Amicus Curiae Brief — Xavier Becerra, Secretary of Health and Human Services, Petitioner v. Empire Health Foundation, for Valley Hospital Medical Center

No. 20-1312

In the Supreme Court of the United States

XAVIER BECERRA, SECRETARY OF HEALTH AND HUMAN

SERVICES,

Petitioner,

V.

EMPIRE HEALTH FOUNDATION, FOR VALLEY HOSPITAL

MEDICAL CENTER,

Respondent.

On Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

BRIEF OF THE FEDERATION OF AMERICAN

HOSPITALS AS AMICUS CURIAE IN SUPPORT

OF RESPONDENT

KATRINA A. PAGONIS

HOOPER, LUNDY &

BOOKMAN, PC

101 Montgomery Street

11th Floor

San Francisco, CA 94104

(415) 875-8500

kpagonis@health-law.com

KELLY A. CARROLL

Counsel of Record

HOOPER, LUNDY &

BOOKMAN, PC

401 9th Street, NW,

Suite 550

Washington, DC 20004

(202) 580-7700

kcarroll@health-law.com

Counsel for Amicus Curiae

i

TABLE OF CONTENTS

Page

INTEREST OF AMICUS CURIAE ............................ 1

SUMMARY OF ARGUMENT ..................................... 2

ARGUMENT ............................................................... 3

I.

THE SECRETARY’S EXHAUSTED-DAYS POLICY

IMPROPERLY REDUCES DSH PAYMENTS ............... 3

II. THE SECRETARY’S EXHAUSTED-DAYS POLICY

IS NOT SUPPORTED BY HOSPITALS, DESPITE

THE GOVERNMENT’S ASSERTIONS OF

HOSPITAL SUPPORT............................................... 9

CONCLUSION .......................................................... 13

APPENDIX – Excerpt of Comments by the

Federation of American Hospitals (June 18,

2010) .......................................................................... 1a

ii

TABLE OF AUTHORITIES

Page(s)

Case

Sw. Consulting 2004 DSH Dual Eligible

Days Grp. v. Blue Cross Blue Shield

Ass’n,

PRRB Dec. No. 2010-D36,

https://www.cms.gov/Regulationsand-Guidance/ReviewBoards/PRRBReview/Downloads/201

0D36.pdf, vacated on other grounds,

CMS Adm’r Dec. (Aug. 12, 2010),

https://www.cms.gov/Regulationsand-Guidance/ReviewBoards/OfficeAttorneyAdvisor/Downl

oads/2010-D36.pdf.......................................... 6, 7, 8

Statutes

42 U.S.C. § 1395ww(d)(5)(F) ....................................... 2

42 U.S.C. § 1395ww(d)(5)(F)(vi) .................................. 5

Other Authorities

42 C.F.R. § 409.61(a) ................................................... 4

68 Fed. Reg. 27,154, 27,207 (May 19,

2003), J.A. 46.................................................. 10, 11

68 Fed. Reg. 45,346, 56,421 (Aug. 1,

2003), J.A. 86........................................................ 11

iii

69 Fed. Reg. 28,196, 28,286 (May 18,

2004), J.A. 87-88 .................................................. 11

69 Fed. Reg. 48,916, 49,099 (Aug. 11,

2004), J.A. 161, 173-174....................................... 11

CMS, April 2021 Medicaid & CHIP

Enrollment Trends Snapshot 2,

https://www.medicaid.gov/medicaid/

national-medicaid-chip-programinformation/downloads/april-2021medicaid-chip-enrollment-trendsnapshot.pdf ........................................................... 7

CMS Ruling No. CMS-1498-R,

https://go.usa.gov/xsnnz ......................................... 9

Supreme Court Rule 37.3(a) ....................................... 1

1

INTEREST OF AMICUS CURIAE1

The Federation of American Hospitals (“FAH”) is

the national representative of more than 1,000

leading tax-paying hospitals and health systems

throughout the United States. FAH members provide

patients in urban and rural communities with access

to high-quality, affordable health care. Its members

include teaching and non-teaching, acute, inpatient

rehabilitation, behavioral health, and long-term care

hospitals. They provide a wide range of acute, postacute, emergency, children’s, cancer care, and

ambulatory services.

