Prologue — Leavitt v. Baystate Health Health Systems Systems (No. 05-936)

@5-936U0N 26 2006

No. Q&EIC Entei oi ai

In the Supreme Court of the Gnited States

MICHAEL O. LEAVITT, SECRETARY OF HEALTH &

HUMAN SERVICES, PETITIONER

—o——

BAYSTATE HEALTH SYSTEMS, D/B/A/ BAYSTATE

MEDICAL CENTER, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

PAUL D. CLEMENT

Solicitor General.

Counsel of Record

PAULA M. STANNARD i PETER D. KEISLER

Acting General Counsel Assistant Attorney General

THOMAS R. BARKER Epwin S. KNEEDLER

Deputy General Counsel Deputy Solicic. ‘General

KATHLEEN H. MCGUAN LISA S. BLATT

Associate General Counsel Assistant lo the Solicitor

: MARK D. POLSTON General

Deputy Associate General ANTHONY J. STEINMEYER

Counsel for Litigation -— ANNE M. MURPHY

GERARD KEATING : Attorneys

SYLVIAJ. TRUJILLO = Department of Justice

Attorneys Washington, D.C. 20536-0001

Department of Health and (202) 514-2217

Human Services

Waskington, D.C. 20201

QUESTION PRESENTED

Whether a federal court may, under 28 U.S.C. 1361, com-

pel the Secretary of Health and Human Services to reopen

and revise final Medicare payment determinations where the

Secretary prospectively changed his interpretation of the

Medicare Act to acquiesce in adverse circuit decisions and

expressly ordered his fiscal intermediaries not to reopen and

revise any final determinations.

(1)

PARTIES TO THE PROCEEDINGS

The petitioner in this Court is the Secretary of Health and

Human Services, Michael O. Leavitt. The respondents are

twenty-six Medicare providers: Baystate Heulth Systems

d/b/a Baystate Medical Center, Berkshire Health Systems,

Brockton Hospital, Carney Hospital, Cooley-Dickinson Hos-

pital, Harrington Memorial Hospital, Holy Family Hospital,

Holyoke Hospital, Jordan Hospital, Landmark Medical Cen-

ter, Lawrence General Regional Health System, Inc.,

Lifespan, Lowell General Hospital, Memorial Hospital of

Rhode Island, Morton Hospital and Medical Center, North

Adams Regional Hospital, City of Quincy Hospital, Roger

Williams Medical Center, Providence Health System, St.

Anne’s Hospital, Caritas Christi Health Care System, St.

Joseph’s Health Services of Rhode Island, Southcoast Hospi-

tals Group, Sturdy Memorial Hospital, University of Massa-

chusetts Memorial Medical Center, doing business as Uni-

versity of Massachusetts Memorial Hospital, and University

of Massachusetts University Medical Center, doing business

as University of Massachusetts University Hospital, which

were appellees in the court of appeals.

(II)

TABLE OF CONTENTS

Page

Opinions below ..........-sccscecesereee ime ienpenih soeanetepnvineononee 1

SE iciciersitinhinmechinenieviviichiaticciictsjuiilesipilicinpiatiinsines okais ]

Regulatory provision involved ..............00 siiisiia ahalpitennigiteaabaeets 2

NI io aiigcc titles sdgessincetenisilecegsniinpeniét dabei sieeneantabiatitababintioniaions 2

Reasons for granting the petition .............ccsscesceceseseeevees seals 8

A. The court of appeals’ decision is clesrly

CITONCOUS ....00cc-ccersceses diptiniatiailabdnniniusiabubincktinienseenaiis 11

1. The providers failed to exhaust their right

to appeal the intermediaries’ DSH deter-

ORION, fs ssicscinstrvsvcnnsassionics pilin thescaaibvicokaicias 12

2. The Secretary has no clear duty to reopen

reimbursement determinations ............sessseee 13

a. Thedecision whether to reopen is

committed to the Secretary’s unre-

Viewable GISCTELION ........cecercccsensecorcesesssossees 14

b. Ruling 97-2 neither notified fiscal 4

intermediaries of an error of law nor :

