United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 11, 2011 Decided September 13, 2011
No. 10-5163
NORTHEAST HOSPITAL CORPORATION,
APPELLEE
v.
KATHLEEN SEBELIUS, SECRETARY, UNITED STATES
DEPARTMENT OF HEALTH AND HUMAN SERVICES,
APPELLANT
Appeal from the United States District Court
for the District of Columbia
(No. 1:09-cv-00180)
Stephanie R. Marcus, Attorney, U.S. Department of
Justice, argued the cause for appellant. On the briefs were
Ronald C. Machen Jr., U.S. Attorney, Anthony J. Steinmeyer,
Assistant Director, and Jeffrica Jenkins Lee, Attorney.
Christopher L. Keough argued the cause for appellee.
With him on the brief were J. Harold Richards and John M.
Faust.
John R. Jacob was on the brief for amicus curiae HCA,
Inc., in support of appellee.
2
Before: GARLAND, GRIFFITH, and KAVANAUGH, Circuit
Judges.
Opinion for the Court filed by Circuit Judge GRIFFITH.
Opinion concurring in the judgment filed by Circuit
Judge KAVANAUGH.
GRIFFITH, Circuit Judge: In a 2008 administrative appeal,
the Secretary of Health and Human Services ruled that a
Medicare beneficiary enrolled in Medicare Part C still
qualifies as a person “entitled to benefits” under Medicare
Part A. As a result, Beverly Hospital in Beverly,
Massachusetts, received a smaller reimbursement from the
Secretary for services it provided to low-income Medicare
beneficiaries during fiscal years 1999-2002. The district court
granted summary judgment for Beverly on the ground that the
Secretary’s interpretation violates the plain language of the
Medicare statute. We conclude that the statute does not
unambiguously foreclose the Secretary’s interpretation. We
nonetheless affirm the district court on the alternative ground
that the Secretary must be held to the interpretation that
guided her approach to reimbursement calculations during
fiscal years 1999-2002, an interpretation that differs from the
view she now advances. Under her previous approach, the
hospital would have prevailed on its claim for a larger
reimbursement.
I
A
The federal Medicare program reimburses medical
providers for services they supply to eligible patients. See
generally 42 U.S.C. § 1395 et seq. The Medicare statute is
divided into five “Parts,” four of which are relevant here. Part
3
A covers medical services furnished by hospitals and other
institutional care providers. See id. §§ 1395c to 1395i-5. The
Secretary makes payments under Part A directly to “providers
of services,” such as hospitals, rather than to managed care
organizations, such as health maintenance organizations
(HMOs). See id. §§ 1395f(a)-(b), 1395x(u). Part B is an
optional supplemental insurance program that pays for
medical items and services not covered by Part A, including
outpatient physician services, clinical laboratory tests, and
durable medical equipment. See id. §§ 1395j to 1395w-4.
Anyone covered by Part A may purchase Part B insurance by
paying a monthly premium. See id. §§ 1395j, 1395o.
Part C governs the “Medicare + Choice” (M+C) program,
which gives Medicare beneficiaries an alternative to the
traditional Part A fee-for-service system. See id. §§ 1395w-21
to 1395w-29. Under M+C, an individual may enroll with an
HMO, preferred provider organization, or other private
“managed care” plan. If a person enrolls in an M+C plan, the
Secretary makes payments to the plan “instead of the amounts
which (in the absence of the [M+C] contract) would otherwise
be payable [to the provider] under [P]arts A and B,” id.
§ 1395w-21(i)(1), and the plan in turn negotiates payment
with the provider. Because M+C enrollees must purchase Part
B coverage, see id. § 1395w-21(a)(3)(A), they tend to be
wealthier than individuals who receive care under Part A. Part
D, which is not relevant to this case, provides a prescription
drug benefit program. See id. §§ 1395w-101 to 1395w-152.