The FAH provides representation and advocacy

on behalf of its members to Congress, the executive

branch, the judiciary, media, academia, accrediting

organizations, and the public. The FAH routinely

submits comments to the Centers for Medicare &

Medicaid Services (“CMS”) on Medicare and Medicaid payment policies and rulemakings and offers

guidance to courts regarding Medicare and Medicaid

reimbursement principles.

FAH

member

hospitals

are

Medicareparticipating providers that serve some of our

country’s

most

vulnerable

communities.

Approximately 90 percent of FAH member hospitals

serve a significant number of low-income patients

and therefore qualify for Medicare disproportionate

1 Pursuant to Supreme Court Rule 37.3(a), counsel of record for

each party has provided written consent to the filing of this

brief. No counsel for any party has authored this brief in whole

or in part, and no person or entity, other than amicus or its

counsel, made a monetary contribution intended to fund the

preparation or submission of this brief.

2

share hospital (“DSH”) payments under 42 U.S.C.

§ 1395ww(d)(5)(F).

Amicus curiae submits this brief in support of Respondent Empire Health because the question presented here—whether the Secretary of the United

States Department of Health and Human Services

(“Secretary”) has permissibly treated patients who

have exhausted their Medicare Part A benefits for

days of inpatient care as being entitled to Part A

benefits for such days in calculating Medicare DSH

payments—is of tremendous importance to the

FAH’s members. The Secretary’s treatment of these

exhausted days has and continues to unlawfully

depress Medicare DSH payments to hospitals that

serve some of the country’s most vulnerable patient

populations, including the FAH’s members.

SUMMARY OF ARGUMENT

The Medicare DSH adjustment serves a critical

role in ensuring the appropriateness and adequacy of

Medicare inpatient hospital payments to DSH hospitals—including FAH member hospitals. Recognizing

that Medicare’s inpatient prospective payment

system (“IPPS”) fails to capture the additional costs

associated with treating low-income patients, Congress requires the Secretary to make Medicare DSH

payments to those hospitals that serve a disproportionate share of low-income patients. The Secretary’s policy at issue here, however, undermines the

purpose of Medicare DSH adjustments by categorizing those patient days for which Medicare Part A

benefits have been exhausted as days on which the

beneficiary is entitled to such benefits. The FAH’s

members report that this exhausted-days policy

3

improperly reduces Medicare DSH payments associated with the inpatient care provided to these medically vulnerable, low-income patients by (1) inflating

the denominator of the Medicare fraction with Medicare Part A exhausted days and (2) excluding from

the numerator of the Medicaid fraction patient days

for the many low-income, exhausted-days beneficiaries who are eligible for Medicaid.

Because the exhausted-days policy works against

Congress’ purpose in enacting the DSH statute, the

FAH has informed the Secretary of its opposition to

the inclusion of exhausted days in the Medicare

fraction. Consistent with the purpose of providing

additional payment to hospitals that dedicate a

disproportionate share of their resources to serving

low-income patients, patient days for Medicaideligible beneficiaries who have exhausted their Part

A inpatient hospital benefits should be included only

in the Medicaid fraction.

For these reasons and the reasons set forth in Respondent’s Brief, the Court should uphold the Ninth

Circuit’s decision vacating the Secretary’s exhausteddays policy in his Federal fiscal year (“FFY”) 2005

final rule.