OPEMOT OD TOODOII aoc sacigocccksiccencatiibtbcrntinienss 17

¢. The providers’ failure to make a timely

request for reopening nullifies any

supposed right to obtain reopening .......... i9

d. The court of appeals’ decision greatly

undermines critical principles of

ENED BCT LT LEC ORE A DRT 20

B. The court of appeals’ decision warrants this

CEE POVIOW oo cescisccsosccresiat vsciisebweibiphetis iseishabakaaeha coast 22

1. The court of appeals’ decision conflicts

with decisions of other courts of appeals and

cannot be reconciled with decisions of

SITIES sescecitinecnc dun iuoeeicul senoediaboreditonshiians 22

(II)

IV

Table of Contents—Continued:

2. This Court’s review is also warranted because

of the fiscal and administrative impact of

the court of appeals’ decision ..

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TABLE OF AUTHORITIES

Cases:

Alaska Prof Hunters Ass’n v. FAA, 117 F.3d

RO EFAS SAU REI aici nscsvacoaibtstincabivtdasasinGabeousgwndssaicsonecsa:

Allied Chem. Corp. v. Daiflon, Inc., 449 U.S. 33

CS IONEY stiussesenebccieiasipeiadscstoctenines Sa camasadaslepiaenion i inaseoncat

Atcheson, Topeka & Santa Fe Ry. v. Pena,

44 F.3d 457 (7th Cir. 1994), aff’d, 516 U.S. 152 (1996) ....

Auer v. Robbins, 519 U.S. 452 (1997) ......-.ccccccecescosssoserssseee

Bartlett Mem'l Med. Ctr., Inc. v. Thompson,

Page |

27

30

la

12a

dla

47a

49a

54a

347 F.3d 828 (10th Cir. 2003) .... 7, 10, 12, 15, 17. 18, 19, 22. 28

Bethesda Hosp. Ass’n v. Bowen, 485 U.S. 399

LRNIODY sickcsiosiedarcdscdainsisdicisaiidiad sheamaipubnlebianiaaiiiaiadedoveanaisdibed cideapisiee

Brogan v. United States, 522 U.S. 398 (1998) on. eeeseeeeee

Cabell Huntington Hosp. Inc. v. Shalala,

ROLF AE DOA CARI Cin, EDD). iickinsesiiecocncccsscacescenscstoosncissvons

Califano v. Sanders, 430 U.S. 99 (1977) 2... Scsscatae

Cheney v. United States Dist. Court, 542 U.S. 367

SE incsinvvnicsasidean ve cendbiccaseatiasbied pois iqhianlcmdatodcgsientsaebiasidebabalbioen

Deaconess Health Servs. Corp. v. Shalala,

SOF ee BOE T CR CaP FSD ciicissisancsanesciiccancvsecdabibpeoatasdondace

Erriniger v. Thompson, 371 F.3d 625 (9th Cir.

a a) SB one MRE AO RDN LER Ie NORE ST LOOMIS ED TSE a

Cases—Continued: Page

Gulf Stream Aerospace-Corp. v. Mayacamas e

Corp., 485 U.S. 271 (1988) .......... adinigiaiatienecticcstelabinninanciorn 12

Harper v. Virginia Dep’t of Taxation, 509 U.S. 86

(1993) ...... : siientanteiitiesaiaresatiates 21

“Heckler v. Ringer, 466 U. S. 602 CUED ceccssrentntssoiesic 12, 13, 24

ICC v. Brotherhood of Locomotive Eng’rs,

GE AS Bos Ee LMT sirsnccetrinisrrsessntverttitinasinetghiniobapitocoiinenben 17,21

Jewish Hosp. Inc. v. Secretary HHS, 19 F.3d 270

IRE Ce TONED wisisessiiecincaiireeevinesteesictnitlniintisicregnienibanlisicdenceoupnnins 13

