hospital’s three-year FTE
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`average in the DGME formula is limited by the number of unweighted FTEs that the hospital
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`trained in its 1996 cost reporting period. The FTE cap is determined “before application of
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`weighting factors” based on the IRP. Id. § 1395ww(h)(4)(F)(i).
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`28.
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`In 1997, the Secretary promulgated an unlawful regulation to implement the 1996
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`Case 1:21-cv-02020 Document 1 Filed 07/26/21 Page 11 of 28
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`cap that calculates a weighted 1996 FTE cap to be used in the payment calculation:
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`For purposes of determining direct graduate medical education payment, for cost
`reporting periods beginning on or after October 1, 1997, a hospital’s unweighted
`FTE count for residents in allopathic and osteopathic medicine may not exceed
`the hospital’s unweighted FTE count for these residents for the most recent cost
`reporting period ending on or before December 31, 1996. If the hospital’s number
`of FTE residents in a cost reporting period beginning on or after October 1, 1997,
`exceeds the limit described in this paragraph (g), the hospital’s weighted FTE
`count (before application of the limit) will be reduced in the same proportion that
`the number of FTE residents for that cost reporting period exceeds the number of
`FTE residents for the most recent cost reporting period ending on or before
`December 31, 1996.
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`42 C.F.R. § 413.86(g)(4) (1997).
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`29. When issuing this regulation, the Secretary stated, “We believe this proportional
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`reduction in the hospital’s unweighted FTE count is an equitable mechanism for implementing
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`the statutory provision.” Medicare Program; Changes to the Hospital Inpatient Prospective
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`Payment Systems and Fiscal Year 1998 Rates, 62 Fed. Reg. 45,966, 46,005 (Aug. 29, 1997);
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`Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal
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`Year 1998 Rates, 63 Fed. Reg. 26,318, 26,330 (May 12, 1998) (hereinafter the “FY 1998 IPPS
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`Rule”).
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`30.
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`On August 1, 2001, the Secretary amended the regulation to determine separate
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`weighted 1996 FTE caps for primary care residents and non-primary care residents, effective for
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`cost reporting periods beginning on or after October 1, 2001. 42 C.F.R. § 413.86(g)(4)(iii)
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`(2001); Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and
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`Rates and Costs of Graduate Medical Education: Fiscal Year 2002 Rates; Provisions of the
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`Balanced Budget Refinement Act of 1999; and Provisions of the Medicare, Medicaid, and
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`SCHIP Benefits Improvement and Protection Act of 2000, 66 Fed. Reg. 39,828, 39,893-96 (Aug.
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`1, 2001) (hereinafter the “FY 2002 IPPS Rule”). The Secretary did not change the formula for
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`Case 1:21-cv-02020 Document 1 Filed 07/26/21 Page 12 of 28
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`determining the weighted 1996 FTE cap. Rather, the Secretary used the same methodology as in
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`the 1997 rule to calculate a primary care weighted 1996 FTE cap and a non-primary care
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`weighted 1996 FTE cap, which are then added together to determine an overall cap. 42 C.F.R. §
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`413.86(g)(4)(iii) (2001); FY 2002 IPPS Rule, 66 Fed. Reg. at 39,894.
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`31.
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`In 2004, CMS redesignated the regulation from 42 C.F.R. § 413.86(g)(4)(iii) to 42
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`C.F.R. § 413.79(c)(2)(iii). Medicare Program; Changes to the Hospital Inpatient Prospective
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`Payment Systems and Fiscal Year 2005 Rates, 69 Fed. Reg. 48,916, 49,112, 49,258-64 (Aug. 11,
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`2004).
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`32.
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`The regulation in effect during all fiscal years at issue in this action states as
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`follows:
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`If the hospital’s number of FTE residents in a cost reporting period beginning on
`or after October 1, 2001 exceeds the limit described in this section [i.e., the 1996
`unweighted cap], the hospital’s weighted FTE count (before application of the
`limit) for primary care and obstetrics and gynecology residents and nonprimary
`care residents, respectively, will be reduced in the same proportion that the
`number of FTE residents for that cost reporting period exceeds the number of
`FTE residents for the most recent cost reporting period ending on or before
`December 31, 1996.
