Health Law Daily PRRB ruling that failed to explain reasoning was arbitrary and capricious
Friday, March 1, 2019

PRRB ruling that failed to explain reasoning was arbitrary and capricious

By Matt Pavich, J.D.

A PRRB ruling that was completely at odds with a contemporaneous interpretation of the law by CMS and failed to explain the reasoning was arbitrary and capricious.

A ruling by the Provider Reimbursement Review Board (PRRB) that HMO patient days should not be included in the compensation formula was flatly contradicted by CMS’ position in a contemporaneous case and ruling that failed to acknowledge the inconsistency was arbitrary and capricious, the federal district court for the District of Columbia has ruled. The court affirmed a magistrate judge’s grant of summary judgment to the hospitals and the remand to CMS (Baptist Medical Center v. Burwell, February 28, 2019, Sullivan E.).

Background. The plaintiff hospitals offered inpatient services for HMO patients and because they treated several low-income patients, they were entitled to supplemental payments for their treatment of low-income patients. The hospitals appealed the intermediary’s ruling that HMO patient days should not be in the numerator of the Medicaid fraction, arguing that the HMO patients were not entitled to Part A benefits and that those days should therefore be included. The PRRB upheld the determination, finding that the HMO statute required the exclusion because HMO payments are made by the Trust Fund established by Part A. The PRRB also found that the policy at the relevant time (1995 through 1998) was to include HMO patient days in the Medicare, but not Medicaid, fraction. The hospitals sought review under the APA. The parties appealed the magistrate judge’s ruling which denied summary judgment to CMS and granted it in part and denied it in part with respect to the hospitals.

Arbitrary and capricious. The magistrate judge recommended granting the hospitals’ motion for summary judgment because CMS’ interpretation was in direct contradiction to CMS’ position in a contemporaneous case. The judge also noted that CMS failed to consider whether its conclusion was a departure from clear public policy during the relevant time period.

The court agreed. The PRRB found that because HMO inpatient services were paid under Part A, the HMO patients were entitled to benefits under Part A. That reasoning, however, was directly contradicted by CMS’ own contemporaneous interpretation in another case where CMS argued that an entitlement to benefits under Part A meant only benefit eligibility, not a right to payment. The court found that not only were these positions inconsistent, the PRRB failed to acknowledge that it was arguing simultaneously for contrary interpretations. Thus, the PRRB did not meet its APA obligation to provide sound reasoning for its decision and the decision was arbitrary and capricious.

Additionally, the PRRB’s failure to address its change in policy rendered the decision arbitrary and capricious. During the fiscal years at issue, CMS’ practice was to exclude HMO patient days from the Medicare fraction, but when presented with this, the PRRB ignored the evidence and thus failed to examine relevant data.

Remand. The court also affirmed the magistrate judge’s decision to remand the case instead of directing the PRRB to include the HMO patient days, finding that the PRRB could easily come to a different conclusion once it aligned its interpretation with the interpretation set forth elsewhere by CMS.

The case is No. 1:16-cv-0124311-cv-0899.

Attorneys: Jeffrey A. Lovitky (Jeffrey A. Lovitky, Attorney at Law) for Baptist Medical Center, Stamford Hospital and NCH Downtown Naples Hospital. Jason Todd Cohen, U.S. Attorney's Office, for Sylvia Mathews Burwell.

Companies: Baptist Medical Center; Stamford Hospital; NCH Downtown Naples Hospital

MainStory: TopStory CaseDecisions CMSNews MedicareContractorNews PaymentNews PartANews ProgramIntegrityNews ProviderNews DistrictofColumbiaNews

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