Part E sets out various “Miscellaneous Provisions,” one
of which is the Prospective Payment System (PPS) for
reimbursing Part A inpatient hospital services. See id.
§ 1395ww(d). Under the PPS, Medicare reimburses a hospital
for services based on prospectively determined national and
regional rates rather than on the actual amount the hospital
4
spends. See id. § 1395ww(d)(1)-(4). The PPS also provides
for payment adjustments based on various hospital-specific
factors. One such adjustment is the “disproportionate share
hospital” (DSH) adjustment, under which the Secretary pays
more for services provided by hospitals that “serve[] a
significantly disproportionate number of low-income
patients.” Id. § 1395ww(d)(5)(F)(i)(I).
Whether a hospital qualifies for a Medicare DSH
adjustment, and the amount of the adjustment the hospital
receives, depends on the hospital’s “disproportionate patient
percentage.” Id. § 1395ww(d)(5)(F)(v)-(vii). This percentage
is a “proxy measure” for the number of low-income patients a
hospital serves, H.R. REP. NO. 99-241, pt. 1, at 17 (1985), and
represents the sum of two fractions, commonly called the
“Medicare fraction” and the “Medicaid fraction.” The
Medicare fraction is:
[T]he fraction (expressed as a percentage), the numerator
of which is the number of such hospital’s patient days for
such period which were made up of patients who (for
such days) were entitled to benefits under [Medicare]
Part A . . . and were entitled to supplementary security
income [SSI] benefits . . . and the denominator of which
is the number of such hospital’s patient days for such
fiscal year which were made up of patients who (for such
days) were entitled to benefits under [Medicare] Part
A....
Id. § 1395ww(d)(5)(F)(vi)(I). The Medicaid fraction is:
[T]he fraction (expressed as a percentage), the numerator
of which 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 a State
[Medicaid] plan . . . but who were not entitled to benefits
5
under [Medicare] Part A . . . and the denominator of
which is the total number of the hospital’s patient days
for such period.
Id. § 1395ww(d)(5)(F)(vi)(II). Here is a visual representation
of the two fractions:
Medicare Fraction Medicaid Fraction
Numerator Patient days for patients Patient days for patients
“entitled to benefits “eligible for
under Part A” and [Medicaid]” but not
“entitled to SSI “entitled to benefits
benefits” under Part A”
Denominator Patient days for patients “Total number of
“entitled to benefits patient days”
under Part A”
A “fiscal intermediary,” typically a private insurance
company acting as the Secretary’s agent, calculates DSH
adjustments. See 42 C.F.R. §§ 421.1, 421.3, 421.100-.128. If a
hospital is dissatisfied with the intermediary’s determination,
it may appeal to the Provider Reimbursement Review Board
(PRRB), an administrative body appointed by the Secretary.
See 42 U.S.C. § 1395oo(a), (h). The PRRB may affirm,
modify, or reverse the fiscal intermediary’s award; the
Secretary in turn may affirm, modify, or reverse the PRRB’s
decision. See id. § 1395oo(d)-(f).
B
Northeast Hospital Corporation owns and operates
Beverly Hospital, a Medicare provider in Beverly,
Massachusetts. For fiscal years 1999-2002, the fiscal
6
intermediary excluded Beverly’s M+C patient days from the
numerator of the Medicaid fraction.
Northeast appealed to the PRRB, arguing that M+C
patients eligible for Medicaid should be counted in the
numerator of the Medicaid fraction because they are not
“entitled to benefits” under Part A. Northeast claimed it was
owed an additional $737,419 in Medicare payments as a result
of the intermediary’s improper calculation. The PRRB ruled
against Northeast, holding that under the statute and
implementing regulations, M+C patient days should not be
counted in the Medicaid fraction because M+C beneficiaries
remain “entitled to benefits under Part A” even after electing
Part C. Beverly Hosp. v. BlueCross BlueShield Ass’n, PRRB
Dec. No. 2008-D37, 2008 WL 7256679, at *4 (Sept. 23,
2008), reprinted in Medicare & Medicaid Guide (CCH)
¶ 82,112. The Secretary affirmed the PRRB’s ruling. Beverly
Hosp. v. BlueCross BlueShield Ass’n, Review of PRRB Dec.
