Case 1:21-cv-03372 Document 1 Filed 12/27/21 Page 1 of 21
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`UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLUMBIA
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`Case No. 1:21-cv-3372
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`v.
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`XAVIER BECERRA, Secretary
`United States Department of
`Health and Human Services,
`200 Independence Avenue, S.W.
`Washington, DC 20201,
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` Defendant.
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`SOUTH BROWARD HOSPITAL DISTRICT
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`d/b/a MEMORIAL HOSPITAL MIRAMAR
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`3501 Johnston Street
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`Hollywood, FL 33021
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`SOUTH BROWARD HOSPITAL DISTRICT
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`d/b/a MEMORIAL REGIONAL PEMBROKE
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`3501 Johnston Street
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`Hollywood, FL 33021
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`SOUTH BROWARD HOSPITAL DISTRICT
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`d/b/a MEMORIAL HOSPITAL WEST
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`3501 Johnston Street
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`Hollywood, FL 33021
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`SOUTH BROWARD HOSPITAL DISTRICT
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`d/b/a MEMORIAL REGIONAL HOSPITAL
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`3501 Johnston Street
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`Hollywood, FL 33021
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` Plaintiffs,
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`COMPLAINT
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`INTRODUCTION
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`1.
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`Plaintiffs, South Broward Hospital District (d/b/a Memorial Hospital Miramar),
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`South Broward Hospital District (d/b/a Memorial Regional Pembroke), South Broward Hospital
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`District (d/b/a Memorial Hospital West), and South Broward Hospital District (d/b/a Memorial
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`Case 1:21-cv-03372 Document 1 Filed 12/27/21 Page 2 of 21
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`Regional Hospital) (the “Hospitals”) by and through their counsel, challenge the Secretary of the
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`United States Department of Health and Human Services’ (the “Secretary”) calculation of the
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`disproportionate share hospital “DSH” adjustment relating to inpatients enrolled in a Medicare
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`Advantage plan under Part C of the Medicare Act (“Part C”).
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`2.
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`The Hospitals filed jurisdictionally proper appeals challenging the DSH Part C
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`policy with the Provider Reimbursement Review Board (“PRRB”) in accordance with 42 U.S.C.
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`§ 1395oo(a). The Secretary, however, seeks to prevent the Hospitals’ appeals of the Medicare Part
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`C issue. First, although the Court of Appeals and the Supreme Court have invalidated the DSH
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`Part C Policy, the Secretary persists in applying it. See Northeast Hosp. Corp. v. Sebelius, 657 F.3d
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`1, 16-17 (D.C. Cir. 2011); Allina Health Services v. Sebelius, 746 F.3d 1102, 1105 (D.C. Cir. 2014)
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`(“Allina I”); Allina Health Servs. v. Price, 863 F.3d 937, 943-44 (D.C. Cir. 2017) (“Allina II”); Azar
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`v. Allina Health Servs., 139 S. Ct. 1804 (2019) (affirming Allina II).
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`3.
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`On August 6, 2020, the Secretary published a notice of proposed rulemaking in
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`which he proposed to retroactively adopt the same policy that was vacated in the Allina litigation.
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`85 Fed. Reg. 47723 (Aug. 6, 2020) (the “Proposed Rule”). The Proposed Rule suggests that, due
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`to the vacatur of the 2004 rule, the Secretary has no rule governing the treatment of Part C days and
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`must therefore engage in retroactive rulemaking. Id. at 47724.
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`4.
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`On August 17, 2020, the Secretary issued CMS Ruling 1739-R (“The Ruling”).
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`Exhibit 1. The Ruling deprives the PRRB of jurisdiction over any pending jurisdictionally proper
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`administrative appeals “regarding the treatment of patient days associated with patients enrolled in
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`Medicare Advantage plans in the Medicare and Medicaid fractions of the disproportionate patient
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`percentage” so that Medicare Administrative Contractors (“MACs”) can apply the result of the
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`retroactive rulemaking to those pending appeals once the new rule is in place.
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`2
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`5.
