Health Reform WK-EDGE Statute precludes review of uncompensated care payment calculation
Monday, January 18, 2021

Statute precludes review of uncompensated care payment calculation

By Jeffrey H. Brochin, J.D.

The PRRB correctly concluded that the express language of the statute precludes administrative and judicial review of the method used by the Secretary of HHS to calculate uncompensated care (UCC) payments, even where plaintiffs alleged that incorrect reporting periods were used.

A federal district court granted the HHS Secretary’s motion for summary judgment in a lawsuit brought by two hospitals whose appeals of uncompensated care (UCC) calculations were denied by the Provider Reimbursement Review Board (PRRB), which claimed that it lacked jurisdiction. The court ruled that the statute in fact precluded PRRB review of the method used by HHS in calculating the respective UCC payments (Scranton Quincy Hospital Company LLC v. Azar, January 7, 2021, Jackson, A.).

Improper reporting periods alleged. Two hospitals that participate in the Medicare program challenged the method by which HHS determined the amount of uncompensated care (UCC) that was used in calculating factor three of their FY 2015 DSH adjustments. Both hospitals had changed ownership during FY 2012, which resulted in each having two cost reports that began in FY 2012. One hospital had a cost report for the six-month period from July 1, 2011 to December 31, 2011 and another for the twelve-month period from July 1, 2012 to June 30, 2013. The second hospital had a cost report for the nine-month period from October 1, 2011 to June 30, 2012 and another for the twelve-month period from July 1, 2012 to June 30, 2013. HHS used each hospital’s cost report for the shorter period, rather than the report covering twelve months, in calculating the FY 2015 UCC adjustment. It was this choice of reporting periods that the hospitals challenged.

PRRB dismissal. On January 30, 2015, the hospitals filed separate administrative appeals of the agency’s selection of the cost report data in determining their UCC adjustments, but on April 1, 2019, the PRRB dismissed the appeals for lack of jurisdiction pursuant to 42 U.S.C. § 1395ww(r)(3). On May 31, 2019, the hospitals filed the instant appeal, and in their complaint, brought pursuant to the Administrative Procedure Act (APA), they alleged that the Board’s application of the preclusion provision in the DSH statute was contrary to the plain meaning of the statute, and, that the PRRB’s denial of jurisdiction raised serious constitutional concerns. HHS moved for summary judgment, which, for the reasons cited below, was granted.

ACA revisions to UCC calculation. In 2010, Congress enacted the Patient Protection and Affordable Care Act (ACA) (P.L. 111–148), which revised the DSH payment in an effort to account for the costs of UCC that hospitals provide to patients who have no means to pay. The amended DSH adjustment, which took effect in FY 2014, is calculated using a combination of the old DSH payment and the new payment for UCC, and is determined by multiplying three factors: (1) an estimate of the remaining seventy-five percent of the DSH payments nationwide, (2) an estimate of the decline in the national uninsured rate for the fiscal year as compared to the prior fiscal year, and (3) each qualifying hospital’s share of the total amount of uncompensated care. It is this third factor that the hospitals challenged as being erroneously calculated by HHS.

Preclusion provision. Paragraph (3) of the statute contains the following review preclusion provision: "There shall be no administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or otherwise of any estimate of the Secretary for purposes of determining the factors described in paragraph (2) or any period selected by the Secretary for such purposes." Both the PRRB and HHS maintained that the preclusion provision was properly interpreted to mean that the PRRB was without jurisdiction to hear the hospitals’ appeal. Conversely, the hospitals claimed that the statutory preclusion provision did not require the PRRB to decline to review the calculations which the hospitals maintained were arbitrary and capricious, because the Secretary’s decision was ultra vires and contrary to his own policies. Furthermore, they argued that the PRRB’s dismissal of their appeal raised constitutional issues.

Board correctly interpreted preclusion provision. The court noted that there is a "strong presumption that Congress intends judicial review of administrative action," and the APA provides for a basic presumption of judicial review of administrative actions. However, Congress may preclude judicial review of an administrative action by statute. In order to determine whether and to what extent a particular statute precludes judicial review, the courts consider its express language, the structure of the statutory scheme, its objectives, its legislative history, and the nature of the administrative action involved.

In the instant case, the court found that the express language of the statute precluded administrative and judicial review of the method used by HHS to calculate UCCs for DSH payment purposes. The hospitals acknowledged that the statute precludes review of the "estimates of the Secretary" and "periods selected by the Secretary," but insisted that they were not challenging the "estimates" nor the "periods" adopted by the Secretary; rather, they were appealing an error in the Secretary’s application of those "estimates" or "periods." The court responded that the "argument dances on the head of pin that will not support its weight," and held that the PRRB was correct in its conclusion that it was without jurisdiction to hear the hospitals’ challenge to HHS’s calculation method.

For the foregoing reasons, the court granted HHS’s motion for summary judgment.

The case is No. 1:18-cv-02310-ABJ.

Attorneys: Daniel J. Hettich (King & Spalding LLP) for Scranton Quincy Hospital Co., LLC. Johnny Hillary Walker, III (U.S. Attorney's Office) for Alex M. Azar.

Companies: Scranton Quincy Hospital Co., LLC

Cases: CaseDecisions AgencyNews InpatientFacilityNews MedicarePartANews ProviderPaymentNews ProgramIntegrityNews DistrictofColumbiaNews NewsFeed

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