Legacy Emanuel Hosp. & Health Ctr. v. Shalala,

FE Fak FBG GE Cir TDG) ssisiciscincsesesstesscstertnctotopscvsccstoecey 13

Mathews v. Eldridge, 424 U.S. 319 (1976) oc ccceseseeeees 20

Monmouth Med. Ctr. v. Thompson, 257 F.3d 807

EAA Saeik MONE) aniivicbativesidhsies anibinieebadescauiisinhin atedidiaenireclanaesens passim

Paralyzed Veterans of Am. v. D.C. Arena L.P.,

117 F.3d 579 (D.C. Cir. 1997), cert. denied, 523

EL tas RAR CAMO) scessdcrtcrniestemasckenobsictinsaeuniee 6, 10, 18, 19, 24, 25

Pittston Coal Group v. Sebben, 488 U.S. 105 :

SC RIPUIEED sccnilnjdlenvnineiitietseeaieniiesbiahenbeeirsisedivilebpalecbermunaeasennmebenoan 13, 21, 24

Regions Hosp. v. Shalala, 522 U.S. 448 (1998) wees 23

Reynoldsville Casket Co. v. Hyde, 514 U.S. 749

CRED schacescscaccbacuenedsbbadeidbniaiampentavenseccbaahbeagbesiiceabineacininaltecyies 21

Shell Offshore, Inc. v. Babbitt, 238 F.3d 622 (Sth

RMS BUTE DS saccticicosecaurasnicsull cis ecsnnspecnguienesasabasieomaaesaceineiinetionmmnensnbabin 25

Thomas Jefferson Univ. v. Shalala, 512 US. 504

Df Ie ENS men aca Aten SoMa NUE SRR aE Staverton re 17

Vermont Yankee Nuclear Power Corp. v. NRDC,

435 US. S19 CE9TS) .......cccee0e = eaaeeapnabineiaehaiedsin voueaaetimnteiepioas 25

Warder v. Shalala, 149 F.3a 73 (st Cir. 1998) 2.0.2.2... 25

Your Home Visiting Nurse Servs., Inc. v.

Sealala, Ge U S64 CHIDO) ens ccccccscsceccecosenacenevessesienecs putsstm

Statutes and regulations:

Administrative Procedure Act, 5 U.S.C. 551 et segq.:

Be Say TIME sins esais cnsasccibudedesacqpediiecccnionebianldiobacicansuenmnbidiy ies 6

Statutes and regulations: Page

5 U.S.C. 558(b)(A) ....... 5 25

Medicare Act, Tit. XVIII, 42 U.S.C. 1395 et seg. .........0000. 2

42 U.S.C. 1395d a 2

42 U.S.C. 1395h ... 2

42 U.S.C. 1395hh(a)(2) 25

Po EEE Tei SALAS URES IF OCR RENO MORE DOSE er SRO oe

GE UB. TORO) icsicessessinicctnbndicctsacii Ries . 6,25

SE FE, SI pansscssepinnicicinetgcipucaiiiaitbicancetiahe : 11

ele SARS Le ROE RIN DDR noes SST EE 12, 21

P BiB se TN bag |) PMR emcees Been SonetOne tC 3

BS TIC; TOBIN oe vcscvsnecccscpnasveesiodensione ge 3

SE UBC. 1IOANBY ois cisions tas 3

BE UP, TOD iiiiccassscicsiceeiseciieiens ‘a ; 3

Me RS cA, SCE IG EF: ccpscccchseseineisdsucecilssnodasikedesininsiiocibedeacciicate 3

Me EF BIA, RIED oor diccescsicndcts ness ccnsiesccocepitiinnestalimtonbicgiianes 3

