PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______
No. 15-1202
______
GEISINGER COMMUNITY MEDICAL CENTER,
Appellant
v.
SECRETARY UNITED STATES DEPARTMENT OF
HEALTH AND HUMAN SERVICES;
MARILYN TAVENNER, Administrator, Centers for
Medicare and Medicaid Services;
ROBERT G. EATON, Chairman, Medicare Geographic
Classification Review Board
______
On Appeal from United States District Court
for the Middle District of Pennsylvania
(M.D. Pa. No. 3-14-cv-01763)
District Judge: Honorable Malachy E. Mannion
______
Argued Tuesday, April 21, 2015
Before: FISHER, CHAGARES and COWEN, Circuit Judges
(Filed: July 23, 2015)
Mary Kay Brown, Esq.
Brown Wynn McGarry Nimeroff
2001 Market Street
Two Commerce Square, Suite 3420
Philadelphia, PA 19103
Joseph D. Glazer, Esq. (ARGUED)
Suite 200
116 Village Boulevard
Princeton, NJ 08540
Counsel for Appellant
Kate L. Mershimer, Esq.
D. Brian Simpson, Esq.
Office of United States Attorney
228 Walnut Street, P.O. Box 11754
220 Federal Building and Courthouse
Harrisburg, PA 17108
Tara S. Morrissey, Esq. (ARGUED)
Michael S. Raab, Esq.
United States Department of Justice
Room 7262
950 Pennsylvania Avenue, N.W.
Washington, DC 20530
Counsel for Appellees
______
OPINION OF THE COURT
______
2
FISHER, Circuit Judge.
Hospitals that are disadvantaged by their geographic
location may reclassify to a different wage index area for
certain Medicare reimbursement purposes by applying for
redesignation to the Medicare Geographic Classification
Review Board (“Board”). Section 401 of the Medicare,
Medicaid, and SCHIP Balanced Budget Refinement Act of
1999, Pub. L. No. 106-113, 113 Stat. 1501 (1999) (“Section
401”), enacted ten years after the Board was established,
creates a separate mechanism by which qualifying hospitals
located in urban areas “shall [be] treat[ed] . . . [as] rural” for
the same reimbursement purposes. To avoid supposed
strategic maneuvering by hospitals, the Secretary of the U.S.
Department of Health and Human Services issued a
regulation providing that hospitals with Section 401 status
cannot receive additional reclassification by the Board on the
basis of that status. See 42 C.F.R. § 412.230(a)(5)(iii)
(“Reclassification Rule”).
Geisinger Community Medical Center (“Geisinger”), a
hospital located in an urban area, received rural designation
under Section 401 but was unable to obtain further
reclassification by the Board pursuant to the Reclassification
Rule. Geisinger sued the Secretary, Sylvia Matthews
Burwell; the Administrator of the Centers for Medicare and
Medicaid Services (“CMS”), Marilyn Tavenner; and the
Chairman of the Board, Robert G. Eaton, in their official
capacities (collectively, “Appellees”), challenging the
Reclassification Rule as unlawful. The District Court upheld
the regulation under Chevron, U.S.A., Inc. v. Natural Res.
Def. Council, Inc., 467 U.S. 837 (1984), and granted
summary judgment in favor of Appellees. Because we
conclude that Section 401 is unambiguous, we will reverse.
3
I.
A.
The Medicare program provides a system of federally-
funded health insurance for eligible elderly and disabled
individuals under Title XVII of the Social Security Act, 42
U.S.C. § 1395 et seq. Under § 1395ww(d), or “subsection
(d),” hospitals are reimbursed for inpatient costs at fixed rates
for categories of treatment through an inpatient prospective
payment system (“IPPS”). Calculating inpatient
reimbursement payments under IPPS is a multi-step process.
First, the Secretary establishes a nationwide standardized rate
for all subsection (d) hospitals located in an “urban” or
“rural” regional area. 42 U.S.C. § 1395ww(d)(2)(A)-(D).
Second, among other variables, CMS adjusts the standardized
rate by a “wage index” that reflects the difference between
hospitals’ local wages and wage-related costs and the national
average. Id. § 1395ww(d)(3)(E).
A hospital’s wage index is the wage index the
Secretary assigns to the specific geographic area where the
hospital is located. Hospitals located in rural areas receive a
wage index that applies to all rural areas in their state.
Hospitals located in urban areas are grouped and treated as a
single labor market based on the area, known as the Core
Based Statistical Area (“CBSA”), in which they are
physically located. Higher wage indices, which reflect higher
labor costs in relation to the national average, correspond to
higher reimbursement rates. Thus, the wage index is a
significant determinant of the way hospitals are reimbursed
for inpatient care costs.
IPPS may yield inequitable results where, for instance,
a rural hospital’s lower wage index does not accurately reflect
its labor costs because it competes for the same labor pool as
hospitals in a nearby but higher wage-index urban area.
4
Thus, in 1987 and 1988, Congress amended the Medicare Act
to allow a hospital to seek reclassification from its
geographically-based wage index area to a nearby wage index
area if it meets certain criteria. See Robert Wood Johnson
Univ. Hosp. v. Thompson, 297 F.3d 273, 276 (3d Cir. 2002)
(explaining the history of the Board reclassification system).
And in 1989, because only a limited number of hospitals were
reclassified under those laws, Congress established the Board
to systematically decide hospitals’ various reclassification
requests. See 42 U.S.C. § 1395ww(d)(10). “The Board shall
consider the application of any subsection (d) hospital
requesting that the Secretary change the hospital’s geographic
classification for purposes of determining” the hospital’s
average standardized rate or wage index. Id.
§ 1395ww(d)(10)(C). Congress gave the Secretary authority
to formulate guidelines to be used by the Board in rendering
its decisions. Id. § 1395ww(d)(10)(D)(i) (“The Secretary
shall publish guidelines to be utilized by the Board in
rendering decisions on applications submitted under this
paragraph . . . .”).
Under those guidelines, which are generally listed at
42 C.F.R. § 412 et seq., a hospital seeking reclassification
must show (1) proximity to the area to which it seeks
redesignation, 42 C.F.R. § 412.230(a)(2), (b)(1); (2) that the
hospital’s three-year average hourly wage (“AHW”) is higher
than other hospitals’ in the area in which it is located, id.