ARGUMENT

I. THE SECRETARY’S EXHAUSTED-DAYS POLICY

IMPROPERLY REDUCES DSH PAYMENTS

The FAH’s members and other hospitals nationwide have long been concerned by the Secretary’s

unlawful depression of Medicare DSH payments,

effectuated here by treating patients for whom

Medicare Part A provides no inpatient hospital

benefits as nonetheless being “entitled to” Part A

4

benefits for that specific day of inpatient care. This

approach reduces Medicare DSH payments by excluding Medicaid-eligible patients who have exhausted their Medicare Part A inpatient hospital

benefits from the numerator of the Medicaid fraction,

which is designed to capture Medicaid patient days

for individuals not also entitled to Medicare Part A

benefits for such days. This exhausted-days policy

also generally inflates the denominator of the Medicare and supplemental security income (“SSI”)

fraction (the “Medicare fraction”). As applied to the

exhausted-days issue before the Court, the Secretary’s approach to Medicare DSH is inconsistent with

the aim of the program and underpays hospitals for

serving particularly vulnerable Medicare beneficiaries whose intensive health needs exhaust their

hospital Medicare benefits such that their inpatient

hospital days are noncovered.2 The FAH’s members

report that the Secretary’s treatment of exhausted

days has depressed Medicare DSH payments associated with the inpatient care provided to these medically vulnerable, low-income patients.

As Respondent details (at 9-11), the amount of a

hospital’s Medicare DSH payments depends on the

hospital’s disproportionate patient percentage, which

is the sum of the Medicare fraction and the Medicaid

2 Medicare beneficiaries can use 90 days of inpatient hospital

services in a benefit period and have a lifetime reserve of 60

days of inpatient hospital services that they can use or not at

the beneficiary’s option. 42 C.F.R. § 409.61(a). These extraordinarily complex and sick patients who exhaust their Medicare

Part A benefits have long inpatient stays and, consequently, are

more likely to meet the asset and means testing required for

Medicaid eligibility.

5

fraction. The DSH statute establishes the composition of those fractions, which necessitates identifying

those patients who are “entitled to” or “not entitled

to” Medicare Part A benefits for particular inpatient

hospital “days,” are “entitled to [SSI] benefits,” and

are “eligible for” Medicaid benefits.

42 U.S.C.

§ 1395ww(d)(5)(F)(vi), as summarized in the following table.

Numerator

Medicare

Fraction

Patient days for

“patients who (for

such days) were

entitled to benefits under Part A”

and “entitled to”

SSI benefits

Denominator Patient days for

“patients who (for

such days) were

entitled to benefits under Part A”

Medicaid

Fraction

Patient days for

patients “who (for

such days) were

eligible for”

Medicaid but

“were not entitled

to benefits under

Part A”

“Total number of

the hospital’s

patient days”

The Medicare DSH statute was adopted by Congress after it replaced the reasonable-cost reimbursement system with the IPPS. Medicare DSH

payments supplement eligible hospitals’ Part A

payments in recognition of the additional costs—

otherwise unaccounted for in the IPPS payments—

associated with serving a high number of low-income

patients. This purpose is uncontested by the Secretary, who characterizes Medicare DSH as an “ad-

6

justment that provides increased Medicare payments” to DSH hospitals. (Pet’r Br. at 4.) Yet, the

Secretary’s exhausted-days policy has the opposite

effect, generally reducing Medicare DSH payments

when hospitals care for patients who—as a result of

their intensive care needs—have exhausted their

inpatient hospital benefits such that Medicare Part

A does not make payment.

For purposes of the Medicare fraction, the limiting factor for the numerator is the number of individuals entitled to SSI benefits. Including a broader

pool of Medicare beneficiary patient days in the

Medicare fraction (e.g., patient days for which Medicare Part A does not make payment due to exhaustion of inpatient hospital benefits) will inflate the

denominator. In other words, under the Secretary’s

exhausted-days policy, each day that the hospital

treats an exhausted-days beneficiary who is not

actively receiving SSI benefits reduces the Medicare

fraction even though the hospital has no right to

receive Part A payment for that care.