No. 2008-D37, 2008 WL 6468518 (Nov. 21, 2008), reprinted
in Medicare & Medicaid Guide (CCH) ¶ 82,207.
Northeast filed suit in the district court challenging the
Secretary’s decision. In an opinion issued on March 30, 2010,
the district court granted summary judgment for Northeast.1
Ne. Hosp. Corp. v. Sebelius, 699 F. Supp. 2d 81 (D.D.C.
2010). In the district court’s view, under the plain language of
the statute, M+C patients eligible for Medicaid must be
counted in the Medicaid fraction because M+C beneficiaries
are no longer “entitled to benefits under Part A” once they
elect Part C. Id. at 93. Counting M+C patients in the Medicaid
fraction increases the size of the fraction and, in Northeast’s
case, the amount of the reimbursement to which it is entitled
1
The district court also granted summary judgment for the
Secretary on several issues not relevant to the present appeal.
7
for its care of low-income patients. We have jurisdiction over
the Secretary’s appeal under 28 U.S.C. § 1291.
II
We review a grant of summary judgment de novo,
viewing the evidence in the light most favorable to the
nonmoving party and drawing all reasonable inferences in the
nonmoving party’s favor. Geleta v. Gray, 645 F.3d 408, 410
(D.C. Cir. 2011). We review the Secretary’s interpretation of
the DSH provision, 42 U.S.C. § 1395ww(d)(5)(F)(vi), under
Chevron U.S.A. Inc. v. Natural Resources Defense Council,
Inc., 467 U.S. 837 (1984). The Chevron inquiry has two steps.
First, “we ask if the statute unambiguously forecloses the
agency’s interpretation.” Nat’l Cable & Telecomm. Ass’n v.
FCC, 567 F.3d 659, 663 (D.C. Cir. 2009). If it does, we
“disregard the agency’s view and ‘give effect to the
unambiguously expressed intent of Congress.’” Id. (quoting
Chevron, 467 U.S. at 843). If, however, “the statute is
ambiguous enough to permit the agency’s reading,” we defer
to the agency’s interpretation “so long as it is reasonable.” Id.
The key interpretive question in this case is whether a
person enrolled in an M+C plan is still “entitled to benefits
under Part A.” The Secretary says yes. Northeast argues that
this interpretation is contrary to the plain language of the
statute, is unreasonable, and in any case cannot be applied to
Beverly’s 1999-2002 DSH adjustments because during those
years the Secretary took the position that M+C enrollees are
not “entitled to benefits under Part A.”
Before proceeding, it may be helpful to explain how the
Secretary’s interpretation results in lower DSH payments. If
an M+C patient is entitled to benefits under Part A (the
Secretary’s interpretation), then his hospital days are counted
in both the numerator of the Medicare fraction, if he is
8
entitled to SSI, and the denominator of that fraction. At the
same time, the patient’s days are not counted in the numerator
of the Medicaid fraction, but are counted in the denominator
of that fraction. If, on the other hand, an M+C patient is not
entitled to benefits under Part A (Northeast’s interpretation),
then the patient’s hospital days are not counted in either the
numerator or the denominator of the Medicare fraction, but
are counted in both the numerator of the Medicaid fraction, if
he is eligible for Medicaid, and the denominator of that
fraction.
Consider first the Medicare fraction. Including M+C
patient days in the numerator and denominator of the fraction
(the Secretary’s interpretation) dilutes the fraction because
M+C enrollees are less likely to qualify for SSI benefits than
non–M+C enrollees. This is because to qualify for Part C a
person must first purchase Part B coverage. See 42 U.S.C.