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`42 C.F.R. § 413.79(c)(2)(iii) (2016-2019). This regulation is still in effect today.
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`33.
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`If a hospital’s unweighted 1996 FTE count exceeds its unweighted FTE cap, the
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`Secretary’s regulation at 42 C.F.R. § 413.79(c)(2)(iii) calculates the ratio of a hospital’s
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`unweighted FTE cap to the hospital’s current-year unweighted FTE count. Id. § 413.79(c)(2)(ii)-
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`(iii) (the “proportion that the number of FTE residents for that cost reporting period exceeds the
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`number of FTE residents for the most recent cost reporting period ending on or before December
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`31, 1996”). This ratio represents the percentage by which the hospital’s 1996 cap is above the
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`current-year unweighted FTE count. The ratio is then multiplied by the current-year weighted
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`FTE count (both residents within and beyond their IRP) and thereby reduces that already
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`Case 1:21-cv-02020 Document 1 Filed 07/26/21 Page 13 of 28
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`weighted FTE count. Id. The resulting number is the weighted 1996 FTE cap. The Secretary’s
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`methodology is expressed in the following equation:
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` (Unweighted FTE Cap)/(Unweighted FTEs) x Weighted FTEs = Weighted FTE Cap
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`The Secretary describes the result of this formula as “the hospital’s reduced cap.” FY 2002 IPPS
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`Rule, 66 Fed. Reg. at 39,894.
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`34.
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`The regulation calculates a hospital’s DGME payment based on its weighted
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`FTEs, which may not exceed its weighted 1996 FTE cap. 42 C.F.R. §§ 413.76(a),
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`413.79(c)(2)(iii).
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`35.
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`In Milton S. Hershey Medical Center. v. Becerra, No. 19-CV-3411, 2021
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`WL 1966572 (D.D.C. May 17, 2021), the plaintiff teaching hospitals sought an order
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`setting aside the Secretary’s regulation at 42 C.F.R. § 413.79(c)(2)(iii), asserting that the
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`regulation is contrary to the Medicare statute and is an arbitrary and capricious exercise
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`of agency discretion under the APA. The United States District Court for the District of
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`Columbia held that the application of 42 C.F.R. § 413.79(c)(2)(iii) to compute the
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`teaching hospitals’ FTE residents “was contrary to law because the regulation effectively
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`changed the weighting factors statutorily assigned to residents and fellows.” Milton S.
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`Hershey Med. Ctr., 2021 WL 1966572, at *1, 4-7 (D.D.C. May 17, 2021). The court
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`stated that “the statue is clear: the Secretary’s rules ‘shall provide, in calculating the
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`number of full-time-equivalent residents in an approved residency program,” that
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`residents be weighted at 1.0 and fellows at 0.5.’” Id. at *5. On July 16, 2021, the
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`Secretary filed a notice of appeal.
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`III. Medicare Cost Report Appeals
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`36.
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`At the close of a hospital’s fiscal year, it is required to submit to its designated
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`Medicare Administrative Contractor (“MAC”) a “cost report” showing both the costs incurred by
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`the hospital during the fiscal year and the appropriate share of these costs to be apportioned to
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`Medicare. 42 C.F.R § 413.24(f). MACs are private companies under contract with the Secretary
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`to pay Medicare claims and audit hospital cost reports, among other duties. 42 U.S.C. §
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`1395kk-1.
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`37.
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`The MAC must analyze and audit the cost report and inform the hospital of a final
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`determination of the amount of Medicare reimbursement through a Notice of Program
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`Reimbursement (“NPR”). 42 C.F.R. § 405.1803(a). A hospital’s DGME payment is among the
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`components of the final payment determination reported in the NPR.
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`38.
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`A hospital may appeal a final determination of its Medicare reimbursement to the
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`Board. 42 U.S.C. § 1395oo(a). The Board has jurisdiction over appeals from MAC
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`determinations if the following requirements are met: (1) the hospital is dissatisfied with the
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`final determination; (2) the amount in controversy is at least $10,000; and (3) the hospital
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`requests a hearing within 180 days of receiving the final determination. Id.
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`39.