Although the inaccessibility of data on the exhausted-days policy has precluded robust analysis of

the issue and the Secretary has not provided his own

analysis, a study that reviewed Federal fiscal year

data furnished by CMS for 52 Medicare DSH hospitals in 17 States confirms that the Secretary’s policy

on exhausted and noncovered days generally reduces

the Medicare fraction. Sw. Consulting 2004 DSH

Dual Eligible Days Grp. v. Blue Cross Blue Shield

Ass’n, PRRB Dec. No. 2010-D36, at 10-11 (June 14,

2010)

(hereinafter

“Southwest

Consulting”),

https://www.cms.gov/Regulations-and-Guidance/

Review-Boards/PRRBReview/Downloads/

2010D36.pdf, vacated on other grounds, CMS Adm’r

7

Dec.

(Aug.

12,

2010),

https://www.cms.gov/

Regulations-and-Guidance/Review-Boards/

OfficeAttorneyAdvisor/Downloads/2010-D36.pdf.

That Southwest Consulting analysis “concluded that

in 94% of the cases analyzed, the SSI fraction would

be diluted” by the Secretary’s policy. Id. at 11 (emphasis added); see also Resp’t Br. at 33. The average

loss per hospital based on the Medicare fraction

impact alone was $49,000 per annual cost reporting

period. Id.

In contrast, if “entitled to” Medicare Part A benefits “for such days” is construed to mean inpatient

hospital days for which Medicare Part A actually

pays benefits, the Medicaid fraction will increase.

Under this approach, the numerator of the Medicaid

fraction increases for each such Medicare beneficiary

who is also one of the 75.4 million Americans enrolled in Medicaid. CMS, April 2021 Medicaid &

CHIP

Enrollment

Trends

Snapshot

2,

https://www.medicaid.gov/medicaid/nationalmedicaid-chip-program-information/downloads/april2021-medicaid-chip-enrollment-trend-snapshot.pdf.

The denominator of the Medicaid fraction, which

consists of the hospital’s total patient days, is unchanged.

This assessment is confirmed by the Southwest

Consulting analysis described above.

Including

exhausted and noncovered patient days in the Medicaid fraction “would increase the DSH calculation for

every hospital by an average of $95,000.” Southwest

Consulting at 11 (emphasis added). Coupled with

the reduction to the Medicare fraction, this results in

a total difference in reimbursement (a “swing”) of, on

8

average, $157,000 per hospital per cost reporting

year under the Secretary’s flawed policy.3 Id.; see

also Resp’t Br. at 33 (noting that the Secretary’s

policy has reduced Medicare DSH payments by

almost $150,000 per hospital per year) (citing Pls.’

Opp. Def’s. Cross-Mot. Summ. J. 41-42, Catholic

Health Initiatives Iowa, Corp. v. Sebelius, 841 F.

Supp. 2d 270 (D.D.C. 2012) (No. 10-0411), 2010 WL

11685305). When aggregated across the thousands

of Medicare DSH hospitals and the years the Secretary’s flawed policy has been in place, the Secretary

has underpaid Medicare DSH hospitals on the order

of billions of dollars.

Nonetheless, the Secretary argues that his exhausted-days policy “did not embody an effort to

minimize disproportionate-share-hospital payments.”

Pet’r Br. at 43. Although the Secretary suggests that

some hospitals favored the (misstated) policy in their

2003 comment letters on the FFY 2004 IPPS proposed rule, the Secretary does not actually argue or

present data indicating that the policy has benefitted

Medicare DSH hospitals. In fact, as described above,

the data analysis that has been performed supports

the logical conclusion that the Secretary’s policy

depresses Medicare DSH payments. Moreover, the

FAH’s member hospitals confirm their experience

that the Secretary’s exhausted-days policy operates

The Southwest Consulting analysis initially calculated this

swing as $144,000 per hospital per cost reporting year, but the

final analysis calculated “the impact – and therefore the

amount in controversy – of counting the days in the SSI fraction

instead of the Medicaid fraction (referred to as the ‘swing’) was

a loss of $157,000 (as compared to $144,000) on average per

hospital, per cost reporting year.” Id.