§ 1395w-21(a)(3)(A). That is, to qualify for Part C a person
must have the means to afford Part B premiums. If M+C
enrollees are less likely to qualify for SSI benefits than non–
M+C enrollees, adopting the Secretary’s interpretation and
counting M+C patients among patients “entitled to benefits
under Part A” reduces the percentage of patients entitled to
benefits under Part A who also qualify for SSI. Northeast’s
interpretation has the opposite effect.
Consider now the Medicaid fraction. Adopting the
Secretary’s interpretation and counting M+C patients among
patients “entitled to benefits under Part A” decreases the
numerator of the fraction (all patients “eligible for
[Medicaid]” but not “entitled to benefits under Part A”) and
has no effect on the denominator (“total number of
patient[s]”), diluting the fraction. Northeast’s interpretation
again has the opposite effect. In sum, then, the Secretary’s
interpretation decreases the DSH adjustment that hospitals
receive, while Northeast’s interpretation has the opposite
9
effect. Nationwide, the practical consequences of this dispute
number in the hundreds of millions of dollars.
A
At Chevron step one we ask whether Congress has
unambiguously foreclosed the Secretary’s interpretation that
M+C enrollees are “entitled to benefits under Part A.” We
conclude Congress has not, because numerous provisions in
the Balanced Budget Act of 1997, Pub. L. No. 105-33, 111
Stat. 251, which enacted M+C, as well as subsequent
amendments to Part C, assume that a person enrolled in M+C
remains entitled to benefits under Part A, and nothing in the
text or structure of the DSH fractions compels a different
result.2
The Secretary argues that the phrase “entitled to benefits
under Part A” applies to all individuals who meet the statutory
criteria in 42 U.S.C. § 426(a) and (b) for receiving “hospital
insurance benefits under Part A.” Under § 426(a), “[e]very
individual who . . . has attained age 65” and “is entitled to
monthly [Social Security benefits]” is “entitled to hospital
insurance benefits under Part A.” Under § 426(b), every
2
Our concurring colleague thinks our criticism of the district
court’s reasoning unnecessary in light of our conclusion that the
Secretary cannot retroactively apply her interpretation to pre-2004
DSH calculations, Concurring Op. 7 n.3, but we commonly say
why the district court erred before affirming on other grounds, see,
e.g., Ginger v. District of Columbia, 527 F.3d 1340, 1344-45 (D.C.
Cir. 2008); Kingman Park Civic Ass’n v. Williams, 348 F.3d 1033,
1041 (D.C. Cir. 2003); Gatewood v. Wash. Healthcare Corp., 933
F.2d 1037, 1040-41 (D.C. Cir. 1991). And considerations of
judicial economy counsel strongly in favor of doing so here, where
the district court is likely to confront the same difficult statutory
interpretation question again in the near future.
10
individual under the age of 65 who meets certain disability,
marital, or other criteria is similarly “entitled to hospital
insurance benefits under Part A.” According to the Secretary,
M+C enrollees are a subset of these two groups, because to be
eligible for Part C a person must first be entitled to benefits
under Part A, see 42 U.S.C. § 1395w-21(a)(3)(A), and
enrolling in Part C does not affect one’s age, marital status, or
ability to work. Thus, by definition M+C enrollees must be
entitled to benefits under Part A.
Northeast counters that M+C enrollees cannot be
“entitled” to benefits under Part A, because once a person
enrolls in M+C, payments on his behalf are made under Part
C, not Part A. Northeast points to three provisions. First,
§ 426(c)(1) states that “entitlement of an individual to hospital
insurance benefits for a month [under Part A] shall consist of
entitlement to have payment made under, and subject to the
limitations in, [P]art A . . . on his behalf for inpatient hospital
services” (emphasis added). See also id. § 1395d(a) (“The
benefits provided to an individual by the insurance program
under [Part A] shall consist of entitlement to have payment
made on his behalf . . . for . . . inpatient hospital
services . . . .” (emphasis added)). Second, § 1395w-21(a)(1),
which was enacted as part of the original 1997 Act, states that
persons eligible for Part C are “entitled to elect to receive
benefits” either “through the original [M]edicare fee-for-
service program under [P]arts A and B . . . or . . . through
enrollment in a Medicare + Choice plan under [Part C]”
(emphasis added). Third, § 1395w-21(i)(1), another 1997 Act
provision, specifies that once a person enrolls in an M+C
plan, Medicare payments to the plan “shall be instead of the
amounts which (in the absence of the [M+C] contract) would
otherwise be payable [to the provider] under [P]arts A and B”
(emphasis added).