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`The Ruling requires the PRRB to determine whether the appeal “satisfies the
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`applicable jurisdictional and procedural requirements of section 1878 of the [Medicare] Act, the
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`Medicare regulations, and other agency rules and guidelines.” See Exhibit 1 at 7. The Ruling
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`instructs the PRRB to remand jurisdictionally proper appeals of the “Part C day DSH issue” back
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`to the MACs that issued the payment determinations under appeal. Id. at 2, 7-8. The Ruling was
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`not adopted through notice-and-comment rulemaking.
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`6.
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`Although the Ruling deprives the Hospitals of relief to which they are entitled, the
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`Proposed Rule has not been finalized, and the Secretary concedes that the Proposed Rule has no
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`payment effect. The Ruling claims that the Proposed Rule “eliminates any actual case or
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`controversy regarding the hospital’s previously calculated SSI and Medicaid fractions and its DSH
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`payment adjustment and thereby renders moot each properly pending claim in a DSH appeal
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`involving the issue resolved by the Supreme Court in Allina . . . .” Id. at 8.
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`7.
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`Here, the Hospitals filed jurisdictionally proper appeals with the PRRB, which
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`include a challenge to the DSH determination based on the DSH Part C policy. The PRRB
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`remanded the Hospitals’ appeals of this issue, justifying the remand solely on the Proposed Rule
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`and the Ruling. Exhibits 2-5.
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`8.
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`The Ruling and subsequent remands of the Hospitals’ appeals of the Medicare Part
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`C issue must be vacated because they were arbitrary, capricious, and contrary to the law. The
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`Ruling and remands violated the Medicare Act and the Administrative Procedure Act (“APA”) by
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`throwing out the Hospitals’ rightful appeals of a final Medicare payment determination and
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`implementing substantive payment policy changes without notice-and-comment rulemaking. The
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`Secretary’s ruling also violated the Constitution by ending the Hospitals’ properly-filed appeals of
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`Case 1:21-cv-03372 Document 1 Filed 12/27/21 Page 4 of 21
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`the Medicare Part C issue and providing no means of review of the Secretary’s ruling—or
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`adjudication of that issue in the Hospitals’ appeals.
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`9.
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`For these reasons as set forth herein, the Hospitals respectfully request that this
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`Court issue a ruling:
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`a. Vacating CMS Ruling 1739-R;
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`b. Vacating the PRRB’s order remanding the Hospitals’ appeals of the Medicare
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`Part C issue to the MAC to comply with CMS Ruling 1739-R;
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`c. Reinstating the Hospitals’ appeals of the Medicare Part C issue before the
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`PRRB;
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`d. In the alternative, issuing a writ of mandamus ordering the Secretary to rescind
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`CMS Ruling 1739-R and reinstate the Hospitals’ appeals of the Medicare Part
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`C issue before the PRRB;
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`e. Ordering the Secretary to recalculate the Hospitals’ DSH payments for the
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`Fiscal Period at issue as directed by the Allina Court and to make prompt
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`payment of any additional amounts due to the Hospitals, plus interest calculated
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`in accordance with 42 U.S.C. § 1395oo(f)(2), 42 U.S.C. § 1395g(d), or both;
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`f. Requiring the agency to pay legal fees and costs of suit incurred by the
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`Hospitals; and
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`g. Providing such other relief as the Court may consider appropriate.
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`JURISDICTION AND VENUE
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`10.
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`This action arises under the Medicare Statute, title XVIII of the Social Security Act,
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`42 U.S.C § 1395 et seq., and the APA, 5 U.S.C. § 551 et seq.
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`11.
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`Jurisdiction is proper under 42 U.S.C. § 1395oo(a)(1)(A)(ii), 42 U.S.C.
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`§ 1395oo(f)(1), 28 U.S.C. § 1331, and 28 U.S.C. § 1361.
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`12.
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`Venue is proper in this judicial district in accordance with 42 U.S.C. § 1395oo(f)(1)
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`and 28 U.S.C. § 1391(e).
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`PARTIES
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`13.
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`The Plaintiffs in this action are hospitals that participate in the Medicare program.
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`a. Plaintiff South Broward Hospital District’s (d/b/a Memorial Hospital Miramar)
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`provider number is 10-0285 and the cost reporting periods at issue in this action
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`are hospital fiscal years 2006, 2007, 2009.
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`b. Plaintiff South Broward Hospital District’s (d/b/a Memorial Regional
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`Pembroke) provider number is 10-0230 and the cost reporting periods at issue
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`in this action are hospital fiscal years 2005, 2007, 2008, 2009.