3

9

as an aggregate reduction to Medicare DSH payments because it understates patient days associated

with this medically vulnerable, low-income patient

population.

II. THE SECRETARY’S EXHAUSTED-DAYS POLICY IS

NOT SUPPORTED BY HOSPITALS, DESPITE THE

GOVERNMENT’S ASSERTIONS OF HOSPITAL SUPPORT

The FAH’s Medicare DSH hospital members do

not support the Secretary’s impermissible exhausteddays policy, despite the Secretary’s assertions to the

contrary because it works against the intent of the

DSH statute. Put simply, when a hospital provides

care for a beneficiary who is enrolled in Medicaid and

has exhausted his or her Medicare Part A benefits,

those dual-eligible exhausted patient days should

increase, not decrease, the hospital’s Medicare DSH

payments. These are precisely the costly, low-income

patient days that disproportionately burden DSH

hospitals and drove Congress to require Medicare

DSH payments.

The FAH has informed the Secretary of its unambiguous opposition to the inclusion of dual-eligible

exhausted days in the Medicare fraction. In particular, in 2010, the FAH commented to the Secretary on

the April 28, 2010 CMS Ruling (CMS Ruling No.

CMS-1498-R, https://go.usa.gov/xsnnz),4 making the

FAH’s views on the Secretary’s exhausted-days

policy clear: “The FAH believes that the language of

the DSH Medicare statute requires the inclusion in

This CMS Ruling, inter alia, purported to limit and resolve

provider appeals involving certain Medicare DSH issues,

including those involving Medicare exhausted days.

4

10

the Medicaid percent of days for patients who are

dually eligible, but who have no covered or payable

Part A benefit.” FAH June 18, 2010 Ltr., at 36

(App’x at 3a). The FAH also stated:

Essentially, FAH believes that dually

eligible patients, by virtue of having exhausted their Medicare Part A benefits

. . . no longer have any right or entitlement to Medicare coverage of (or payment for) those inpatient services/days.

That is, the dually eligible patients were

not “entitled” to Medicare Part A benefits for the days at issue. Thus, such dual eligible days belong solely in the Medicaid percent of the DSH computation.

Id. at 37 (App’x at 5a). In addition to explaining that

dual-eligible exhausted days belong solely in the

Medicaid fraction, the FAH reiterated that “the

Medicare DSH statute does not mandate and, in fact,

does not permit the inclusion in the SSI percent of

dual eligible days where Medicare Part A does not

make payment or provide coverage.” Id. (App’x at

5a).

The Secretary’s exhausted-days policy emerged

from a flawed rulemaking process that misled hospitals as to the then-status quo treatment of exhausted

days, generating confusion among commenters. As

Respondent details (at 16-19), in the FFY 2004 IPPS

proposed rule, the Secretary incorrectly stated that

his then-current policy was to count dual-eligible

patient days in the Medicare fraction, and exclude

them from the Medicaid fraction, “even after the

patient’s Medicare coverage is exhausted.” 68 Fed.

Reg. 27,154, 27,207 (May 19, 2003), J.A. 46; see also

id. at 27,207-08 (“As noted above, our current policy

11

regarding dual-eligible patient days is that they are

counted in the Medicare fraction and excluded from

the Medicaid fraction, even if the patient’s Medicare

Part A coverage has been exhausted.”), J.A. 46. The

Secretary then proposed to change that policy and “to

begin to count in the Medicaid fraction of the DSH

patient percentage the patient days of dual-eligible

Medicare beneficiaries whose Medicare coverage has

expired.” Id. This latter proposal was not adopted in

the FFY 2004 IPPS final rule. 68 Fed. Reg. 45,346,

56,421 (Aug. 1, 2003), J.A. 86.

Nor did the Secretary address any further change

to his policy in the FFY 2005 IPPS proposed rule.