§ 412.230(d)(1)(iii); and (3) that the hospital’s AHW is
comparable to hospitals’ in the area to which it seeks
redesignation, id. § 412.230(d)(1)(iv). For all three criteria,
there are more relaxed standards for hospitals located in rural
areas. For instance, the proximity rule requires that urban
hospitals be located within 15 miles of the area to which it
seeks reclassification, but only requires rural hospitals to be
5
within 35 miles. Id. § 412.230(b)(1). In addition, certain
“special” status hospitals, such as rural referral centers
(“RRCs”), are exempt from the first and second requirements.
See 42 U.S.C. § 1395ww(d)(10)(D)(iii); 42 C.F.R.
§ 412.230(a)(3), (d)(3).
In 1999, ten years after the Board was established,
Congress enacted Section 401. Section 401 allows hospitals
located in urban areas to be treated as hospitals located in
rural areas for the purpose of determining three aspects of
Medicare reimbursement: inpatient reimbursement, 42
U.S.C. § 1395ww(d)(8)(E); outpatient reimbursement, id.
§ 1395l(t); and critical access hospital eligibility, id. § 1395i-
4(c)(2)(B)(i). Only the first component, which amends
subsection (d), is at issue here. It reads in full:
42 U.S.C. [§] 1395ww(d)(8)[] is amended by
adding at the end the following new
subparagraph:
(E)(i) For purposes of this subsection, not later
than 60 days after the receipt of an application
(in a form and manner determined by the
Secretary) from a subsection (d) hospital
described in clause (ii), the Secretary shall treat
the hospital as being located in the rural area (as
defined in paragraph (2)(D))1 of the State in
which the hospital is located.
(ii) For purposes of clause (i), a subsection
(d) hospital described in this clause is a
1
Pursuant to 42 U.S.C. § 1395ww(d)(2)(D), “the term
‘rural area’ means any area outside [] an [urban] area.”
6
subsection (d) hospital that is located in an
urban area (as defined in paragraph (2)(D))
and satisfies any of the following criteria:
(I) The hospital is located in a rural
census tract of a metropolitan statistical
area (as determined under the most
recent modification of the Goldsmith
Modification, originally published in the
Federal Register on February 27, 1992
(57 Fed. Reg. 6725)).
(II) The hospital is located in an area
designated by any law or regulation of
such State as a rural area (or is
designated by such State as a rural
hospital).
(III) The hospital would qualify as a
rural, regional, or national referral center
under paragraph (5)(C) or as a sole
community hospital under paragraph
(5)(D) if the hospital were located in a
rural area.
(IV) The hospital meets such other
criteria as the Secretary may specify.
Id. § 1395ww(d)(8). In the Conference Report accompanying
Section 401, Congress highlighted several benefits of a
hospital receiving Section 401 status:
7
Hospitals qualifying under this section shall be
eligible to qualify for all categories and
designations available to rural hospitals,
including sole community, Medicare dependent,
critical access, and referral centers.
Additionally, qualifying hospitals shall be
eligible to apply to the Medicare Geographic
[Classification] Review Board for geographic
reclassification to another area. The Board shall
regard such hospitals as rural and as entitled to
the exceptions extended to referral centers and
sole community hospitals, if such hospitals are
so designated.
H.R. Conf. Rep. No. 106-479, 512 (1999).
The Secretary, in implementing Section 401, was
concerned that the statute would “create an opportunity for
some urban hospitals to take advantage of the [Board]
process.” See 65 Fed. Reg. 47,054, 47,087 (Aug. 1, 2000).
She was afraid that some hospitals, claiming to be
disadvantaged by their urban status, could first be reclassified
as rural under Section 401 and thereby “receiv[e] the benefits
afforded to rural hospitals,” and then subsequently claim
disadvantage from that rural status and “seek reclassification
through the [Board] back to the urban area for purposes of
their standardized amount and wage index.” Id. As a result,
the Secretary issued the Reclassification Rule:
An urban hospital that has been granted
redesignation as rural under § 412.103 [the
regulation implementing Section 401] cannot
receive an additional reclassification by the
[Board] based on this acquired rural status for a
year in which such redesignation is in effect.
8
42 C.F.R. § 412.230(a)(5)(iii). Under the Reclassification
Rule, a hospital with Section 401 status cannot be reclassified
by the Board to a different wage index area for any year the
hospital maintains that status. To seek reclassification by the
Board, therefore, a subsection (d) hospital must cancel its
Section 401 designation.
B.
Geisinger is a not-for-profit, general, acute care
hospital physically located in the Scranton-Wilkes-Barre-
Hazelton, PA CBSA. It applied for designation as a Section
401 hospital and was approved, effective June 11, 2014. It
also applied for designation as an RRC and was approved,
effective July 1, 2014.2 On August 26, 2014, Geisinger
cancelled its Section 401 status, effective October 1, 2015.
On August 28, 2014, Geisinger submitted two
applications to the Board to redesignate to a different urban
area, effective October 1, 2015: (1) on the basis of its Section
401 status, a primary application as a rural hospital to
reclassify to the Allentown-Bethlehem-Easton, PA-NJ CBSA
(“Allentown CBSA”); and (2) on the basis of its cancelled
Section 401 status, effective October 1, 2015, a secondary
application as an urban hospital to reclassify to the East
Stroudsburg, PA CBSA (“East Stroudsburg CBSA”), which
would be considered only if the former was denied.
Geisinger estimates that reclassification to the Allentown
CBSA would increase its reimbursement payments by
approximately $2.6 million per year and to the East
Stroudsburg CBSA by approximately $1.3 million per year.
2
See 42 U.S.C. § 1395ww(d)(5)(C)(i) (providing that
to earn status as an RRC a hospital must first be classified as
rural).
9
The 27-mile distance between Geisinger and the
Allentown CBSA fails to meet the proximity requirement
under the Secretary’s rules for hospitals located in urban
areas, but it meets the more relaxed criteria for hospitals
located in rural areas. See id. § 412.230(b)(1). But for the
Reclassification Rule, therefore, Geisinger’s primary
application as a hospital with Section 401 status would be
considered by the Board using the rural standards. However,
because it was “[l]eft with no choice but to try to comply with
the Secretary’s illegal regulatory scheme or lose millions of
dollars in reimbursement,” Geisinger cancelled its Section
401 status so that the Board could alternatively consider its
application to the East Stroudsburg CBSA, whose
requirements it could meet as an urban hospital.3 Appellant’s
Br. at 14.