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`c. Plaintiff South Broward Hospital District’s (d/b/a Memorial Hospital West)
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`provider number is 10-0281 and the cost reporting periods at issue in this action
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`are hospital fiscal years 2006, 2007, 2008, 2009.
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`d. Plaintiff South Broward Hospital District’s (d/b/a Memorial Regional Hospital)
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`provider number is 10-0038 and the cost reporting periods at issue in this action
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`are hospital fiscal years 2005, 2008, 2009.
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`14.
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`Defendant, Xavier Becerra, is the Secretary of the United States Department of
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`Health and Human Services (“HHS”) and is sued in his official capacity. HHS is the Federal agency
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`that administers CMS. CMS is the Federal agency to which the Secretary has delegated
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`administrative authority over the Medicare program, which is established under title XVIII of the
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`Social Security Act. See 42 U.S.C. § 1395 et seq. References to the Secretary are meant to refer
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`to him, his subordinate agencies and officials, and to his official predecessors or successors as the
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`context requires.
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`LEGAL AND REGULATORY BACKGROUND
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`Medicare DSH Payment
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`15.
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`Part A of the Medicare statute addresses “inpatient hospital services.” 42 U.S.C.
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`§ 1395d(a)(l). Beginning in 1983, the Medicare program pays most hospitals for the operating costs
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`of inpatient hospital services under the prospective payment system (“PPS”). See 42 U.S.C.
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`§ 1395ww(d)(l)-(5); 42 C.F.R. Part 412. Under PPS, Medicare pays standardized amounts per
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`discharge, subject to certain payment adjustments. Id. The DSH payment is one type of PPS
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`payment adjustment. See 42 U.S.C. § 1395ww(d)(5)(F); 42 C.F.R. § 412.106.
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`16.
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`A hospital may qualify for a DSH adjustment based on its “disproportionate patient
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`percentage” (“DSH patient percentage”). See 42 U.S.C. § 1395ww(d)(5)(F)(i)(I) and (d)(5)(F)(v);
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`42 C.F.R. § 412.106(c)(1). Hospitals that serve a disproportionate share of low-income patients
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`may be entitled to an upward percentage adjustment to the standard PPS rates. See 42 U.S.C.
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`§ 1395ww(d)(5)(F); see also 42 C.F.R. § 412.106. The DSH patient percentage serves as a proxy
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`for utilization by low-income patients, establishes a hospital’s qualification as a DSH, and
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`determines the amount of the DSH adjustment. See 42 U.S.C. § 1395ww(d)(5)(F)(iv) and (vii)–
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`(xiii); 42 C.F.R. § 412.106(d). The DSH patient percentage is comprised of the sum of two fractions
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`expressed as percentages. 42 U.S.C. § 1395ww(d)(5)(F)(vi).
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`17.
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`The first fraction, commonly known as the “Medicare fraction” or “SSI fraction,”
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`is defined as:
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`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 this subchapter and were
`entitled to supplementary security income benefits (excluding any State
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`supplementation) under subchapter XVI of this chapter, 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
`this subchapter . . .
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`42 U.S.C. § 1395ww(d)(5)(F)(vi)(II). The Medicare fraction is computed annually by CMS, and
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`the MACs must use CMS’s calculation to compute a hospital’s DSH payment adjustment. See 42
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`C.F.R. § 412.106(b)(2)–(3).
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`18.
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`The other fraction is the “Medicaid fraction” and is defined as:
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`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
`subchapter XIX [i.e., the Medicaid program], but who were not entitled to benefits
`under part A of this subchapter, and the denominator of which is the total number
`of the hospital’s patient days for such period.
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`42 U.S.C. § 1395ww(d)(5)(F)(vi)(I). According to CMS’s regulations, it is the MAC’s obligation
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`to determine the Medicaid fraction for each provider: “The [MAC] determines . . . the number of
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`the hospital’s patient days of service for which patients were eligible for Medicaid but not entitled
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`to Medicare Part A, and divides that number by the total number of patient days in the same
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`period.” 42 C.F.R. § 412.106(b)(4).
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`Medicare Part C
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`19.