69 Fed. Reg. 28,196, 28,286 (May 18, 2004), J.A. 8788. Yet, when finalizing the FFY 2005 IPPS final

rule, the Secretary adopted precisely the opposite

treatment of exhausted days from what had been

proposed in the prior year’s rulemaking. 69 Fed. Reg.

48,916, 49,099 (Aug. 11, 2004), J.A. 161, 173-174.

Moreover, mere days before the termination of the

FFY 2005 IPPS rulemaking comment period, the

Secretary admitted in a web-posting that he had

“misstate[d]” his current policy in the FFY 2004

IPPS proposed rule, and that his actual policy had

been that only “covered” Medicare patient days were

included in the Medicare fraction. J.A. 93-94.

This muddled and mercurial rulemaking process

generated misinformed comments on the FFY 2004

proposed rule. Nevertheless, the Secretary cites

comments the FAH and other hospitals made in

conjunction with these misleading rulemakings in

asserting that the challenged interpretation of

“entitled to” in the Medicare fraction is a “reasonable

policy choice consistent with the statute’s objectives”

warranting deference. Pet’r Br. at 43. Specifically,

12

the Secretary cites to commenters, including the

FAH, as observing that the Secretary’s original (and

later abandoned) policy proposal (1) “would give rise

to

significant

recordkeeping

and

other

administrative burdens” and (2) “would have reduced

[commenters’] payments.” Pet’r Br. at 43-44 (citing

J.A. 59-60, 68-69, 73-74, 79-80, 91, 114, 132-133, 150;

and citing J.A. 54-55, 59-60, 66, 68-69, 71-74, 77-82,

90-92, 113-116, 132-133, 134-135, 147-151, 153-156,

respectively).

But the Secretary misuses the FAH’s and other

hospitals’ comments for these assertions. Critically,

the Secretary fails to mention that many of the

comments that he cites as allegedly supportive relied

on his significant and later-admitted misrepresentation of agency policy in the May 19, 2003 proposed

rule. This mistaken understanding was so material

as to cause commenters that addressed the July 7,

2004 CMS web posting (J.A. 93-94), like the FAH, to

“reconsider[]. . . those comments” and request that

the agency take “additional comments pertaining to

this issue” into consideration when submitting

comments to the FFY 2005 proposed rule, for which

the comment period would close just a few days after

CMS acknowledged its error. See FAH comment

letter submitted July 12, 2004, J.A. 152-56.

The Secretary’s about-face and last-minute admission of material misstatements in the proposed

rulemaking resulted in comments demonstrating

concern and confusion by the hospital community.

With the benefit of a more full understanding of the

Secretary’s exhausted-days practices and current

policy, the FAH opposes including Part A exhausted

days in the Medicare fraction. Consistent with the

purpose of providing additional payment to hospitals

13

that serve a disproportionate share of low-income

patients, Medicaid beneficiaries who have exhausted

their Part A inpatient hospital benefits should be

included only in the Medicaid fraction.

CONCLUSION

For the foregoing reasons and those contained in

Respondent Empire Health’s brief, the judgment of

the Court of Appeals for the Ninth Circuit should be

affirmed.

Respectfully submitted.

KELLY A. CARROLL

Counsel of Record

HOOPER, LUNDY & BOOKMAN, PC

401 9th Street, NW, Suite 550

Washington, DC 20004

(202) 580-7700

kcarroll@health-law.com

KATRINA A. PAGONIS

HOOPER, LUNDY & BOOKMAN, PC

101 Montgomery Street

11th Floor

San Francisco, CA 94104

(415) 875-8500

kpagonis@health-law.com

Counsel for Amicus Curiae

October 25, 2021

APPENDIX

1a

APPENDIX

[LOGO] Federation of American Hospitals

Charles N. Kahn III

President and CEO

June 18, 2010

Marilyn Tavenner

Acting Administrator

Centers for Medicare & Medicaid Services

Attention: CMS-1498-P and CMS-1498-P2

Room 445-G

Hubert H. Humphrey Building

200 Independence Avenue, S.W.

Washington, DC 20201

Re: CMS-1498-P and CMS-1498-P2; Medicare

Program; Proposed Changes and Supplemental Proposed Changes to the Hospital

Inpatient Prospective Payment Systems

for Acute Care Hospitals and the LongTerm Care Hospital Prospective Payment

System and Proposed Fiscal Year 2011

Rates; ; 75 Fed. Reg. 23852 (May 4, 2010)

and 75 Fed. Reg. 30918 (June 2, 2010)