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`A group of hospitals may appeal a common dispute to the Board if the following
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`requirements are met: (1) the hospitals are dissatisfied with the final determination; (2) the
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`amount in controversy is, in the aggregate, at least $50,000; and (3) the hospitals request a
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`hearing within 180 days of the final determination. Id. § 1395oo(a), (b).
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`40.
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`In addition, for group appeals, the matter at issue must involve “a single question
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`of fact or interpretation of law, regulations, or CMS Ruling that is common to each provider in
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`the group.” 42 C.F.R. § 405.1837(a)(2).
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`Case 1:21-cv-02020 Document 1 Filed 07/26/21 Page 15 of 28
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`41.
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`If the MAC fails to issue a timely final determination, the Medicare statute
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`entitles a provider to a Board hearing under the following conditions: (1) the provider has not
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`received a final determination from the MAC after filing an original or amended cost report; (2)
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`the provider’s cost report complied with the applicable rules and regulations; (3) the provider
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`filed a request for a hearing within 180 days after notice of the contractor’s determination would
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`have been received if the determination had been timely; and (4) the amount in controversy is at
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`least $10,000 (or at least $50,000 for a group appeal). 42 U.S.C. § 1395oo(a)(1)(B)-(C), (2)-(3).
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`The Secretary’s regulation implementing § 1395oo(a)(1)(B)-(C) states that a final determination
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`is deemed untimely if not received, through no fault of the provider, within one year after the
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`date of receipt by the contractor of the provider’s last-filed cost report for the period. 42 C.F.R.
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`§ 405.1835(c)(1).
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`42.
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`The Board lacks the authority to decide the validity of a Medicare regulation. Id.
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`§ 405.1867. If a hospital (or group of hospitals) appeals an issue that involves a question that is
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`beyond the Board’s authority, the Board may authorize EJR of the case. 42 U.S.C. §
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`1395oo(f)(1); 42 C.F.R. § 405.1842.
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`43.
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`The Board must grant EJR if it determines that (1) the Board does not have the
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`authority to decide the legal question because the question is a challenge either to the
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`constitutionality of a statute or to the substantive or procedural validity of a regulation or CMS
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`Ruling; and (2) the Board has jurisdiction to hold a hearing on the specific matter at issue. 42
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`U.S.C. § 1395oo(f)(1); 42 C.F.R. § 405.1842(f)(1).
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`44.
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`If the Board issues an EJR decision, the CMS Administrator has the right to
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`“review the Board’s jurisdictional finding, but not the Board’s authority determination.” 42
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`C.F.R. § 405.1842(a)(3). The Board’s decision to grant EJR “becomes final and binding on the
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`Case 1:21-cv-02020 Document 1 Filed 07/26/21 Page 16 of 28
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`parties unless the decision is reversed, affirmed, modified, or remanded by the Administrator.”
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`Id. § 405.1842(g)(1)(iii).
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`45.
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`If the Board grants the hospital’s request for EJR, the hospital may seek judicial
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`review of the action involving a question of law or regulations by commencing a civil action
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`within sixty days of the date on which notification of the Board’s determination is received. 42
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`U.S.C. § 1395oo(f)(l); 42 C.F.R. § 405.1842(g)(2).
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`FACTS SPECIFIC TO THIS CASE
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`46.
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`Plaintiffs are teaching hospitals that receive Medicare DGME payments.
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`Plaintiffs all trained residents in their fiscal year 1996 (“FY 1996”) cost reporting periods.
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`Accordingly, the Secretary established DGME FTE caps for each Plaintiff based on its FY 1996
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`resident FTE count.
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`47.
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`During the fiscal years at issue in this action, Plaintiffs’ FTE counts exceeded
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`their 1996 FTE caps. Plaintiffs’ FTE counts included residents who were both within and
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`beyond the IRP. The Secretary employed the methodology of the regulation at 42 C.F.R. §
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`413.79(c)(2)(iii) when applying the FTE weighting factors for residents beyond their IRP to
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`Plaintiffs’ DGME FTE caps.
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`I.
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`Board Case Numbers 19-2083G, 20-1605G, 20-1919G, and 21-1135G
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`48.