C.
On September 10, 2014, while its applications were
pending before the Board, Geisinger filed a complaint in the
U.S. District Court for the Middle District of Pennsylvania.
Count I alleged that the Reclassification Rule violates Section
401. Count II alleged that the Reclassification Rule violates
the Administrative Procedure Act (“APA”), 5 U.S.C. § 701 et
seq. Geisinger sought a declaratory judgment that the
Reclassification Rule was unlawful and a permanent
3
Geisinger’s application to the East Stroudsburg
CBSA relied on a rule that allows a hospital with current
status as an RRC (as of the date of the Board’s review) to
reclassify to the nearest urban area without satisfying
proximity requirements. See 42 C.F.R. § 412.230(a)(3).
Geisinger is located 15.7 miles away from the East
Stroudsburg CBSA, which is the nearest urban area to
Geisinger.
10
injunction, an order of mandamus, or both, prohibiting the
agency from applying the Reclassification Rule to its pending
applications and ordering it to apply the rural standards.
The parties filed cross-motions for summary judgment
and the District Court granted Appellees’ motion on
December 22, 2014. See Geisinger Cmty. Med. Ctr. v.
Burwell, Civ. A. No. 3:14-1763, 2014 WL 7338751 (M.D. Pa.
Dec. 22, 2014). The District Court first explained that it had
subject matter jurisdiction because Geisinger challenged the
legality of the Reclassification Rule itself and not the
agency’s decisions on its applications, over which the
Medicare Act precludes judicial review. See 42 U.S.C.
§ 1395ww(d)(10)(C)(iii)(II) (providing that Board decisions
may be appealed to the Secretary and that “[t]he decision of
the Secretary shall be final and shall not be subject to judicial
review”). On the merits, the District Court held that because
Congress did not expressly provide that Section 401 extends
to the Board reclassification process, and because Congress
granted the Secretary broad authority to administer that
process, Section 401 was ambiguous at Step One of Chevron,
467 U.S. at 842-43. At Step Two, the District Court
concluded that the Secretary’s decision to eliminate the
potential for “inconsistent reclassifications of the same
hospital for the same period” and other “unintended
consequences” vis-à-vis the Reclassification Rule was a
reasonable accommodation of Section 401 and therefore
should be upheld. Geisinger, 2014 WL 7338751, at *10.
Geisinger timely appealed.
On February 23, 2015, the Board did not treat
Geisinger as located in the rural area of Pennsylvania and
denied Geisinger’s primary application for reclassification to
the Allentown CBSA. It approved Geisinger’s secondary
application for reclassification to the East Stroudsburg CBSA
11
on the basis that Geisinger had cancelled its Section 401
status. Reinforcing the application of the Reclassification
Rule, the Administrator of CMS affirmed the Board’s
decision on June 1, 2015.4
II.
The District Court exercised jurisdiction under 28
U.S.C. §§ 1331 and 1361 and 5 U.S.C. § 701 et seq. We
exercise appellate jurisdiction under 28 U.S.C. § 1291.
The Court reviews the District Court’s grant of
summary judgment de novo. Montone v. City of Jersey City,
709 F.3d 181, 189 (3d Cir. 2013). Under the APA, a
reviewing court may “hold unlawful or set aside agency
action, findings, and conclusions” that are found to be, inter
alia, “not in accordance with law.” 5 U.S.C. § 706(2). While
we usually afford deference to an agency’s interpretation of a
statute it is charged with administering, “when we are called
upon to resolve pure questions of law by statutory
4
Because Geisinger does not seek judicial review of
the denial of its applications, this Court maintains jurisdiction
over the appeal. See ParkView Med. Assocs., L.P. v. Shalala,
158 F.3d 146, 148 (D.C. Cir. 1998) (explaining that
“hospitals [are] free to challenge the general rules leading to
denial” where the Secretary affirmed the Board’s denial of
plaintiff’s reclassification request); Universal Health Servs. v.
Sullivan, 770 F. Supp. 704, 710 (D.D.C. 1991) (“The
[Medicare] Act does not . . . expressly preclude judicial
review of the guidelines utilized by the Board and the
Secretary in deciding upon reclassification requests.”); cf. 5
U.S.C. § 702 (conferring a general cause of action upon
persons “suffering legal wrong because of agency action” and
withdrawing it where the relevant statute precludes judicial
review).
12
interpretation, we decide the issue de novo without deferring
to [the] agency.” Port Auth. Trans-Hudson Corp. v. Sec’y,
U.S. Dep’t of Labor, 776 F.3d 157, 161 (3d Cir. 2015)
(internal quotation marks omitted).
III.
Because this case concerns a challenge to an agency’s
construction of a statute, we use the familiar two-step analysis
set forth in Chevron. “First, always, is the question whether
Congress has directly spoken to the precise question at issue.
If the intent of Congress is clear, that is the end of the matter;
for the court, as well as the agency, must give effect to the
unambiguously expressed intent of Congress.” Chevron, 467
U.S. at 842-43. We proceed to Step Two “if the statute is
silent or ambiguous with respect to the specific issue.” Id. at
843. Then, “the question for the court is whether the
agency’s answer is based on a permissible construction of the
statute,” and the regulation must be given deference unless it
is “arbitrary, capricious, or manifestly contrary to the statute.”
Id. at 843, 844.
The “precise question at issue” here is whether the
Secretary is required to treat hospitals with Section 401 status
like hospitals physically located in rural areas for purposes of
Board reclassification. Id. at 842. Based on the plain
language of the statute, we conclude that Congress has
unambiguously expressed its intent that the Secretary shall do
so. Because Congress’s intent is clear, we complete our
analysis at Step One and do not proceed to Step Two to
determine whether the Reclassification Rule is a permissible
construction of Section 401.
A.