GE CET, SIE arccciestis satanic aciecbciinck copies 2

42 U.S.C. 1395ww(d SP )VII LD) ......ccccccccoccssccsccsccssonssceess 4

Social Security Act, 42 U.S.C. 301 et seq. essssssscssssesssees ibe 2

Me I BE, 1D SI) vii encrtirctcodnvessctsinipepservecdrsoeeentbincicod 20

OE UE. Say CR ioscan ccicticsssabicsitenstontion 11,12

FE A) RG Ac SITE acceseninckiasaicdioncsnviahpabsitocaaiotanscoeabeukabaonnincivaite 4

OR UE TM ee 4, 12, 15, 16

42 C.F.R.:

ONE a POEL ILD osiisnss dacs scabcssuucsteciacherdaiedintsoesiccaccoinnuiads 2

OR MIDE MN MII es a chased siacnsubiah paosoohenieienuuiasgddoohidalintiacuisbe 2

See iam RO IT assassin coisctanecnpcoesesiildsbelins cccndbesceianch : 12

SEENON MAN SOROUD ssveciraswchcticaseessistivibinieab cnichehebant iapsnetutigcicdudisions 3

POETS HUES BOMB OMIRY is concn eseiasevnadoencensondncion ssteduncviosbatatitsisbusiacodis 3

RUROCION TI I scrscincsehcnscdn sbeticseiraacatoumas concchsehdnccnseaiseumaiios 3

SUOMEMEIUE HPN MAO EF Sicciicn acon ccsiccecshcsksselaticags tock ads tadiadentlabaaice bie 3

SENOS I REMI sia aicicen nieces nicht sniGersudaccncoees pcnanoaniincadcbaaamsetaon eg

Peseta: GEE, BIS a passim

Seeteins Mia Raa) CRIT) cic ccacacccccvsoaeoni> soapnnssteiewecs 4

SOMES DEEN RID ori scescnspnecesdicecsescdnnace d, 6, 9, 14, 15, 16

section 400. 158B(D) (1987) 0. .ec.cerecrssecscccsetssavcestateseseose 3, 14,16

Section 405. 1885(b)(1)(1) (2OO2Z) .......-.cccscsssscccscececsssscsrrcncees q

Vil

Regulations—Cont. . -d: Page

Section 405.1885()i 1 (ii) (2002) 2.2... cecsssesececseceesncecenceneeees 7

Section 405.1885(1)(2Z) (2002) .......cvccsssrcerercecerceserensercseeerees 7

SOEEIONE GPs BOITIOD isciiiteonisscbinissainiepniiiieaniaetebscosinepetanibartadings 3

RTE LI wins eltissivsecevvtshdeuninessiciiiobiiaplesiiemmapiensaiconesi 28

SEINE SEA GID) icccrvennseinipivdpiis-einteerersdiplbacanpalaoiecmiicontcnesine 29

CON ETE Sais iecitecssctcenieesecsin chpsinicapcnebicevaddaidbibceah scbecuidele 2, 29

Miscellaneous: p

108 Cong. Rec. (1962):

SOU EE eens Mtg; sancesicsessacipinctnichovincopbevnseasiiibubeinepasblgiaaipaubpddbhaias 16

i ON re es 16

a SN i 16

Bi FNL Bes FO, Fae CRT) sescancpctacssvinilnesecharsvasttecetedtebieasbebiades 15

51 Fed. Reg. (1986):

Sic SUCRE A. ciunclslasedidebedivicciapeamasdioentumanibitcdstcduassancaamhadicaiaias 4

Ce SAGO eRe oi a Mee ENE POU, Bere De 4

63 Fed. Reg. (199%):

Se I 265

ES, GeO. scsasccchiniicamanandnisseicieladctachsimigbinaketaliiaodaae 26

PRG | APMC ae abot oy mana hy viata tec ome EET CME 26

SF,” ME RU sabes checanictecnpnscoubeebbadtcbnoned: beste Soebeadoneiitasovimeud bscbanes 26