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`In 1997, Congress amended the Medicare statute by adding a new Part C. Balanced
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`Budget Act of 1997 (“BBA”), Pub. L. No. 105-33, § 4001, codified at 42 U.S.C. § 1395w-21. Part
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`C governs the Medicare Advantage program (formerly known as the Medicare+Choice program).
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`After the 1997 amendment, a Medicare beneficiary may elect to receive Medicare benefits “under
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`this subchapter” through one of two means: “(A) through the original Medicare fee-for-service
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`program under parts A and B, or (B) through enrollment in a [Medicare Advantage] plan under
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`this part [i.e., part C].” See 42 U.S.C. § 1395w-21(a)(l); see also 42 C.F.R. § 422.50; 63 Fed. Reg.
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`Case 1:21-cv-03372 Document 1 Filed 12/27/21 Page 8 of 21
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`34968 (June 26, 1998). Through the creation of Part C, Medicare beneficiaries who elected for
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`coverage under Medicare Part C were no longer entitled to payments for their care under Part A.
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`The Secretary’s Policy on Counting Part C Days in the DSH Calculation
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`20.
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`Although the Medicare Advantage program was established in 1997, the Secretary
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`did not publish any rule or instruction governing how to count these Part C days in the Medicare
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`DSH calculation until 2003. Prior to that time, “the Secretary treated Part C patients as not entitled
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`to benefits under Part A.” Allina Health Servs. v. Sebelius, 746 F.3d 1102, 1106 (D.C. Cir. 2014)
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`(“Allina I”) (emphasis in original). From 1986 through 2004, the Secretary interpreted the term
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`“entitled to benefits under Part A” to mean covered, or paid, by Medicare Part A. See id. at 1108
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`(describing the agency’s “policy . . . of excluding Part C days from the Medicare fraction and
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`including them in the Medicaid fraction”); id. at 1106 (“Prior to 2003, the Secretary treated Part C
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`patients as not entitled to benefits under Part A.”).
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`21.
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`This policy resulted in the addition of Medicare Advantage days in the Medicaid
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`fraction’s denominator count of total days, and in the Medicaid numerator for patients who were
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`also Medicaid eligible. To clarify the policy for Medicare Advantage days in the FFY 2004
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`Inpatient Proposed Rule, the Secretary proposed:
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`[O]nce a beneficiary elects Medicare Part C, those patient days attributable to the
`beneficiary should not be included in the Medicare fraction of the DSH patient
`percentage. These patient days should be included in the count of total patient days
`in the Medicaid fraction (the denominator), and the patient’s days for the M+C
`beneficiary who is also eligible for Medicaid would be included in the numerator
`of the Medicaid fraction.
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`See 68 Fed. Reg. 27154, 27208 (May 19, 2003). The Secretary opined that there would be no
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`major financial impact associated with this proposal. See id. at 27416. The Secretary proposed to
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`amend the existing DSH regulation to effectuate this clarification of the existing rule. See id. at
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`27229–30 (proposing amendments to DSH regulation at § 412.106 in order to accomplish several
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`proposed changes to the rule). However, the final rule published on August 1, 2003 did not include
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`this or other aspects of the 2003 proposed rule relating to the DSH payment. See 68 Fed. Reg.
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`45346, 45422 (Aug. 1, 2003). A year later, the Secretary published another final rule adopting a
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`policy change with respect to the counting of Medicare Part C days in the Medicare DSH payment
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`calculation. See 69 Fed. Reg. 48916, 49099, 49246 (Aug. 11, 2004); see also 72 Fed. Reg. 47130,
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`47384 (Aug. 22, 2007) (discussing the 2004 “policy change”). In this 2004 final rule, the Secretary
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`“adopt[ed] a policy” and “revis[ed]” the DSH regulation to begin to count Medicare Advantage
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`patient days as Medicare Part A patient days in the SSI fraction, effective October 1, 2004. 69
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`Fed. Reg. at 49099. The adoption of this new policy was accomplished by deleting the word
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`“covered” where it previously appeared in the definition of the Medicare fraction in 42 C.F.R.
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`§ 412.106(b)(2)(i). See id.; compare 42 C.F.R. § 412.106(b)(2)(i) (2002) with 69 Fed. Reg. at
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`49246 (revised text of § 412.106(b)(2)(i)). The Secretary also declined to adopt his proposal to
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`include Part C days in the Medicaid fraction. 69 Fed. Reg. at 49099.
