Allina Health Services v. Burwell

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

ALLINA HEALTH SERVICES, )

et al., )

Plaintiffs, )

)

v. ) Civil Action No. 14-1415 (GK)

)

SYLVIA M. BURWELL, Secretary )

United States Department of )

Health and Human Services, )

)

Defendant. )

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MEMORANDUM OPINION

Plaintiffs Allina Heal th Services, et al. ("Plaintiffs") ,

bring this action against Sylvia M. Burwell, in her official

capacity as Secretary of the United States Department of Health

and Human Services ("Secretary" or "Defendant"), challenging the

calculation of certain disproportionate share hospital ( "DSH")

payments as procedurally and substantively invalid.

This matter is before the Court on the Defendant's Motion to

Dismiss for Lack of Jurisdiction or in the Alternative for

Voluntary Remand [Dkt. No. 15]. Upon consideration of the Motion,

Opposition [Dkt. No. 16], Reply [Dkt. No. 18], the entire record

herein, and for the reasons set forth below, the Motion shall be

denied.

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I. Background

A. Factual Overview1

In Allina Health Services v. Sebelius, a group of hospitals,

including the Plaintiffs in the present case, challenged a 2004

rulemaking by the Secretary ( "2004 Final Rule") pertaining to

calculations for Disproportionate Share Hospital ("DSH") payment

determinations under Medicare. See No. 10-cv-1463 (D.D.C.). In

November 2012, the Court (Collyer, J.) granted summary judgment

for the plaintiffs, finding that the 2004 Final Rule violated the

procedural requirements of the Administrative Procedure Act

("APA") and vacating the rule. See Allina Health Servs. v.

Sebelius, 904 F. Supp. 2d 75 (D.D.C. 2012) ("Allina I").

On appeal, our Court of Appeals affirmed the part of the

Allina I Court's decision vacating the 2004 Final Rule. But, the

Court of Appeals held that the Allina I Court erred when it

directed the Secretary to calculate the DSH payments in a

particular manner, rather than simply remanding. See Allina Health

Servs. v. Sebelius, 746 F.3d 1102, 1111 (D.C. Cir. 2014).

1 For purposes of ruling on a motion to dismiss, the factual

allegations of the complaint must be presumed to be true and

liberally construed in favor of the plaintiff. Aktieselskabet AF

21. November 2001 v. Fame Jeans Inc., 525 F.3d 8, 15 (D.C. Cir.

2008); Shear v. Nat'l Rifle Ass'n of Am., 606 F.2d 1251, 1253 (D.C.

Cir. 1979). Therefore, the facts set forth herein are taken from

Plaintiffs' Complaint [Dkt. No. 1].

2

Plaintiffs allege that after the D.C. Circuit's opinion, the

Secretary published calculations for federal fiscal year 2012 DSH

payments ("2012 DSH Calculations") 2 based on the 2004 Final Rule

that had been vacated. Plaintiffs also allege that the new 2012

DSH Calculations are procedurally invalid. Compl. ~~ 47-49.

Plaintiffs timely appealed to the Provider Reimbursement Review

Board ("PRRB") challenging the 2012 DSH Calculations, see Compl.

~~ 36-39, and requested that the PRRB grant expedited judicial

review. Id. ~ 41.

The PRRB is an independent administrative tribunal that

resolves disputes regarding hospital reimbursement determinations

by Medicare contractors or the Centers for Medicare & Medicaid

Services ("CMS"). See 42 U.S.C. § 1395oo(a). The PRRB may resolve

certain payment disputes without following low-level policy

guidance, see 42 C.F.R. § 405.1867; however, it is bound by agency

regulation and rulings, id., and cannot decide "question[s] of law

or regulations." 42 U.S.C. § 1395oo(f) (1). Section 1395oo(f) gives

providers "the right to obtain judicial review of any action .

which involves a question of law or regulations . . . whenever the

[PRRB] determines . . . that it is without the authority to decide

the question." Id.