GF BU: Ft LOA): weicisinscscoverevtcliccv tinphevinntlantenviiansentibes 3

67 Fed. Reg. (2002):

S|: AEM DMN \ciaciibs-sotheemmstahcsaeickokdciebvsdbixinrehidea obanabciadniacaadiauaadiasasbiis 7

Ai: Rear ey elias WIE a ESI Tia ma 15, 22

sn OE ae 17

89, SO APPEND NO seicpicchnencsidcssanmnicteibpiosaninnbsiaebontertncsutaadee 17,21

Ohi TIO Eos snes sp brensehnniopulesietiottode deacidactiosiuiiaaainlamaaniags 21,22

Health & Human Servs., CMS Financial Report,

Pineal 2 ett 2003 CNV. DOOD) aaiccocinnncteciccssoangscsctosperves 4,28

HCFA Ruling 97-2 (Feb. 27, 1997) ........0cccscscocercorriocsseeses passim

S. Rep. No. 1992, 87th Cong., 2d Sess. (1972)... cessessseeseees \ 16

Jn the Supreme Court of the Gnited States

i No.

MICHAEL O. LEAVITT, SECRETARY OF HEALTH &

HUMAN SERVICES, PETITIONER

v.

BAYSTATE HEALTH SYSTEMS, D/B/A/ BAYSTATE

MEDICAL CENTER, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

The Solicitor General, on behalf of the Secretary of Health

and Human Services, Michael 0. Leavitt, respectfully peti-

tions for a writ of certiorari to review the judgment of the

United States Court of Appeals for the District of Columbia

Circuit in this case.

OPINIONS BELOW

The opinion of the court of appeals (App., jufra, Ja-11a) is

reported at 414 F.5d 7. The opinion of the district court

(App., infra, 12a-30a) is reported at 309 F. Supp. 2d 89.

JURISDICTION ‘

The judgment of the court of appeals was entered on July

1, 2005. A petition for rehearing was denied on September

28, 2005 (App., infra, 47a-48a). On December 19, 2005, Chief

Justice Roberts extended the time within which to file a pe-

tition for a writ of certiorari to and including January 26,

2006. This Court’s jurisdiction is invoked under 28 U.S.C.

1254(1).

(1)

REGULATORY PROVISION INVOLVED

The reopening regulation, 42 C.F.R. 405.1885 (1997), and

Ruling 97-2 are reproduced at App., infra, 49a-55a.

STATEMENT

l. a. Title XVIII of the Social Security Act establishes the

federally funded Medicare program to provide health insur-

ance to the elderly and disabled. 42 U.S.C. 1395 et seq. Part

A of the program provides insurance for covered inpatient

hospital and related post-hospital services. When patient

beneficiaries receive covered services, the Secretary of

Health and Human Services (HHS) reimburses the provid-

ers of those services under the Medicare Act and the imple-

menting regulations. 42 U.S.C. 1395d, 1895ww(d).

A provider's total allowable Medicare payment is based on

a “cost report” that it must prepare after the close of its fis-

cal year. 42 C.F.R. 405.1801(b)(1), 413.24(f). The cost report

is filed with a “fiscal intermediary,” generally a private in-

surance company that acts as the Secretary’s agent and de-

termines the amount of payments to be made pursuant to an

agreement with the Secretary. 42 U.S.C. 1395h. The inter-

mediary analyzes the cost report, audits it to the extent nec-

essary, and issues the provider a written “notice of amount

of program reimbursement” (NPR) containing the final de-

termination of the total amount due the provider for Medi-

care services during the reporting period. Your Home Visit-

ing Nurse Servs., Inc. v. Shalala, 525 U.S. 449, 451 (1999)

(Your Home); 42 C.F.R. 405.1808.

Congress specified in the Medicare Act a comprehensive

scheme for administrative and judicial review of a fiscal in-

termediary’s final determination. A “dissatisfied” provider

may obtain a hearing before the Provider Reimbursement

Review Board (PRRB) in HHS if the amount in controversy

~is at least $10,000 (or $50,000 for group appeals) and the pro-

vider requests a hearing within 180 days after notice

of the intermediary’s final determination. 42 U.S.C.