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`22.
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`The Secretary’s sole explanation for the agency’s 2004 determination to begin
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`counting Medicare Part C days as Medicare Part A days in the SSI fraction (effective October 1,
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`2004) was that Medicare Advantage enrollees “are still, in some sense, entitled to benefits under
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`Medicare Part A.” 69 Fed. Reg. at 49099. It necessarily follows based on identical statutory text
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`related to both fractions (“entitled to benefits under part A”) that the Secretary’s policy to include
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`such days in the SSI fraction also entails their exclusion in the Medicaid fraction, to the extent
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`patients are dually eligible for Medicaid.
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`23.
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`In 2007, the Secretary published in the Federal Register notice of a further change
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`to the DSH regulation, which was adopted without advance notice or opportunity for comment.
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`See 72 Fed. Reg. at 47384. The 2007 notice stated that the agency “inadvertently” failed to change
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`Case 1:21-cv-03372 Document 1 Filed 12/27/21 Page 10 of 21
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`the text of the regulation in 2004 to the extent necessary “to conform to the preamble language.”
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`Id. Accordingly, the Secretary decided to make a “technical correction” to the text of Section
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`412.106(b)(2) in order to effectuate “the policy iterated in that [2004] rule.” Id. Following that
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`correction, the portion of the regulation defining the numerator and denominator of the SSI fraction
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`now refers to patients who are “entitled to Medicare Part A (or Medicare Advantage (Part C)).”
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`Id. at 47411 (amending § 412.106(b)(2)(i)(B) and (iii)(B)).
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`The Allina I and Allina II Litigation
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`24.
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`The United States Court of Appeals for the District of Columbia held that the policy
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`regarding Part C days adopted by the Secretary in 2004 was “deficient” from a notice standpoint
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`and was therefore vacated. Allina I, 746 F.3d at 1111. In particular, the Court of Appeals agreed
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`with this Court that “an agency must cogently explain why it has exercised its discretion in a given
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`manner” and that “[i]n this case, the Secretary failed to do so…” See Allina Health Servs. v.
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`Sebelius, 904 F. Supp. 2d 75, 94 (D.D.C. 2012); see also FCC v. Fox TV Stations, Inc., 129 S. Ct.
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`1800, 1811 (2009) (explaining that agencies “may not . . . depart from a prior policy sub silentio
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`or simply disregard rules that are still on the books”). The holding was based on the fact that the
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`Secretary’s explanation for his policy change was limited to the following cursory statement: “once
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`Medicare beneficiaries elect Medicare Part C coverage, they are still, in some sense, entitled to
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`benefits under Medicare Part A.” 69 Fed. Reg. at 49099.
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`25.
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`In addition, as the Allina I Court also held, the agency violated the notice-and-
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`comment rulemaking requirements of the APA and the Medicare statute because the new rule
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`adopted in 2004 was the opposite of the rule proposed by the Secretary in 2003, and the public
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`was not afforded adequate notice of, or a meaningful opportunity to comment upon, the rule that
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`the agency actually adopted. See Allina I, 746 F.3d at 1108 (“[A]gencies may not ‘pull a surprise
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`switcheroo on regulated entities’ . . . [and] [t]he word ‘clarify’ does not suggest that a potential
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`underlying major issue is open for discussion.”) (internal citations omitted).
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`26.
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`The Court of Appeals remanded to the CMS Administrator to decide, in the absence
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`of the vacated 2004 rule, how Part C days should be treated for the purposes of DSH. On
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`December 2, 2015, the Administrator issued a decision, simply reaffirming the Secretary’s prior
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`position and concluding that the same policy could be adopted even in absence of the 2004
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`regulation. See Allina Health Servs. v. Sebelius, No. 1:10-cv-01463-RMC, CMS Adm’r Dec.
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`(D.D.C. Dec. 2, 2015). In other words, CMS has continued to include Part C days in the Medicare
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`fraction and exclude Part C days in the Medicaid fraction, despite not having a valid policy on the
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`books for doing so.
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`27.