Dear Ms. Tavenner:

The Federation of American Hospitals (“FAH”) is

the national representative of investor-owned or

managed community hospitals and health systems

throughout the United States. Our members include

teaching and non-teaching, short-stay rehabilitation

and long-term care hospitals in urban and rural

America, and provide a wide range of ambulatory,

acute and post-acute services. We appreciate the

opportunity to comment on the Centers for Medicare

and Medicaid Services’ (“CMS”) proposed rule (“Pro-

2a

posed Rule” or “NPRM”) and supplemental proposed

rule regarding changes to the hospital inpatient prospective payment system and fiscal year (“FY”) 2011

rates and other issues. Please note that broad topic

areas, under which we generally use the same numerical headings and subheadings as in the NPRM,

organize our comments below. Thus, some numerical

headings may not be represented below when no

comment is submitted for that part of the NPRM. To

the extent that the supplemental rule touches on an

area addressed in the NPRM, we have identified our

comments as relating to the supplemental rule in a

subtitle of that comment. Supplement proposed rule

changes not related to part of the original proposed

rule are addressed at the end of this letter.

1

* * *

5. CMS Ruling (NPRM at 24006)

The FAH agrees with some aspects of CMS’s April

28, 2010 DSH Ruling (CMS-1498-R) (“the Ruling”),

particularly the use of an improved SSI matching

process for settlement of pending appeals regarding

the SSI match and open cost reports (as discussed

above) and the favorable settlement of the labor/

delivery days issue (as discussed below). However, the

FAH believes the Ruling itself is invalid for a number

of reasons. Therefore, the FAH asks CMS to withdraw

the Ruling because it violates the Medicare Act’s

establishment of the PRRB appeal process, it violates

the DSH statute, it violates the Medicare DSH regula1

References in the titles of various sections below are to the

specific parts of the Proposed Rule as they appear in the Federal

Register and cites to the NPRM at a given page are references to

the applicable starting page of the relevant discussion in the

Federal Register.

3a

tion in place prior to October 1, 2004, and it is

predicated on erroneous factual assumptions. As a

preliminary matter, CMS Rulings should be published

in the Federal Register presumably to allow for notice

and the ability to comment and to assure that they are

carefully vetted in advance of such formal publication.

42 C.F.R. § 401.108(a).7 Regardless of the reasons for

the requirement, CMS has not followed the regulation

and thus, if CMS is not inclined to withdraw the

Ruling, then at the very least it should be published in

the Federal Register in order to be effective.

* * *

b. With Respect to Dual Eligible Days,

the Ruling Violates the DSH Statute

The Ruling mandates inclusion in the SSI percent

of patient days associated with patients eligible for

both Medicare and Medicaid (“dually eligible”) but, for

such days, there is no Medicare coverage and Medicare

does not make payment. The FAH believes that the

language of the DSH Medicare statute requires the

inclusion in the Medicaid percent of days for patients

who are dually eligible, but who have no covered or

payable Part A benefit. 42 U.S.C. § 1395ww(d)(5)(F)

establishes that the Medicaid proxy must include:

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

7

Although the regulation indicates that rulings “may be

published in the Federal Register”, when the regulation is read

in its entirety and in context, it is clear that the way a “precedent

final opinion, order, statement of policy or interpretation” actually becomes a binding Ruling is when it is published in the

Federal Register “as a CMS Ruling. . . .” 42 C.F.R. § 401.108(a).