2Although the calculations are for the 2012 fiscal year, they were

published on June 30, 2014, after the Court of Appeals vacated the

2004 Final Rule. Compl. ~ 36.

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By letter dated August 13, 2014, the PRRB granted Plaintiffs'

request for expedited judicial review, finding that "it is without

the authority to decide the legal question of whether the

regulation regarding the [2012 DSH Calculations] is valid and

whether the Secretary's actions subsequent to the decision in

Allina [I] are legal. /1

Letter from the Provider Reimbursement

Review Board to Stephanie Webster 6 (Aug. 13, 2014) [Dkt. No. 14-

1] ( "PRRB Decision") .

B. Procedural Background

On August 19, 2014, Plaintiffs filed their Complaint,

pursuant to the PRRB's grant of expedited judicial review [Dkt.

No. 1]. Plaintiffs filed a Notice of Related Case on the same day

[Dkt. No. 2]. Judge Collyer granted Defendant's objection to the

related case designation on May 18, 2015, and the case was randomly

reassigned to this Court. Minute Order dated May 18, 2015; Case

Assignment [Dkt. No. 20].

On October 27, 2014, Defendant filed her Motion to Dismiss

for Lack of Jurisdiction or in the Alternative for Voluntary Remand

[Dkt. No. 15] ("Motion") . Plaintiffs filed their Opposition on

November 10, 2014 [Dkt. No. 16] ("Opp'n"), and Defendant filed her

Reply on November 20, 2015 [Dkt. No. 18] ("Reply").

II. Standard of Review Under Fed. R. Civ. P. 12{b) (1)

As courts of limited jurisdiction, federal courts possess

only those powers specifically granted to them by Congress or

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directly by the U.S. Constitution. Kokkone~ v. Guardian Life Ins.

Co. of Arn., 511 U.S. 375, 377 (1994). The plaintiff bears the

burden of establishing by a preponderance of the evidence that the

Court has subject matter jurisdiction to hear the case. See Shuler

v. United States, 531 F.3d 930, 932 (D.C. Cir. 2008). In deciding

whether to grant a motion to dismiss for lack of jurisdiction under

Rule 12 (b) (1), the court must "accept all of the factual

allegations in [the] complaint as true [.] " Jerome Stevens

Pharmaceuticals, Inc. v. Food & Drug Adrnin., 402 F.3d 1249, 1253-54

(D.C. Cir. 2005) (internal quotation marks omitted) (citing United

States v. Gaubert, 499 U.S. 315, 327 (1991)). The Court may also

consider matters outside the pleadings, and may rest its decision

on its own resolution of disputed facts. See Herbert v. Nat'l Acad.

of Sciences, 974 F.2d 192, 197 (D.C. Cir. 1992).

III. Analysis

The Defendant has moved to dismiss this case on the ground

that the PRRB improvidently granted expedited judicial review.

Defendant alleges the PRRB reached the conclusion that it was

"without authority to decide" Plaintiffs' challenge to the 2012

DSH Calculations because it erroneously believed "it was 'bound'

to apply the vacated 2004 Final Rule." Motion at 5. Dismissal,

Defendant argues, will permit the PRRB to reconsider Plaintiffs'

challenge. Id. at 1-2.

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In the alternative, Defendant requests that the Court "grant

a voluntary remand to the agency, which will allow the PRRB to

adjudicate (P]laintiffs' claims without consideration of the

vacated (2004 Final Rule]." Id. at 2.

Plaintiffs oppose Defendant's Motion, arguing that the PRRB's

expedited judicial review determination is final and not subject

to review. See Opp'n at 6-11. Plaintiffs also contend that, if

subject to review, the PRRB's determination was correct, and that

voluntary remand is improper. The Court will address each argument

in turn.

A. The Court Has Authority to Review the PRRB Expedited

Judicial Review Determination

Plaintiffs argue that judicial review of the PRRB's lack of

authority determination is improper. Opp'n at 7-8. Section

1395oo(f) itself makes plain that judicial review is available.