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`The Secretary’s continued treatment of Part C days as “days entitled to Part A” was
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`challenged in Allina II. There, the D.C. Circuit Court again ruled against the Secretary, holding
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`that he does not have authority to adopt this policy absent notice-and-comment rulemaking. See
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`Allina II, 863 F.3d at 944. Specifically, the Court held that the Medicare statute required
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`notice-and-comment rulemaking for any 1) “rule, requirement or other statement of policy” that
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`2) “establishes or changes” 3) a “substantive legal standard” that 4) governs “payment for
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`services.” Id. at 943 (citing 42 U.S.C. § 1395hh(a)(2), (b)(l)). Finding that each of these four
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`requirements was met, the D.C. Circuit Court once again invalidated the Secretary’s on-going
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`policy for failure to undertake notice-and-comment rulemaking as required by the Medicare
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`statute.
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`28.
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`The Court also stated that the Secretary “could not circumvent this [notice-and-
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`comment] requirement by claiming that it was acting by way of adjudication rather than
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`rulemaking.” Allina II, 863 F.3d at 945.
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`Case 1:21-cv-03372 Document 1 Filed 12/27/21 Page 12 of 21
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`29.
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`On June 3, 2019, the Supreme Court affirmed the Court of Appeals’ ruling in Allina
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`II. Azar v. Allina Health Services, 139 S. Ct. 1804 (2019). The Supreme Court held that the
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`Secretary’s 2014 application of the 2004 Part C days policy required notice-and-comment
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`rulemaking under section 1395hh(a)(2) of the Medicare statute. Id. at 1810-14. In addition, the
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`Supreme Court’s decision did not disturb the Court of Appeals’ ruling that the readopted 2004
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`policy is invalid under 42 U.S.C. § 1395hh(a)(4) because the Secretary failed to engage in
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`notice-and-comment rulemaking. Id. at 1816.
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`The Proposed Rule
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`30.
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`On August 6, 2020, the Secretary issued a proposed rule titled “Treatment of
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`Medicare Part C Days in the Calculation of a Hospital’s Medicare Disproportionate Patient
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`Percentage.” 85 Fed. Reg. 47723 (Aug. 6, 2020). The stated purpose of the Proposed Rule is to
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`establish a policy regarding “the treatment of days associated with [Medicare] beneficiaries
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`enrolled in Medicare Part C” for the purposes of calculating Medicare DSH payments for cost
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`reporting periods occurring prior to October 1, 2013. Id. at 47723.
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`31.
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`The Secretary states in his proposed rule that it is necessary to apply his policy
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`retroactively because he has no rule governing the treatment of Part C days for cost reporting
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`periods occurring prior to October 1, 2013. Id. at 47725. However, the Secretary ignores the fact
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`that he had a policy prior to 2004 that governed the treatment of Part C days in the DSH calculation,
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`and that policy continues to apply.
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`32.
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`The Secretary also asserts that retroactive rulemaking is (a) necessary to comply
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`with the statutory requirement to calculate Medicare DSH payments, and (b) in the “public
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`interest” because, absent retroactive rulemaking, the Secretary “would be unable to calculate and
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`confirm proper DSH payments for the time periods before FY 2014….” Id.
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`Case 1:21-cv-03372 Document 1 Filed 12/27/21 Page 13 of 21
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`The Ruling (CMS Ruling 1739-R)
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`33.
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`On August 17, 2020, the Secretary issued Ruling CMS-1739-R. The Ruling
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`instructs the PRRB to remand jurisdictionally-proper appeals that include the Allina II issue to the
`
`applicable MACs to “recalculate the provider’s DSH payment adjustment in accordance with the
`
`Secretary’s forthcoming rule”:
`
`If the administrative tribunal finds that the applicable jurisdictional and procedural
`requirements are satisfied for a given claim on the Part C day DSH issue and that
`any NPR that is the basis for the claim issued before CMS’s forthcoming final rule
`or that arise from an appeal based on an untimely NPR under 42 U.S.C.
`1395oo(a)(1)(B) or (C) and any subsequently issued NPR for that fiscal year pre-
`dates the new final rule then the appeals tribunal will issue a brief written order,
`remanding each such claim that qualifies for relief under the Ruling to the
`appropriate Medicare contractor for calculation of the DSH payment adjustment for
`the period at issue pursuant to the forthcoming rule.