To determine whether a statute is unambiguous under
Step One, “court[s] should always turn first to one, cardinal
13
canon before all others[:] We have stated time and again that
courts must presume that a legislature says in a statute what it
means and means in a statute what it says there.” Conn. Nat’l
Bank v. Germain, 503 U.S. 249, 253-54 (1992). That is,
because we presume Congress expresses its intent through the
ordinary meaning of the words it uses, an exercise of statutory
interpretation must begin by examining the plain and literal
language of the statute. See United States v. Geiser, 527 F.3d
288, 294 (3d Cir. 2008). And “[w]here the statutory language
is plain and unambiguous, further inquiry is not required.”
Rosenberg v. XM Ventures, 274 F.3d 137, 141 (3d Cir. 2001);
In re Price v. Del. State Police Fed. Credit Union, 370 F.3d
362, 368 (3d Cir. 2004) (“We are to begin with the text of a
provision and, if its meaning is clear, end there.”).
While we also read the language in its broader context
of the statute as a whole, see id. at 369-70, this Court made
clear in United States v. Geiser that “legislative history
should not be considered at Chevron [S]tep [O]ne,” 527 F.3d
at 294; In re Phila. Newspapers, LLC, 599 F.3d 298, 304 (3d
Cir. 2010) (“Where the statutory language is unambiguous,
the court should not consider statutory purpose or legislative
history.”). Following the Court’s established precedent on
14
this matter, we will not consider legislative history in our Step
One analysis.5
With this framework in mind, we turn to the text of
Section 401. The relevant portion reads: “For purposes of
this subsection . . . the Secretary shall treat the hospital [with
Section 401 status] as being located in the rural area (as
defined in paragraph (2)(D)) of the State in which the hospital
is located.” 42 U.S.C. § 1395ww(d)(8)(E)(i). The parties
make several quasi-textual and -structural arguments
supporting their interpretation of the statute that we group
into three categories and discuss in turn.
1.
Geisinger’s first argument relates to Section 401’s
opening clause, “[f]or purposes of this subsection.” Id. The
5
Geisinger argues that the Supreme Court’s recent
plurality decision in Lawson v. FMR LLC, which cited to the
legislative record to determine whether a provision of the
Sarbanes-Oxley Act was ambiguous, mandates that legislative
history should now be considered at Step One. 134 S. Ct.
1158, 1169-71 (2014). However, the Supreme Court has
often oscillated between considering and then refusing to
consider legislative history at Step One. We explicitly noted
the Supreme Court’s “ambiguous guidance” in this regard and
nonetheless firmly staked our position in Geiser. 527 F.3d at
293. If the Supreme Court had intended to clarify the
widespread confusion around this issue, we imagine that it
would say so clearly. And even if it had, it bears emphasis
that the decision was a plurality opinion. In any event, this
Court has spoken clearly on its refusal to consider legislative
history at Step One, see id., and we see no reason to revisit
that decision because some members of the Supreme Court
considered legislative history in passing in Lawson.
15
subsection to which the statute indisputably refers is
subsection (d), which, as discussed, addresses a wide range of
rules for inpatient care reimbursement under the Medicare
program, including the requirements for calculating the
standardized rate for rural and urban regional areas, id.
§ 1395ww(d)(2)(D); adjusting the wage index on the basis of
a hospital’s local geographic area, id. § 1395ww(d)(3); and
administering the Board reclassification process, id.
§ 1395ww(d)(10). Geisinger alleges that this clause, which
explicitly directs the Secretary to apply Section 401 for
purposes of subsection (d), requires the Secretary to apply
Section 401 to subsection (d)(10), i.e., the Board
reclassification process. We agree.
One of our “most basic interpretive canons” is that “[a]
statute should be construed so that effect is given to all its
provisions, so that no part will be inoperative or superfluous,
void or insignificant.” Corley v. United States, 556 U.S. 303,
314 (2009) (alteration in original) (internal quotation marks
omitted); see also Rosenberg, 274 F.3d at 142 (“[T]he
preferred construction of a statute and its regulations is one
that gives meaning to all provisions.”). Here, Congress must
have intended that Section 401 apply comprehensively over
subsection (d), including subsection (d)(10), because the
language “[f]or purposes of this subsection” would not have
any purpose or meaning if it did not.
Appellees counter that because Section 401 is not
applicable to every paragraph within subsection (d), whether
Section 401 must apply to the Board reclassification process
is ambiguous. For instance, the command that a hospital shall
be treated as rural is not applicable to subsection (d)(6),
which requires the Secretary to make certain publications in
the Federal Register, 42 U.S.C. § 1395ww(d)(6); or
subsection (d)(7), which limits administrative and judicial
16
review, id. § 1395ww(d)(7). In other words, there are some
subsection (d) provisions for which the hospital’s rural status
is irrelevant.
But this does not contravene Congress’s intent—
demonstrated by using the clause “[f]or purposes of this
subsection”—that Section 401 governs everywhere it is
applicable; it does not contravene Congress’s intent that
Section 401 governs everywhere a hospital’s rural status is
relevant. Cf. Babbitt v. Sweet Home Chap. of Cmtys. for a
Great Or., 515 U.S. 687, 722 (1995) (“[T]he definition of
‘take’ in [a provision of the Endangered Species Act] applies
‘[f]or the purposes of this chapter,’ that is, it governs the
meaning of the word as used everywhere in the Act.”). As
discussed, a hospital’s urban-rural geographic location has a
dispositive effect on the hospital’s designated standardized
rate and wage index. In turn, it has a dispositive effect on the
Board reclassification process, the statutory purpose of which
is to redesignate the hospital from rural to urban or vice versa
for purposes of receiving a new standardized rate or wage
index. See 42 U.S.C. § 1395ww(d)(10)(C). This bolsters our
conclusion that Congress intended Section 401 to apply to
these specific processes. Thus, we must read Section 401 as
mandating that for purposes of Board reclassification, which
is inextricably intertwined with a hospital’s rural or urban
designation, the Board shall treat the hospital as rural.
The District Court disagreed with this construction,
concluding that “the statute does not discuss the Board
reclassification process at all, nor does it discuss the
intersection of redesignation and geographic reclassification
under the Medicare Act.” Geisinger, 2014 WL 7338751, at
*8; see also Appellees’ Br. at 23 (arguing that Section 401 is
“silent” with regard to Board reclassification). Appellees
further contend that if Congress had intended that subsection
17
(d) hospitals be able “to take advantage of both
reclassification procedures almost simultaneously, piling
exception on top of exception,” then it would have done so
more clearly. Appellees’ Br. at 25.