Section 1395oo(f) (1) states that providers "shall have the right

to obtain judicial review of any final decision of the [PRRB] ." 42

U.S.C. § 1395oo(f) (1) (emphasis added). In the same paragraph, the

statute designates the PRRB's determination of its authority to

decide the question of law or regulations "a final decision":

"[T]he determination shall be considered a final decision and not

subject to review by the Secretary." Id. Consequently, the statute

is clear that the PRRB' s authority determination is a final

decision and therefore subject to judicial review. Id.

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The Seventh Circuit reached the same conclusion in Edgewater

Hosp. , Inc. v. Bowen, stating that " [Section 13 9500 ( f)] itself

establishes a right to judicial review of the [PRRB's]

determination that it lacks the authority to decide a question of

law or regulations." 857 F.3d 1123, 1130 (7th Cir. 1989); accord

Providence Yakima Medical Center v. Sebelius, 611 F.3d 1181, 1187-

88 (9th Cir. 2010) (appellate court held PRRB's lack of authority

determination was incorrect and remanded to District Court with

instructions to remand to PRRB) .

The only case Plaintiffs cite in support of their argument is

Lion Health Servs., Inc. v. Sebelius, a case from the Northern

District of Texas that is not binding on this Court. See Opp'n

at 7 (citing 689 F. Supp. 2d 849 (N.D. Tex. 2010), rev'd in part

on other grounds, 635 F.3d 693 (5th Cir. 2011)). The Lion Health

court addressed the issue of judicial review only in passing,

stating in a footnote that its subject matter jurisdiction was

premised on 42 U.S.C. § 1395oo(f) (1) and that it "s[aw] no reason

why it should review the PRRB's determination of its own authority

at th[at] time." Lion Health, 689 F. Supp. 2d at 856 n.6.

Lion Health lends little support to Plaintiffs' argument. The

Lion Health court did not engage in any in-depth analysis of the

issue, nor did it definitively hold that judicial review was

unavailable.

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Plaintiffs next argue that the Secretary is statutorily

barred from interfering with the PRRB Decision. See Opp'n at 6-7;

42 u. s . c . § 13 9 5 00 ( f ) ( 1) ("the [expedited judicial review]

determination shall be considered a final decision and not subject

to review by the Secretary") . Plaintiffs are correct that the

Secretary may not directly overturn the PRRB's determination, but

I

that is not what the Secretary is attempting to do here--rather,

the Secretary is asking the Court to review the PRRB's lack of

authority determination. 3

For all the foregoing reasons, the Court concludes that it

has the authority to review the PRRB's determination that it is

without the authority to decide the legal questions at hand.

B. The PRRB Correctly Determined that It Lacks the

Necessary Authority

The Secretary argues that the PRRB erroneously determined

that it is without authority to decide Plaintiffs' case because

the PRRB believed it was "bound" to apply the vacated 2004 Final

Rule. Motion at 5. The crux of the Secretary's argument is, because

the 2004 Final Rule was vacated, it no longer existed and th_erefore

the PRRB "could not have been 'bound by' that nonexistent rule."

3

Plaintiffs also argue that the Court "cannot look behind the

[PRRB' s] determination of its own authority to grant relief." Opp' n

at 10 (citing Affinity Healthcare Servs., Inc. v. Sebelius, 746 F.

Supp. 2d 106, 115 (D.D.C. 2010)). Affinity Healthcare is not

instructive here, as that case involved the CMS Administrator's

reversal of the PRRB' s authority determination, not judicial

review of the determination.

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Id. at 6. The Secretary also argues that the PRRB was under "the

misimpression that the Secretary had a policy of applying the

regulation notwithstanding" the vacatur. Id.

Plaintiffs argue that, despite her contentions in this case,

the Secretary's usual position is that vacatur does not

automatically eliminate the binding nature of a rule, and that a

vacated rule remains binding until the Secretary affirmatively

acquiesces. See Opp'n at 14-15. Therefore, Plaintiffs contend that

the PRRB correctly determined it was bound by the vacated 2004

Final Rule.