`
`See Exhibit 1 at 7-8. As a result, before issuing a remand, the PRRB must find that the claim meets
`
`“applicable jurisdictional requirements.” However, the Ruling states:
`
`By this Ruling, the Administrator provides notice that the PRRB and other
`Medicare administrative appeals tribunals lack jurisdiction over the Part C days
`issue for years before FY 2014 as to any appeals arising from NPRs from that period
`that pre-dates the forthcoming rule or that arise from an appeal based on an
`untimely NPR under 42 U.S.C. 1395oo(a)(1)(B) or (C) and any subsequently issued
`NPR for that fiscal year pre-dates the new final rule.
`
`See Exhibit 1 at 6-7. The Ruling also states that it “eliminates any actual case or controversy
`
`regarding” the Allina II issue providing the claim is otherwise jurisdictionally proper. Exhibit 1
`
`at 8-9.
`
`34.
`
`The Ruling is a final agency determination for the purposes of judicial review
`
`because it will deprive the Hospitals of further opportunity for review. The Secretary’s Proposed
`
`Rule proposes to retroactively implement the very policy that it has been applying illegally for
`
`decades. As a result, when the Hospitals’ appeals of the Medicare Part C issue are remanded to the
`
`
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`Case 1:21-cv-03372 Document 1 Filed 12/27/21 Page 14 of 21
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`MAC, it is unlikely that the MAC will make any adjustments to the Hospitals’ cost report. Absent
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`any adjustments, the PRRB will not have jurisdiction for further review.
`
`The Medicare Appeals Process
`
`35.
`
`It has always been CMS’s policy that: “It is not necessary for hospitals serving a
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`disproportionate number of low-income patients . . . to formally apply for a disproportionate share
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`adjustment.” 51 Fed. Reg. 31454, 31457 (Sept. 3, 1986). It is unnecessary for a provider to
`
`formally claim DSH on the as-filed cost report because the “final determination of a hospital’s
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`eligibility for, and amount of, any disproportionate share adjustment will be made by the [MAC]
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`at the time of the year-end settlement of [a] cost report.” Id. at 31458. But, “[u]pon receipt of the
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`Notice of Program Reimbursement, all hospitals have the right to appeal the [MAC]’s
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`determination.” Id.
`
`36.
`
`Section 1878(a) of the Social Security Act entitles a provider of services under the
`
`Medicare program to a hearing before the PRRB if three prerequisites are met: (i) the provider is
`
`dissatisfied with a final determination of the Secretary as to the amount of the payment under the
`
`Medicare Act; (ii) the provider files a request for hearing within 180 days of the final determination
`
`(typically an NPR); and (iii) the amount in controversy is at least $10,000 for an individual appeal
`
`or $50,000 for a group appeal. 42 U.S.C. § 1395oo(a); 42 C.F.R. § 405.1835. If an appeal satisfies
`
`these requirements, the PRRB has jurisdiction to hear the appeal. Id.
`
`37.
`
`When the PRRB has jurisdiction to hear an appeal, but the appeal involves a statute,
`
`regulation, or policy that the PRRB is without authority to overturn, the PRRB may, through its
`
`own motion or upon request of the provider, grant expedited judicial review (“EJR”) of the appeal.
`
`42 U.S.C. § 1395oo(f)(1). If EJR is granted, the provider can seek judicial review in federal court
`
`
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`14
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`Case 1:21-cv-03372 Document 1 Filed 12/27/21 Page 15 of 21
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`without first having a hearing before the PRRB. Id. The provider must file its complaint no later
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`than 60 days after receiving notice of the PRRB’s decision to grant EJR. Id.
`
`38.
`
`The Medicare statute allows providers to bring a civil action pursuant to the APA
`
`through EJR. See 42 U.S.C. § 1395oo(f)(l).
`
`PROCEDURAL BACKGROUND
`
`39.
`
`The Hospitals filed jurisdictionally proper appeals with the PRRB on the grounds
`
`that (a) the Medicare fraction that CMS used to calculate DSH payments improperly included Part
`
`C days, and (b) the Medicaid fraction that CMS unlawfully used to calculate those payments
`
`improperly excluded Medicaid-eligible Part C days from the numerator. The Hospitals added their
`
`appeals to the following group appeals:
`
`a. Memorial Healthcare System 2005-2006 Part C Days Disproportionate Patient
`
`Percentage CIRP Group PRRB (Case No.: 14-1418GC).