In other words, the District Court and Appellees read
ambiguity into the statute because of what it does not say,
rather than read it for what it plainly says. To be sure,
Congress did not explicitly provide that Section 401 applies
to subsection (d)(10). But it did explicitly provide that
Section 401 applies for purposes of subsection (d), which
covers subsection (d)(10) and had covered it for ten years
before Section 401 was amended. To comprehensively
amend subsection (d)—which contains dozens of paragraphs
and subparagraphs concerning inpatient reimbursement, many
of which involve a hospital’s rural or urban status—rather
than each provision within it, Congress necessarily used
broad language. Still, “[a]s a general matter of statutory
construction, a term in a statute is not ambiguous merely
because it is broad in scope.” See In re Phila. Newspapers,
599 F.3d at 310; see also Diamond v. Chakrabarty, 447 U.S.
303, 315 (1980) (“Broad general language is not necessarily
ambiguous when congressional objectives require broad
terms.”). If the phrase was not intended to cover subsection
(d)(10), contrary to the literal reading of the text, then
Congress would have noted which paragraphs of subsection
(d) were specifically excluded or included. It did not. And
despite Appellees’ attempt to infer intent against layering the
two reclassification processes, the Court cannot ignore the
plain language of the statute. “Our task is to apply the text,
not to improve upon it.” Pavelic & LeFlore v. Marvel Entm’t
Grp., 493 U.S. 120, 126 (1989).
18
2.
Next, Geisinger points to the portion of the text
mandating that hospitals with Section 401 status be treated
“as being located in the rural area (as defined in paragraph
(2)(D)) of the state where the hospital is located.” 42 U.S.C.
§ 1395ww(d)(8)(E)(i). Paragraph (2)(D) defines “rural area”
as “any area outside” an urban area. Id. § 1395ww(d)(2)(D).
Because there is only one definition of “rural” within
subsection (d), Geisinger argues, Congress must have
intended that the Board evaluate applications from hospitals
with acquired-rural status under Section 401 in the same way
it evaluates applications from hospitals physically located in
rural areas.
Appellees argue, however, that Geisinger’s
interpretation is permissible under the plain language of the
statute, but it is not compelled. Another interpretation of
Section 401, they reason, is that the Secretary must treat
Section 401 hospitals as rural for all inpatient reimbursement
purposes and, therefore, must not reclassify those hospitals as
urban under the Board reclassification process.
To be sure, “[a] provision is ambiguous only where the
disputed language is reasonably susceptible of different
interpretations.” In re Phila. Newspapers, 599 F.3d at 304
(internal quotation marks omitted). “But just because a
particular provision may be, by itself, susceptible to differing
constructions does not mean that the provision is therefore
ambiguous. . . . Rather, a provision is ambiguous when,
despite a studied examination of the statutory context, the
natural reading of a provision remains elusive.” In re Price,
370 F.3d at 369. Here, the natural reading of Section 401 and
the statutory scheme reinforces Geisinger’s view.
Section 401 does not say that we cannot reclassify the
Section 401 hospital as urban. It says we must treat the
19
Section 401 hospital as rural for purposes of subsection (d),
including subsection (d)(10). This means that Section 401
hospitals must be able to participate in the Board
reclassification process and seek redesignation from their
current location to another location for purposes of receiving
a new standardized rate or wage index. To this end, Section
401 mandates that hospitals with Section 401 status be treated
as rural, which has well-settled meaning and implications
under the Medicare Act. See supra Part I.A. Thus, hospitals
with Section 401 status should apply as being located in the
rural area of their state and be evaluated by the Board under
the more relaxed standards regularly applied to rural
hospitals. Considering this “broader, contextual view”
together with the text, In re Price, 370 F.3d at 369, we find
the statute unambiguous. Appellees’ view that Section 401
hospitals cannot be reclassified as urban would, in effect,
prohibit hospitals with Section 401 status from reclassifying
under subsection (d)(10), contrary to the plain and natural
reading of the statute.
3.
Third, and finally, Geisinger focuses on Section 401’s
command that “the Secretary shall treat” hospitals with
Section 401 status as rural. 42 U.S.C. § 1395ww(d)(8)(E)(i)
(emphasis added). Geisinger argues that the “shall” language
in Section 401 must be viewed as mandatory. See, e.g.,
United States v. Monsanto, 491 U.S. 600, 607 (1989).
Indeed, “[t]he word shall is ordinarily the language of
command.” Alabama v. Bozeman, 533 U.S. 146, 153 (2001)
(internal quotation marks omitted).
Appellees do not dispute that Section 401 uses
mandatory language, nor do we. Appellees argue, rather, that
because Congress granted the Secretary authority to
promulgate guidelines for the Board reclassification process,
20
see 42 U.S.C. § 1395ww(d)(10)(D), the Reclassification Rule
was a permissible and necessary exercise of that authority in
the supposed gap that Section 401 created. Appellees
emphasize that “[n]othing in Section 401 constrains the
Secretary’s broad discretion to establish criteria for Board
reclassification,” which “‘is precisely the type of legislative
gap-filling that [courts] entrust to an agency’s sound
discretion.’” Appellees’ Br. at 23 (quoting Santomenno ex
rel. John Hancock Trust v. John Hancock Life Ins. Co.
(U.S.A), 768 F.3d 284, 299 (3d Cir. 2014)).
But this authority was granted in subsection (d)(10),
which, again, covers the Board reclassification process.
While the Secretary is unquestionably authorized to issue
guidelines regarding Board reclassification, e.g., to design the
proximity standards for urban versus rural hospitals, it does
not follow that the Secretary is authorized to disregard the
plain language of Section 401. Rather, Section 401’s
mandate that the Secretary shall treat Section 401 hospitals as
rural without adding any discretionary language as Congress
used in subsection (d)(10) and elsewhere in Section 401 itself,
see 42 U.S.C. § 1395ww(d)(8)(E)(i) (referencing the receipt
of an application “in a form and manner determined by the
Secretary”); id. § 1395ww(d)(8)(E)(ii)(IV) (establishing as
the last criterion for Section 401 eligibility any “other criteria
as the Secretary may specify”), lends itself to the opposite
conclusion. “[W]here Congress includes particular language
in one section of a statute but omits it in another section of the
same Act, it is generally presumed that Congress acts
intentionally and purposely in the disparate inclusion or
exclusion.” Russello v. United States, 464 U.S. 16, 23 (1983)
(alteration in original) (internal quotation marks omitted).