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`Plaintiffs Barnes-Jewish Hospital, Hospital for Special Surgery, Memorial
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`Hermann Texas Medical Center, Methodist Healthcare - Memphis Hospitals, Michigan
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`Medicine, Milton S. Hershey Medical Center, St. Joseph’s Regional Medical Center, Truman
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`Medical Center Hospital Hill, and University of Missouri Health Care contest the application of
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`42 C.F.R. § 413.79(c)(2)(iii) to their fiscal years ending in 2016. Plaintiffs Barnes-Jewish
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`Hospital, Hospital for Special Surgery, Memorial Hermann Texas Medical Center, Michigan
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`Case 1:21-cv-02020 Document 1 Filed 07/26/21 Page 17 of 28
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`Medicine, Milton S. Hershey Medical Center, St. Joseph’s Regional Medical Center, Truman
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`Medical Center Hospital Hill, and University of Missouri Health Care timely filed appeals with
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`the Secretary’s Board following the receipt of their final determinations from their MACs,
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`pursuant to 42 U.S.C. § 1395oo. Plaintiff Methodist Healthcare - Memphis Hospitals filed an
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`appeal with the Board pursuant to 42 U.S.C. § 1395oo(a)(1)(C) based on the failure of the MAC
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`to issue timely final determination. Plaintiff Methodist Healthcare - Memphis Hospitals, through
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`no fault of its own, did not receive a final determination within one year after the date of receipt
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`by the MAC of its last-filed cost report for its fiscal year ending December 31, 2016. Plaintiff
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`Methodist Healthcare - Memphis Hospitals filed its appeal with the Board within the 180-day
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`window following the expiration of the 12-month period for issuance of the final contractor
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`determination.
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`49.
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`Plaintiffs Barnes-Jewish Hospital, Hospital for Special Surgery, Memorial
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`Hermann Texas Medical Center, Methodist Healthcare - Memphis Hospitals, Michigan
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`Medicine, Milton S. Hershey Medical Center, St. Joseph’s Regional Medical Center, Truman
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`Medical Center Hospital Hill, and University of Missouri Health Care joined a group appeal,
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`with an aggregate amount in controversy of over $50,000, contesting the application of 42 C.F.R.
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`§ 413.79(c)(2)(iii) to their cost reports ending in 2016. The Board assigned case number 19-
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`2083G to these Plaintiffs’ group appeal.
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`50.
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`Plaintiffs Hospital for Special Surgery, Memorial Hermann Texas Medical
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`Center, Michigan Medicine, and University of Missouri Health Care contest the application of 42
`
`C.F.R. § 413.79(c)(2)(iii) to their fiscal years ending in 2018. Plaintiffs Hospital for Special
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`Surgery, Memorial Hermann Texas Medical Center, Michigan Medicine, and University of
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`Missouri Health Care filed an appeal with the Board pursuant to 42 U.S.C. § 1395oo(a)(1)(B)-
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`
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`Case 1:21-cv-02020 Document 1 Filed 07/26/21 Page 18 of 28
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`(C) based on the failure of the MACs to issue timely final determinations. Plaintiffs Hospital for
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`Special Surgery, Memorial Hermann Texas Medical Center, Michigan Medicine, and University
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`of Missouri Health Care, through no fault of their own, did not receive final determinations
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`within one year after the date of receipt by the MACs of their last-filed cost report for their fiscal
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`year ending in 2018. Plaintiffs Hospital for Special Surgery, Memorial Hermann Texas Medical
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`Center, Michigan Medicine, and University of Missouri Health Care filed their appeals with the
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`Board within the 180-day window following the expiration of the 12 month period for issuance
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`of the final contractor determination.
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`51.
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`Plaintiffs Hospital for Special Surgery, Memorial Hermann Texas Medical
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`Center, Michigan Medicine, and University of Missouri Health Care joined a group appeal, with
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`an aggregate amount in controversy of over $50,000, contesting the application of 42 C.F.R. §
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`413.79(c)(2)(iii) to their cost reports ending in 2018. The Board assigned case number 20-
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`1605G to these Plaintiffs’ group appeal.
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`52.
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`Plaintiffs Methodist Healthcare - Memphis Hospitals, Michigan Medicine, Milton
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`S. Hershey Medical Center, and Truman Medical Center Hospital Hill contest the application of
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`42 C.F.R. § 413.79(c)(2)(iii) to their fiscal years ending in 2017. Plaintiffs Michigan Medicine,
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`Milton