139500(a)(1(A)i), (a2), (a)(3), (b), and (h); 42 C.F.R.

405.1835, 405.1845(a). See Your Home, 525 U.S. at 451; Be-

thesda Hosp. Ass’n v. Bowen, 485 U.S. 399, 403-404 (1988).

The Board’s decision is subject to review by the Secretary

and to judicial review in federal district court if an action is

brought within 60 days. 42 U.S.C. 139500(f)(1); 42 C.F.R.

405.1875 and 405.1877; Your Home, 525 U.S. at 451.

b. The Secretary has promulgated regulations governing

“(rjeopening” of Medicare reimbursement determinations

and decisions. 42 C.F.R. 405.1885; Your Home, 525 U.S. at

451. The reguiations provide that a determination by the

intermediary or a decision of the PRRB or the Secretary on

administrative appeal may be reopened within three years

with respect to specific “findings on matters at issue in such

determination or decision,” on the motion of either the af-

fected provider or the relevant decision-maker—the inter--

mediary, PRRB or Secretary. 42 C.F.R. 405.1885(a); see

Your Home, 535 U.S. at 451. For the time period relevant to

this case, the regulations further provided that “{a] deter-

mination * * * rendered by the intermediary shall be re-

opened and revised by the intermediary” if, “within the

aforementioned 3-year period,” the Health Care Financing

Administration (HCFA) in HHS notifies the intermediary

that such determination “is inconsistent with the applicable

law, regulations, or general instructions issued by [HCFA]

in accordance with the Secretary’s agreement with the inter-

mediary.” 42 C.F.R. 405.100%(b) (1997).

The Secretary’s reopening regulations also provide that

“(jjurisdiction for reopening a determination or decision

rests exclusively with that administrative body that ren-

dered the last determination or decision.” 42 C.F.R.

! HCFA has been renamed the Centers for Medicare and Medicaid

Services (CMS). 66 Fed. Reg. 35,437 (2001).

465.1885(¢). This Court held in Your Home that an inter-

mediary’s denial of a request under 42 C.F.R. 405.1885(a)

(1997) to reopen an intermediary’s final determination was

not subject to review by the PRRB or by a federal court un-

der federal question jurisdiction, 28 U.S.C. 1331, or the man-

damus statute, 28 U.S.C, 1361. 525 U.S. at 452-457. “

2. In February 1997, HCFA issued Ruling 97-2, which

prospectively acquiesced on a nationwide basis in the ad-

verse decisions of four courts of appeals that had rejected

the Secretary’s method for calculating the “disproportionate

share hospital” (DSH) adjustment to the rates applicable to

those hospitals that serve a disproportionate percentage of

low-income patients. App., infra, 49a-53a. In authorizing

DSH adjustments, the Medicare Act requires calculation of a

fraction whose numerator 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

Medicaid. 42 U.S.C. 1395ww(d)(5)F)(vi)UL). In a preamble

to the 1986 regulations implementing the DSH provicion, the

Secretary explained that he interpreted the Act to mean

that “Medicaid covered days will include only those days for

which benefits are payable,” 51 Fed. Reg. 16,777 (1986); ac-

cord 51 Fed. Reg. 31,460 (1986), and thus to exclude days for

which patients were not eligible under the terms of a State’s

Medicaid pian to receive payment for services.

Ruling 97-2 explained that, although HCFA “believes that

its longstanding interpretation of the statutory language was

a permissible reading of the statutory language,” HCFA

recognized that its interpretation “is contrary to the applic-

able law in four judicial circuits.” App., infra, 5la. Accord-

ingly, HCFA announced that it would follow the adverse ap-

pellate decisions on a nationwide basis beginning on or after

February 27, 1997, in order “to ensure national uniformity in

calculation of DSH adjustments.” Jbid. Ruling 97-2 stated

that HCFA would begin to “count in the Medicaid fraction