Congress could have granted the Secretary discretion to
administer Section 401. It did not. Rather, it used
21
commanding language and the Court must give that language
effect, notwithstanding the Secretary’s independent authority
to develop guidelines used in the Board reclassification
process.
B.
Section 401 refers to subsection (d) in its entirety,
which includes the Board reclassification process; requires
the Secretary to treat Section 401 status hospitals as rural,
which has a singular definition and well-settled implications
under the Medicare Act; and uses mandatory language
(“shall”). Altogether, we read Section 401 to reflect
Congress’s unambiguous intent on the “precise question at
issue,” Chevron, 467 U.S. at 842: for subsection (d)
purposes, including administering Board applications for
wage index reclassification, the Secretary shall treat Section
401 hospitals as located in the rural area of the state. Because
Congress’s intent is clear, we end our inquiry here and do not
reach Chevron Step Two. See id. at 843 n.9 (“If a court,
employing traditional tools of statutory construction,
ascertains that Congress had an intention on the precise
question at issue, that intention is the law and must be given
effect.”).
IV.
Congress has unambiguously expressed its intent that
the Secretary shall treat Section 401 hospitals as rural for
Board reclassification purposes. See 42 U.S.C.
§ 1395ww(d)(8)(E)(i). We conclude, therefore, that the
Reclassification Rule is unlawful and reverse the District
Court’s order granting Appellees’ summary judgment motion.
22
COWEN, Circuit Judge, dissenting
The majority offers a well-reasoned reading of Section 401.
In fact, the majority may even offer the most persuasive
interpretation of this statutory provision. However, it is not this
Court’s job to adopt what it believes to be the best reading of the
statute. Instead, we must “use the familiar two-step analysis set
forth in Chevron.” (Majority Opinion at 12.) Under this doctrine,
we must first decide whether or not “Congress has directly spoken
to the precise question at issue.” Chevron, U.S.A., Inc. v. Natural
Res. Def. Council, Inc., 467 U.S. 837, 842-43 (1984). If we
conclude that the statute is silent or ambiguous with respect to the
specific question at issue, the Court must then consider whether the
agency’s approach is based on a permissible construction of the
statute. See, e.g., id. at 843. “‘Chevron deference is premised on
the idea that where Congress has left a gap or ambiguity in a
statute within an agency’s jurisdiction, that agency has the power
to fill or clarify the relevant provisions.’” Santomenno ex rel. John
Hancock Trust v. John Hancock Life Ins. Co. (U.S.A.), 768 F.3d
284, 299 (3d Cir. 2014) (quoting Core Commnc’ns, Inc. v. Verizon
Pa. Inc., 493 F.3d 333, 343 (3d Cir. 2007)), cert. denied, 135 S. Ct.
1860 (2015). Accordingly, the Court must leave undisturbed “‘a
reasonable accommodation of conflicting policies that were
committed to the agency’s care by the statute . . . unless it appears
from the statute or its legislative history that the accommodation is
not one that Congress would have sanctioned.’” Chevron, 467
U.S. at 845 (citation omitted). We must defer to an agency’s
reasonable construction of a statute—“whether or not it is the only
possible interpretation or even the one a court might think best.”
Holder v. Martinez Gutierrez, 132 S. Ct. 2011, 2017 (2012) (citing
Chevron, 467 U.S. at 843-44 & n.11). Because I believe that
Section 401 is ambiguous and that the Reclassification Rule
constitutes a permissible interpretation of this statutory provision, I
must respectfully dissent.
1
“Section 401 refers to subsection (d) in its entirety” (which
includes subsection (d)(10)), expressly requires the Secretary to
treat a Section 401 hospital as being located in the rural area (as
defined in subsection (d)(2)(D)) of the State in which the hospital
is located, and, in the process, “uses mandatory language” (i.e.,
provides that the Secretary “shall” treat the hospital as being
located in a rural area). (Id. at 21.) Even if Section 401
unambiguously requires that a Section 401 hospital be treated as
though it were a hospital located in a rural area for purposes of
subsection (d)(10), it does not follow that this statutory provision
unambiguously requires the Secretary and the Board to consider
applications filed by Section 401 hospitals under the same exact
criteria the Secretary adopted to govern reclassification
applications filed by hospitals physically located in rural areas.
I agree with the District Court (as well as the United States
District Court for the District of Connecticut) that Section 401 is
silent as to whether hospitals reclassified as rural under Section
401 must be considered eligible for Board reclassification pursuant
2
to subsection (d)(10).1 See Lawrence & Mem’l Hosp. v. Burwell,
Civ. No. 3:13cv1495 (JBA), 2014 WL 7338859, at *6 (D. Conn.
Dec. 22, 2014); Geisinger Cmty. Med. Ctr. v. Burwell, --- F. Supp.
3d ---, 2014 WL 7338751, at *8 (M.D. Pa. 2014); Lawrence &
Mem’l Hosp. v. Burwell, 986 F. Supp. 2d 124, 135 (D. Conn. Dec.
6, 2013). Section 401 does not expressly address the specific
criteria that must be satisfied in order to obtain Board
reclassification. Even though it contains mandatory language, this
statutory provision does not expressly direct the Secretary or the
Board to treat Section 401 hospitals exactly the same as hospitals
physically located in rural areas as part of the Board
reclassification process. In fact, the provision does not address the
Board reclassification process at all—nor does it take into account
the intersection or relationship between Board reclassification
1
It appears that, although the Reclassification Rule
was promulgated in 2000, only two lawsuits have been filed
(to date) challenging the lawfulness of this rule. In addition
to the current proceeding filed by Geisinger in 2014,
Lawrence & Memorial Hospital commenced an action in the
District of Connecticut in 2013 attacking the Reclassification
Rule as unlawful under the terms of Section 401. The
Lawrence & Memorial Hospital court initially denied the
hospital’s motion for a preliminary injunction (enjoining
defendants from acting on its application for Board
reclassification under subsection (d)(10) until the district
court could hold a hearing on the merits of its action). See
Lawrence & Mem’l Hosp., 986 F. Supp. 2d at 127-38. It
subsequently granted summary judgment in favor of the
defendants. See Lawrence & Mem’l Hosp., 2014 WL
7338859, at *1-*10. Lawrence & Memorial Hospital’s
appeal is currently pending before the Second Circuit.