The Court need not determine at this time whether a vacated

rule immediately becomes nonbinding or if it remains binding until

the Secretary affirmatively acquiesces to it, because Plaintiffs

allege that the Secretary did in fact apply the vacated 2004 Final

Rule in the 2012 DSH Calculations, so as to "constitute unlawful

nonacquiecence [sic] of binding D.C. Circuit law." PRRB Decision

at 5; Opp'n at 12. Even if the 2004 Final Rule became non-binding

upon vacatur, Plaintiffs allege that the Secretary unlawfully

continued to apply it. Therefore, the legality of the 2012 DSH

Calculations is a legal question that the PRRB correctly determined

it does not have the authority to decide.

Although the Secretary's Motion and Reply both ignore it,

Plaintiffs brought a second allegation before the PRRB: if the

2012 DSH Calculations do not involve an application of the vacated

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2004 Final Rule, then the 2012 DSH Calculations are a procedurally

invalid adoption of a new rule. Specifically, Plaintiffs allege

that the 2012 DSH Calculations violate the notice and comment

requirements of the Medicare Act and the APA. Opp'n at 14.

Plaintiffs correctly contend that the PRRB lacked the

authority to decide this second issue, and Defendant has offered

no argument in opposition. Opp'n at 12-13

For the foregoing reasons, the Court finds that the PRRB

properly determined that it was without the authority to decide

the legal questions brought by Plaintiffs. Because the PRRB's grant

of expedited judicial review was proper, Defendant's Motion to

Dismiss is denied.

c. Voluntary Remand Is Improper

The Secretary argues that regardless of whether the PRRB

Decision was proper, the case should be voluntarily remanded to

the PRRB. The Secretary's sole rationale is that the PRRB

erroneously concluded that it was bound to apply the 2004 Final

Rule, and therefore the agency should be given the opportunity to

cure its own mistake. See Motion at 7.

The Court finds that remand is not appropriate in this

instance. The Secretary's voluntary remand argument is identical

to its prior argument that the PRRB Decision was erroneous, which

the Court has already rejected. See supra, Section III.B. To be

clear, the Secretary is not conceding that the vacated 2004 Final

10

Rule was mistakenly applied in the 2012 DSH Calculations, nor is

she seeking to cure any alleged errors in the 2012 DSH

Calculations- -the only mistake identified by the Secretary is

PRRB's grant of expedited judicial review. However, the Court has

already concluded that expedited judicial review was appropriate.

In addition, any error by the PRRB in its expedited judicial

review determination is not the Secretary's to cure. While the

Secretary requests that this Court "allow the [PRRB] to cure its

own mistake," Mot. at 7 (citing Edward w. Sparrow Hosp. Ass'n v.

Sebelius, 796 F. Supp. 2d 104, 207 (D.D.C. 2011)), the PRRB itself

does not allege that it made any mistake at all. And Section

139500 (f) (1) states that the PRRB' s expedited judicial review

determination is "not subject to review by the Secretary." 42

U.S.C. § 1395oo(f) (1). Granting voluntary remand in this instance,

by reason of the Secretary's determination that the PRRB's decision

was a mistake, would circumvent the statute.

Finally, the Secretary's voluntary remand argument fails to

address one of the bases for the PRRB's decision. The Secretary

does not argue that the PRRB erred in determining that it does not

have the authority to decide whether the 2012 DSH Calculations

violate procedural requirements. As there was no error on this

question, voluntary remand would be inappropriate.

For the foregoing reasons, the Secretary's request for

voluntary remand is denied.

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IV. Conclusion

Upon consideration of the Motion, Opposition, Reply, the entire

record herein, and for the foregoing reasons, it is hereby

ORDERED, that Defendant's Motion to Dismiss for Lack of

Jurisdiction or in the Alternative for Voluntary Remand is denied;

and it is further

ORDERED, that an Initial Scheduling Conference shall be held

on this matter on November 3, 2015, at 10:30 a.m.

October 29, 2015 Gla<Js ~&:J {;~ "

United States District Judge

Copies to: attorneys on record via ECF

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