11
Northeast’s logic is straightforward: “there is only one
benefit provided under [P]art A,” and that benefit is “the right
to have payment made under [P]art A.” Appellee’s Br. 21. But
individuals who enroll in an M+C plan do not receive benefits
under Part A; rather, they receive benefits under Part C.
According to Northeast, then, M+C enrollees cannot possibly
be “entitled” to benefits under Part A, because they can no
longer even receive benefits under Part A. Rather, they can
only receive benefits under Part C. See 42 U.S.C. § 1395w-
21(a)(1), (i)(1). Northeast’s argument rests on the statute’s
plain meaning: a hospital patient is not “entitled” to benefits
that the law denies him.
The trouble with Northeast’s reasoning, however, is that
elsewhere the 1997 Act assumes that a person who enrolls in
an M+C plan is still “entitled to benefits under Part A.” See
FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120,
133 (2000) (“It is a ‘fundamental canon of statutory
construction that the words of a statute must be read in their
context and with a view to their place in the overall statutory
scheme.’” (quoting Davis v. Mich. Dep’t of Treasury, 489
U.S. 803, 809 (1989))). Section 1395w-21(a)(3)(A) states that
a “Medicare + Choice eligible individual” is a person “who is
entitled to benefits under [P]art A” and “enrolled under [P]art
B.” Under Northeast’s reasoning, once a person elects Part C
he is no longer “eligible” for Part C, because he is no longer
“entitled to benefits under Part A” (because payments on his
behalf are no longer made under Part A). Aside from the
textual incongruity that would result from saying that once a
person enrolls in Part C he is no longer “eligible” for it,
neighboring Part C provisions make clear that a person
remains a “Medicare + Choice eligible individual” even after
enrolling in Part C.
12
Section 1395w-21(d)(2)(A), for instance, requires the
Secretary to mail “each Medicare + Choice eligible
individual” information about available Part C plans,
including “[a] list identifying the Medicare + Choice plans
that are (or will be) available to residents of the area,” before
the start of each annual open enrollment period. If M+C
enrollees are no longer “eligible” for Part C once they enroll,
this means the Secretary is not required to mail them this
information, even though the purpose of the open enrollment
period is to allow beneficiaries to change plans.
Our concurring colleague suggests it would not be
strange at all if the Secretary did not have to mail Part C plan
information to M+C enrollees, presumably because M+C
enrollees already know about their Part C options. Concurring
Op. 8. But Part C options change every year, which is
undoubtedly why the Act requires the Secretary to update the
information she sends out annually “to reflect changes in the
availability of [M+C] plans and the benefits and . . .
premiums for such plans.” 42 U.S.C. § 1395w-21(d)(2)(D).
Contrary to the concurrence’s suggestion, then, it would be
odd indeed if the Secretary were required to mail information
to individuals not enrolled in Part C but not required to mail
such information to persons who are enrolled in Part C. After
all, M+C enrollees are the people most likely to be interested
in annual changes to benefits and plan availability. That a
neighboring provision also requires the Secretary to “provide
for activities [that] broadly disseminate” information about
Part C coverage options to Medicare beneficiaries, id.