3
under subsection (d)(10), on the one hand, and Section 401
reclassification, on the other hand.
According to the majority, the District Court and Appellees
have read ambiguity into the statute based on what it does not say,
as opposed to what it plainly says. However, “what it does not
say” (id. at 17) is of special significance here given Congress’s
creation of two reclassification mechanisms. Both Section 401 and
subsection (d)(10) effectively serve as exceptions to the general
principle that a hospital’s reimbursement is tied to its physical
location. Does Section 401 unambiguously grant hospitals like
Geisinger the right “to take advantage of both reclassification
procedures almost simultaneously, piling exception on top of
exception”—and to do so under the same Board reclassification
standards that otherwise apply to hospitals physically located in
rural areas? (Appellees’ Brief at 25.) Given the statutory silence,
the answer to this question must be “No.” According to Appellees,
Section 401 could reasonably be read as a directive for the
Secretary to treat Section 401 hospitals as rural for all purposes,
thereby prohibiting any further reclassification under subsection
(d)(10). While this may not be the best reading of the statutory
provision, the majority goes too far by claiming that it is contrary
to the plain and natural reading of this provision. After all, Section
401 broadly applies to subsection (d) and states, inter alia, that the
Secretary “shall treat” the hospital as being located in the “rural”
area of the State. Congress, in any event, left what could only be
considered a “‘gap’” between two distinct reclassification
mechanisms, which the Secretary attempted “‘to fill’” by adopting
the Reclassification Rule. Santomenno, 768 F.3d at 299 (citation
omitted). In fact, Congress delegated to the Secretary broad
4
discretionary authority over the Board reclassification process.2
Subsection (d)(10)(D)(i) provides that “[t]he Secretary shall
publish guidelines to be utilized by the Board in rendering
decisions on applications submitted under this paragraph.” The
majority acknowledges that “the Secretary is unquestionably
authorized to issue guidelines regarding Board reclassification,
e.g., to design the proximity standards for urban versus rural
hospitals,” but it underestimates the scope and significance of this
delegation of authority. (Majority Opinion at 20.) This Court has
recognized that Congress established the Board to pass on
applications for reclassification “according to certain standards and
guidelines” and then “gave the Secretary the authority to formulate
the guidelines to be used by the [Board].” Robert Wood Johnson
Univ. Hosp. v. Thompson, 297 F.3d 273, 276 (3d Cir. 2002) (citing
subsection (d)(10)(D) and 42 C.F.R. § 412.230 et seq.); see also,
e.g., Athens Comty. Hosp., Inc. v. Shalala, 21 F.3d 1176, 1179
(D.C. Cir. 1994) (indicating that Congress delegated to Secretary
authority to determine degree to which Board’s discretion should
2
I further note that the majority also relies on what
Section 401 “does not say” at several points in its opinion.
(See Majority Opinion at 17 (“If the phrase was not intended
to cover subsection (d)(10), contrary to the literal reading of
the text, then Congress would have noted which paragraphs
of subsection (d) were specifically excluded or included.”),
19 (“Section 401 does not say that we cannot reclassify the
Section 401 hospital as urban.”), 20-21 (“Rather, Section
401’s mandate that the Secretary shall treat Section 401
hospitals as rural without adding any discretionary language
as Congress used in subsection (d)(10) and elsewhere in
Section 401 itself, lends itself to the opposite conclusion.”
(citations omitted)).
5
be limited); Universal Health Servs. of McAllen, Inc. v. Sullivan,
770 F. Supp. 704, 716-17 (D.D.C. 1991) (explaining that Congress
intended to grant Secretary power to establish substantive criteria
for Board reclassification), aff’d mem., 978 F.2d 745 (D.C. Cir.
1992). “The broad deference of Chevron is even more appropriate
in cases that involve a ‘complex and highly technical regulatory
program,’ such as Medicare, which ‘require[s] significant expertise
and entail[s] the exercise of judgment grounded in policy
concerns.’” Robert Wood Johnson, 297 F.3d at 282 (quoting
Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994)); see
also, e.g., Universal Health Servs., 770 F. Supp. at 718 (“Judicial
deference is particularly appropriate because the Secretary’s
obligation to promulgate reclassification guidelines involves an
‘“accommodation of conflicting policies that were committed to
the agency’s care by statute, . . .”’ [Chevron, 467 U.S. at 845]
(citations omitted). As previously discussed, the Secretary’s duty
to ensure budget neutrality is at odds with his duty to reclassify
hospitals so that they may receive increased Medicare
reimbursement. The Secretary, as sole administrator of the
Medicare Act, is in a unique position to evaluate and reconcile the
competing policy concerns within the Medicare program.”).
Most of the substantive standards or criteria that the Board
uses to dispose of reclassification applications are set forth in the
Secretary’s own regulations. Congress did expressly direct the
Secretary to include guidelines for, inter alia, “comparing wages”
in the area in which the hospital is classified and the area in which
the hospital is applying to be classified. § 1395ww(d)(10)(D)(i)(I).
It also specified that the guidelines shall provide for the Board to
base any comparison of the “average hourly wage” on the average
of the AHW in the most recently published data and such amount
from each of the two immediately preceding surveys. §
1395ww(d)(10)(D)(vi). “Under the guidelines published by the
Secretary under clause (i), in the case of a hospital which has ever
6
been classified by the Secretary as a rural referral center under
paragraph (5)(C), the Board may not reject the application of the
hospital under this paragraph on the basis of any comparison
between the average hourly wage of the hospital and the average
hourly wage of hospitals in the area in which it is located.” §
1395ww(d)(10)(D)(iii). In turn, it was the Secretary—and not
Congress—that then adopted the specific criteria that a hospital
must meet, i.e., a basic proximity requirement as well as standards
for comparing the hospital’s AHW with the AHW of other
hospitals located in the area in which the hospital is located and
with the AHW of hospitals in the area to which it seeks to
reclassify. See, e.g., Universal Health Servs., 770 F. Supp. at 706-
22 (rejecting challenge to Secretary’s proximity requirement). It
was also the Secretary that chose to treat urban and rural hospitals
differently for purposes of these criteria by, among other things,
specifying disparate proximity criteria for urban and rural
hospitals. I note that subsection (d)(10) does not even use the
terms “urban hospital,” “hospital located in an urban area,” or
“rural hospital.” Although it does refer to RRCs, the subsection
expressly mentions “hospitals located in a rural area” only once,
and it does so to specify that two Board members shall be
representatives of such hospitals. § 1395ww(d)(10)(B)(i).