4a

subchapter XIX of this chapter, but who were

not entitled to benefits under part A of this

subchapter. . . .

42 U.S.C. § 1395ww(d)(5)(F)(vi)(II) (emphasis added).

Accordingly, under the statute, the inclusion of patient

days in the Medicaid proxy depends on whether the

patients were eligible for Medicaid, but not entitled to

Medicare benefits for the days in question.

Various federal courts have construed the terms

“eligible” and “entitled” as used in the DSH statute.

This case law shows that these terms are not synonymous or interchangeable. In Jewish Hosp., Inc. v.

Secretary of Health & Human Services, 19 F.3d 270 (6th

Cir. 1994), the Sixth Circuit found that the term

“eligibility” refers to the “‘qualification’ for benefits or

the capability of receiving those benefits.” Jewish

Hosp., 19 F.3d at 274; see also Legacy Emanuel Hosp.

& Health Ctr. v. Shalala, 97 F.3d 1261, 1265 (9th

Cir. 1996). In contrast, the Jewish Hosp. court found

that “[t]o be entitled to some benefit means that one

possesses the right or title to that benefit” or “the

absolute . . . right . . . to . . . payment.” See Jewish

Hosp., 19 F.3d at 275; see also Legacy Emanuel, 97

F.3d at 1265. In other words, Jewish Hosp. and

Legacy Emanuel establish that eligibility is not tied

to payment for services, while entitlement is tied

to payment. CMS acquiesced in those decisions

through HCFA Ruling 97-2. Multiple other courts

have endorsed the distinction drawn in Jewish Hosp

and Legacy Emanuel. See Cabell Huntington Hosp. v.

Shalala, 101 F.3d 984, 987 (4th Cir. 1996); Deaconess

Health Services Corp. v. Shalala, 83 F.3d 1041 (8th Cir.

1996) affirming 912 F. Supp. 438 (E.D. Mo. 1995).

Indeed, two recent court cases validate FAH’s view

that dual eligible exhausted days are not days

5a

“entitled to benefits under Part A.” See Northeast

Hosp. Corp. v. Sebelius, Case No. 09-0180 (D.D.C.

March 30, 2010); Metropolitan Hosp., Inc. v. U.S. Dep’t

of Health & Human Servs., Case No. 1:09-cv-128 (W.D.

Mich. Apr. 5, 2010).

Essentially, FAH believes that dually eligible

patients, by virtue of having exhausted their Medicare

Part A benefits (exhausted) or receiving non-covered

care or having their stay paid by an insurer primary

to Medicare (“MSP”), no longer have any right or

entitlement to Medicare coverage of (or payment for)

those inpatient services/days. That is, the dually

eligible patients were not “entitled” to Medicare Part

A benefits for the days at issue. Thus, such dual

eligible days belong solely in the Medicaid percent of

the DSH computation.

c. With Respect to Dual Eligible Days,

the Ruling Violates the Pre-2004

Regulation

The FAH believes that the Ruling constitutes

improper retroactive rulemaking. First, as noted

above, the Medicare DSH statute does not mandate

and, in fact, does not permit the inclusion in the SSI

percent of dual eligible days where Medicare Part A

does not make payment or provide coverage. Rather,

such days belong only in the Medicaid percent. Further, though, FAH believes that the pre-2004 regulation was clear in allowing inclusion in the SSI

percent only of “covered” days. See, e.g., 42 C.F.R.

§ 412.106(b)(2) (2003). Unpaid, uncovered dual eligible days are not “covered” days and thus do not

belong in the SSI percent under the plain language of

the DSH regulation in existence through September

30, 2003. The Ruling’s mandate to remand for inclusion of such days in the SSI percent therefore clearly

6a

violates the existing regulation for any discharges

prior to October 1, 2004 and is a clear example of

improper retroactive rulemaking. Again, contrary to

the eighth and final ruling on the last page of the

Ruling, the FAH believes that the DSH statute does

not mandate any such retroactive effect.

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