§ 1395w-21(d)(1), does not eliminate the oddity Northeast’s
interpretation produces. “Broadly disseminating” information
about Part C options is not the same as mailing plan
information to every M+C enrollee, and if it were, § 1395w-
13
21(d)(2)’s mail-notification requirement would be
superfluous.3
Northeast’s interpretation would also produce the
anomalous result that an M+C plan must provide general plan
information “upon request” to non–M+C enrollees, but need
not provide such information upon request to persons enrolled
with a different M+C plan. See id. § 1395w-22(c)(2)
(requiring “Medicare + Choice organization[s]” to provide
“general coverage information and general comparative plan
information” to “Medicare + Choice eligible individual[s]”
upon request). But an M+C enrollee looking to change plans
is likely to be just as interested in learning about his options
as someone looking to join an M+C plan for the first time. It
would make no sense for Congress to require plans to provide
information upon request to the one but not the other, but that
is the result Northeast’s interpretation produces.
The concurrence says we claim that under Northeast’s
interpretation M+C enrollees “would not be able to obtain
plan information from their Part C plans,” and then points out
a separate provision that requires plans to provide information
3
The concurrence also argues that relying on the open-season
notice provision to interpret the term “entitled to benefits under Part
A” amounts to “using a very small tail to wag a very large dog.”
Concurring Op. 8. But as discussed infra, that is not the only
provision that assumes a person who enrolls in Part C remains
entitled to benefits under Part A. See also 42 U.S.C. § 1395w-
21(a)(3)(A), (e)(2)(D), (h)(1); id. § 1395w-22(a)(7), (c)(2); id.
§ 1395w-23(o)(3)(B)(ii); id. § 1395w-24(e)(1)(B), (e)(4)(B); id.
§ 1395w-27(e); id. § 1395w-27a(f)(4)(A). And in any event, given
that this case requires us to determine the relationship between
enrollment in Part C and entitlement to Part A benefits, it makes
sense to consider how that relationship plays out in other
provisions.
14
to their own enrollees. Concurring Op. 9 (citing 42 U.S.C.
§ 1395w-22(c)(1)). This is a straw man. The problem with
Northeast’s interpretation is not that it would excuse M+C
plans from providing information to their own enrollees.
Rather, the problem is that it would require plans to provide
information upon request to individuals not enrolled in M+C
at all but not require plans to provide this information to
individuals enrolled in M+C with a different plan. There is no
reason why Congress would require plans to provide
information to the former but not the latter.
Another provision that becomes odd under Northeast’s
interpretation is § 1395w-21(h)(1), which prohibits M+C
plans from distributing marketing materials to “Medicare +
Choice eligible individuals” unless the plans first submit the
materials to the Secretary for review. Under Northeast’s
reading of the statute, plans would be unable to send
unreviewed marketing materials to non–M+C enrollees but
free to send such materials to individuals already in an M+C
plan, because those individuals would no longer be
“Medicare + Choice eligible individuals.” This would make
little sense: M+C enrollees are no less vulnerable to
misleading marketing campaigns than individuals not enrolled
in Part C.
Our concurring colleague says he finds nothing odd with
requiring M+C plans to submit marketing materials to the
Secretary for review before sending such materials to
Medicare beneficiaries not enrolled in Part C. Concurring Op.
9. Nor do we: § 1395w-21(h)(1) requires as much. What we
do find odd, however, is a provision that prohibits plans from
sending unreviewed marketing materials to individuals not
enrolled in M+C but permits them to send those same
materials to M+C enrollees. The concurrence does not offer
15
any reason why Congress would treat enrollees and non-
enrollees differently here, and we can think of none.
Last but not least are 42 U.S.C. § 1395w-24(e)(1)(B) and
(e)(4)(B).4 These provisions limit the average premiums,
deductibles, and copayments M+C enrollees pay for certain
benefits to the average amounts “individuals entitled to
benefits under [P]art A . . . and enrolled under [P]art B”
would pay for those same benefits “if they were not members
of a Medicare + Choice organization for the year.” These
provisions assume it is possible to be both entitled to benefits
under Part A and enrolled in an M+C plan.