The majority appears to suggest that this delegation of
authority is entitled to little, if any weight, in the current inquiry
because it was set forth in subsection (d)(10)—and not Section
401. According to the majority, “Section 401’s mandate that the
Secretary shall treat Section 401 hospitals as rural without adding
any discretionary language as Congress used in subsection (d)(10)
and elsewhere in Section 401 itself lends itself to the opposite
conclusion [that the Secretary is not “authorized to disregard the
plain language of Section 401”].” (Id. at 20-21 (citations
omitted).) As the majority recognized, we nevertheless must read
the language of a statutory provision in its broader context. See,
7
e.g., FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120,
132-33 (2000).
Section 401 itself purportedly amends subsection (d)(10)
(which was enacted ten years earlier). It is this subsection (and not
Section 401) that establishes the Board and grants the Secretary the
power to develop guidelines for the Board. It is reasonable to
conclude that Congress believed there was no need to add
additional language expressly granting the Secretary power to
adopt regulations regarding the eligibility of Section 401 hospitals
for Board reclassification (and the criteria to be used in assessing
their applications for Board reclassification) because Congress had
already delegated to the Secretary broad discretionary authority
over the entire Board reclassification process. In subsection
(d)(10)(D)(iii), Congress expressly prohibited the Secretary from
adopting any guideline allowing the Board to reject an application
filed by a hospital that has at any time been classified as an RRC
on the basis of a comparison of its AHW to the AHW of hospitals
in the area in which it is located. Congress similarly could have
amended subsection (d)(10) to add, for instance, language directing
the Secretary to publish a guideline requiring the Board to consider
applications filed by Section 401 hospitals under the same exact
criteria that govern reclassification applications filed by hospitals
physically located in rural areas. It did not do so, and I find that
this fact strongly weighs against the majority’s conclusion that
Congress unambiguously expressed its intent that the Secretary
shall treat Section 401 hospitals as rural for Board reclassification
purposes. (Cf., e.g., id. at 20-21 (“‘[W]here Congress includes
particular language in one section of a statute but omits it from
another, it is generally presumed that Congress acts intentionally
and purposefully in the disparate inclusion or exclusion.’ Russello
v. United States, 464 U.S. 16, 23 (1983) (alteration in original)
(internal quotation marks omitted).”).)
8
Because I conclude that Congress has not “directly spoken
to the precise question at issue” in this case, Chevron, 467 U.S. at
842-43, I must consider whether the Reclassification Rule
constitutes a permissible construction of Section 401. Given the
statutory ambiguity, it was the Secretary’s task—exercising the
broad discretionary authority granted under subsection (d)(10)—to
attempt to fill the gap that exists between two reclassification
mechanisms. See, e.g., Santomenno, 768 F.3d at 299. It is then
our obligation to decide whether this “‘interpretation is reasonable
in light of the language, policies, and legislative history’” of
Section 401 and the statutory scheme as a whole. United States v.
McGee, 763 F.3d 304, 315 (3d Cir. 2014) (quoting GenOn REMA,
LLC v. EPA, 722 F.3d 513, 522 (3d Cir. 2013), cert. denied, 135 S.
Ct. 1402 (2015). In light of the fact that Chevron deference is
especially appropriate in the Medicare context, see, e.g., Robert
Wood Johnson, 297 F.3d at 282, I believe that the Reclassification
Rule satisfies Chevron Step Two.
As the District Court aptly pointed out in its ruling, “[i]t
cannot be said that the Secretary’s regulation, which was
promulgated to avoid permitting a hospital to be treated as rural for
some purposes and as urban for others allowing the hospital to
receive inappropriate reimbursements, was unreasonable, even if
the plaintiff can point to other reasonable policy choices.”
Geisinger, 2014 WL 7338751, at *11. In the respective preambles
to the proposed and final rules implementing Section 401, the
Secretary addressed the statutory language, identified her primary
concern about this legislation (e.g., that hospitals physically
located in urban areas might try to take advantage of Section 401
by obtaining reclassification under this statutory provision and the
various benefits accorded to rural hospitals and then seek
reclassification under subsection (d)(10) back to urban areas for
standardized amount and wage index purposes), explained why
such a result would be inappropriate, and considered but rejected
9
alternative approaches. Medicare Program; Changes to the
Hospital Inpatient Prospective Payment Systems & Fiscal Year
2001 Rates, 65 Fed. Reg. 47,054, 47,087-89 (Aug. 1, 2000);
Medicare Program; Changes to the Hospital Inpatient Prospective
Payment Systems & Fiscal Year 2001 Rates, 65 Fed. Reg. 26,282,
26,308 (May 5, 2000); see also, e.g., Lawrence & Mem’l Hosp.,
2014 WL 7338859, at *8 (“[T]he record shows that the Secretary’s
decision was deliberate, logical, and considered.”). She expressly
addressed the Conference Report accompanying Section 401. 65
Fed. Reg. at 47,087-89; 65 Fed. Reg. at 26,308. By stating that the
Section 401 hospitals shall be eligible for Board reclassification
and that “[t]he Board shall regard such hospitals as rural,” the
report does weigh in favor of Geisinger’s reading of this statutory
provision. H.R. Conf. Rep. No. 106-479, 512 (1999). However,
this report (which did not mention subsection (d)(10)’s delegation
of authority to the Secretary and did not expressly consider the
potential problems that could arise from the existence of two
distinct reclassification mechanisms) is insufficient to establish
that Congress would never have sanctioned the Secretary’s
Reclassification Rule. See, e.g., Chevron, 467 U.S. at 845. In the
end, the Secretary appropriately exercised the power she was
granted by Congress so as to reconcile the distinct reclassification
mechanisms created by Congress.
For the foregoing reasons, I would affirm the order of the
District Court granting Appellees’ motion for summary judgment.
10