By Donielle Tigay Stutland, J.D.
A Michigan District court found that a CMS Administrator’s decision to exclude Medicare reimbursement for medical residents rotated out to other hospitals should stand, given the decision was based on substantial evidence and was not arbitrary and capricious.
Full time graduate medical education (GME) reimbursement cannot stand for students rotated out to other hospitals, a Michigan district court held, granting summary judgment to the HHS Secretary. The district court Roberts granted summary judgment for the Secretary, noting that the agency’s decision was based on substantial evidence and was not arbitrary and capricious (Beaumont Hospital v. Azar, October 24, 2019, Roberts, V.).
Regulatory Background. The Medicare program places a cap on the number of FTE residents for which a teaching hospital can be reimbursed by Medicare. Under 42 C.F.R. § 413.79(e)(1) hospital specific caps are addressed. However, in 2007, only the preamble to the regulation discussed the issue of residents who rotate out to other hospitals and how this should be calculated for reimbursement. In 2012, this was codified as part of the regulation’s text by explicitly excluding time that a resident spent a portion of the year training at another hospital.
Factual Background. The plaintiff is an acute care inpatient hospital, which established a family medicine training program for medical students on July 1, 2004. The program was approved for 30 FTE positions. During the first three years of the program, some residents spent time training at two other hospitals, because the necessary training could not be provided on-site. The hospital requested its fiscal intermediary to pay for 30 FTEs for its family medicine program.
In calculating the hospital’s FTE resident cap, the Medicare Administrative Contractor (MAC) apportioned caps based on the percentage of time spent training at the hospital. The MAC calculated the hospital’s FTE caps by apportioning the caps for graduate medical education (GME) and indirect medical education (IME) to be 23.96 and 23.87 respectively.
The hospital appealed the determination to the PRRB, as provided in 42 U.S.C. § 1395oo(a). After a hearing, the PRRB determined that the MAC "improperly calculated the provider’s GME and IME FTE resident caps" and directed the MAC to adjust Beaumont’s "new family medicine training program cap to 29.28 for both GME and IME." The PRRB concluded that the administrative regulation was unambiguous and that the regulation did not exclude residents rotating within other hospitals for the FTE count.
The Secretary then exercised his right to review the PRRB’s decision, acting through the Administrator for the CMS. The Administrator concluded that payments made by Medicare were only intended to reimburse teaching hospitals for resident time spent at that specific hospital. The hospital then appealed this decision to the court.
Discussion and Holding. In reviewing the decision of the PRRB, the court used the Chevron standard, which provides a two-step analysis framed to adjudicate questions of statutory interpretation when reviewing administrative decisions. In determining whether the court should grant deference to a government agency’s interpretation of a statute it must first ask whether Congress has directly addressed the issue. If it has not, then the agency’s interpretation is valid, if it is a permissible interpretation of the statute.
The court reviewed the Administrator’s decision pursuant to the standard of review set forth in the Administrative Procedure Act, which would allow the court to set aside an agency decision if it is, "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" or "unsupported by substantial evidence in a case … otherwise reviewed on the record of an agency hearing provided by statute."
The court found that there was substantial evidence to support the Secretary’s decision. The Secretary relied on text in the preamble to the statute, which was subsequently made into a rule, and notes that, "out-rotators" should not be excluded from the hospital’s FTE count. The hospital argues that the preamble did not appear in the codified text until 2012, which was after the time period at issue. The court found because there were some interpretive guides as well as the preamble that support the Administrator’s decision, there is enough to satisfy the "substantial evidence" standard. The court also found no evidence that the Administrator acted "arbitrarily and capriciously."
The court granted the Secretary’s motion for summary judgment.
The case is No. 2:18-cv-12352-VAR-MKM.
Attorneys: Daniel L. Stanley (Honigman LLP) for Beaumont Hospital-Wayne f/k/a Oakwood Annapolis Hospital. Bradley Darling, U.S Department of Justice, for Alex M. Azar, II.
Companies: Beaumont Hospital-Wayne f/k/a Oakwood Annapolis Hospital
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