Other Part C provisions enacted after the original 1997
Act also assume that a person who enrolls in an M+C plan is
still “entitled to benefits under Part A.” Although “[l]ater laws
that do not seek to clarify an earlier enacted general term and
do not depend for their effectiveness [on] . . . a change in the
meaning of the earlier statute” are normally “beside the
point,” United States v. Monzel, 641 F.3d 528, 536 (D.C. Cir.
2011) (quoting Gutierrez v. Ada, 528 U.S. 250, 257-58
(2000)) (internal quotation marks omitted), we find
subsequently enacted Part C provisions relevant in this case
because they inform the relationship between Part C
4
Our concurring colleague makes much of the fact that we
mention several provisions the Secretary did not cite in her briefs.
See Concurring Op. 9-11. “Under Chevron’s first step, however, we
have a duty to conduct an ‘independent examination’ of the statute
in question, looking not only ‘to the particular statutory language at
issue,’ but also to ‘the language and design of the statute as a
whole,’” including provisions “not relied on” by the parties.
Martini v. Fed. Nat’l Mortg. Ass’n, 178 F.3d 1336, 1345-46 (D.C.
Cir. 1999) (quoting N.Y. Shipping Ass’n v. Fed. Maritime Comm’n,
854 F.2d 1338, 1355 (D.C. Cir. 1988); K Mart Corp. v. Cartier,
Inc., 486 U.S. 281, 291 (1988)) (internal citations omitted).
16
enrollment and Part A entitlement, see Branch v. Smith, 538
U.S. 254, 281 (2003) (plurality opinion) (“[I]t is, of course,
the most rudimentary rule of statutory construction . . . that
courts do not interpret statutes in isolation, but in the context
of the corpus juris of which they are a part, including later-
enacted statutes . . . .”); see also Almendarez-Torres v. United
States, 523 U.S. 224, 269-70 (1998) (Scalia, J., dissenting)
(arguing that Congress’s “expressed understanding” of what a
phrase means “is surely evidence that it is fairly possible to
read the provision that way” (internal quotation marks
omitted)); Griffith v. Lanier, 521 F.3d 398, 402 (D.C. Cir.
2008) (“[W]e read a body of statutes addressing the same
subject matter in pari materia . . . including later-enacted
statutes as well.”). And these subsequently enacted provisions
confirm that “entitled to benefits under Part A” is a term of art
that can encompass M+C enrollees.
Section 1395w-21(e)(2)(D), for example, provides that an
institutionalized “Medicare + Choice eligible individual” may
“change the Medicare + Choice plan in which the individual
is enrolled.” The provision assumes that a person may enroll
in an M+C plan and yet still remain a “Medicare + Choice
eligible individual.” But under Northeast’s reasoning an M+C
enrollee could never be a “Medicare + Choice eligible
individual,” because he is no longer entitled to benefits under
Part A.
Our concurring colleague responds by arguing that
Northeast’s interpretation would still allow institutionalized
M+C enrollees to switch plans. Concurring Op. 10. But this
response misses the point. The problem is not that Northeast’s
interpretation would prevent institutionalized M+C enrollees
from changing plans, but rather that § 1395w-21(e)(2)(D)
describes a person who is both “enrolled” in an M+C plan and
17
a “Medicare + Choice eligible individual,” a combination the
concurrence says is impossible.
Another provision that assumes an individual who enrolls
in Part C may remain a “Medicare + Choice eligible
individual” is § 1395w-23(o)(3)(B)(ii), which defines the term
“qualifying county” for purposes of an annual benchmark
computation as, inter alia, a county in which “at least 25
percent” of “[Medicare + Choice] eligible individuals” were
“enrolled in [M+C] plans” for the year. Like § 1395w-
21(e)(2)(D), this provision clearly contemplates that a person
may be both “eligible” for and “enrolled” in Part C, but under
Northeast’s interpretation that could never be the case.