`
`b. Memorial Healthcare System 2007 Post 1498-R Part C Days CIRP Group
`
`(PRRB Case No.: 13-3043GC).
`
`c. Memorial Healthcare System 2008 Post 1498-R Part C Days CIRP Group
`
`(PRRB Case No.: 13-3044GC).
`
`d. Memorial Healthcare System 2009 DSH Medicaid Ratio Part C Days CIRP
`
`Group (PRRB Case No.: 14-0557GC).
`
`e. Memorial Healthcare System 2009 DSH SSI Fraction Part C Days CIRP Group
`
`(PRRB Case No.: 14-0558GC).
`
`40.
`
`The Hospitals filed their appeals in a timely manner in accordance with 42 U.S.C.
`
`§ 1395oo(a).
`
`
`
`15
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`

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`Case 1:21-cv-03372 Document 1 Filed 12/27/21 Page 16 of 21
`
`41.
`
`The PRRB remanded the Hospitals’ appeals of the Medicare Part C issue to the
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`MAC pursuant to Ruling CMS-1739-R for recalculation of the DSH payment adjustment.
`
`a. The Memorial Healthcare System 2005-2006 Part C Days Disproportionate
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`Patient Percentage CIRP Group PRRB (Case No.: 14-1418GC) remand was
`
`issued on December 6, 2021. See Exhibit 2.
`
`b. The Memorial Healthcare System 2007 Post 1498-R Part C Days CIRP Group
`
`(PRRB Case No.: 13-3043GC) remand was issued on October 28, 2021. See
`
`Exhibit 3.
`
`c. The Memorial Healthcare System 2008 Post 1498-R Part C Days CIRP Group
`
`(PRRB Case No.: 13-3044GC) remand was issued on October 28, 2021. See
`
`Exhibit 4.
`
`d. The Memorial Healthcare System 2009 DSH Medicaid Ratio Part C Days CIRP
`
`Group (PRRB Case No.: 14-0557GC) remand was issued on October 28, 2021.
`
`See Exhibit 5.
`
`e. The Memorial Healthcare System 2009 DSH SSI Fraction Part C Days CIRP
`
`Group (PRRB Case No.: 14-0558GC) remand was issued on October 28, 2021.
`
`See Exhibit 5.
`
`42.
`
`The CMS Administrator did not review the PRRB’s remand letters and CMS has
`
`stated that no payment effect is anticipated on remand. As a result, the apparent effect of the
`
`PRRB’s remand decisions is to confirm the payments that the Hospitals previously received and
`
`which are part of their appeals to the PRRB and, therefore, constitute final agency action for
`
`purposes of judicial review.
`
`
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`16
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`Case 1:21-cv-03372 Document 1 Filed 12/27/21 Page 17 of 21
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`CAUSES OF ACTION
`
`COUNT I
`Violation of the Medicare Act
`(Hospitals’ Appeal Rights)
`
`The Hospitals hereby incorporate by reference paragraphs 1 through 42.
`
`The Hospitals are entitled to appeal final payment determinations made by the
`
`43.
`
`44.
`
`MAC to the PRRB and to obtain interest on any recovery ultimately received. 42 U.S.C.
`
`§ 1395oo(f).
`
`45.
`
`Through CMS Ruling 1739-R and the subsequent remand by the PRRB, the
`
`Secretary violated his nondiscretionary duty to permit the Hospitals to appeal for payment and
`
`interest required under the Medicare Act.
`
`46.
`
`The Secretary effectively revoked the Hospitals’ statutory right to appeal the
`
`Medicare Part C issue. The Secretary’s actions have harmed the Hospitals and they are entitled to
`
`relief.
`
`
`47.
`
`48.
`
`COUNT II
`Violation of the Medicare Act
`(Notice-and-Comment Rulemaking)
`
`The Hospitals hereby incorporate by reference paragraphs 1 through 46.
`
`The Medicare Act requires the Secretary to subject any rules, requirements, or other
`
`policy statements that impact a provider’s payment to notice-and-comment rulemaking. 42 U.S.C.
`
`§ 1395hh(a)(2); Allina Health Servs., 139 S. Ct. at 1809.
`
`49.