Two more provisions relevant to this point are
§§ 1396d(p)(1) and 1395w-22(a)(7).5 Section 1396d(p)(1)
provides that a person “entitled to hospital insurance benefits
under [P]art A” who meets certain income requirements is a
“qualified [M]edicare beneficiary,” while § 1395w-22(a)(7)
instructs that a “qualified [M]edicare beneficiary . . . who is
enrolled in a specialized [M+C] plan for special needs
individuals” may not be charged costs above a certain
amount. Read together, these provisions expressly
contemplate a person who is both “entitled to benefits under
Part A” and enrolled in Part C, something Northeast says is
impossible.
The concurrence’s response to this analysis again misses
the point. The problem is not, as the concurrence suggests,
that Northeast’s interpretation would cause Medicare rather
than Medicaid to pay for low-income M+C enrollees. See
5
Section 1396d(p)(1) is not located in Part C of the Medicare
statute, but is relevant here because it defines a key term in
§ 1395w-22(a)(7), which is located in Part C of the Medicare
statute.
18
Concurring Op. 10. Rather, the problem is that these two
provisions, when read together, describe a person who is
simultaneously enrolled in an M+C plan and entitled to
benefits under Part A, something Northeast’s interpretation
does not allow.
Yet another provision that makes no sense under
Northeast’s interpretation is § 1395w-27(e), which authorizes
the Secretary to charge fees to M+C plans to help recoup the
costs of distributing information about Part C options, among
other things. See 42 U.S.C. § 1395w-27(e)(2)(B). For fiscal
years 2001-2005, such fees could not exceed “the Medicare +
Choice portion (as defined in [§ 1395w-27(e)(2)(E)]) of
$100,000,000.” Id. § 1395w-27(e)(2)(D)(ii)(IV). That
paragraph, in turn, defines “Medicare + Choice portion” as
“(i) the average number of individuals enrolled in Medicare +
Choice plans during the fiscal year,” divided by “(ii) the
average number of individuals entitled to benefits under [P]art
A . . . and enrolled under [P]art B . . . during the fiscal year.”
Under Northeast’s interpretation, if more than 50 percent of
individuals eligible to enroll in Part C do so, then this fraction
exceeds a value of 1, because Northeast’s interpretation
deletes M+C enrollees from the denominator (because under
Northeast’s interpretation M+C enrollees are no longer
entitled to benefits under Part A). Let’s plug in some
numbers. Suppose there are 50 million people entitled to
benefits under Part A and enrolled in Part B (and thus eligible
to enroll in Part C), and 30 million of them enroll in Part C.
The fraction would then equal: 30 million / (50 million – 30
million) = 30 million / 20 million = 1.5. That would in turn
make the “Medicare + Choice portion of $100,000,000”
equal: $100,000,000 * 1.5 = $150,000,000. Obviously the
“Medicare + Choice portion” of a dollar amount cannot equal
19
a sum greater than the original dollar amount. Here again,
Northeast’s interpretation leads to a nonsensical result.6
Rather than attempting to show why the fraction still
works under Northeast’s interpretation, our concurring
colleague instead raises a red herring. How can we say
Northeast’s interpretation produces a nonsensical result for
this fraction for fiscal years 2001-2005, he asks, when we also
hold that the Secretary must apply Northeast’s interpretation
to pre-2004 DSH calculations to avoid retroactivity problems?
See Concurring Op. 11. But the issue before us is not whether
the Secretary acted reasonably before 2004, when she may
have interpreted “entitled to benefits under Part A” to include
M+C enrollees under § 1395w-27(e)(2)(E) but to exclude
those enrollees in the DSH calculations, and we express no
opinion as to whether interpreting that phrase inconsistently
would be permissible. Compare IBP, Inc. v. Alvarez, 546 U.S.
21, 34 (2005) (“[I]dentical words used in different parts of the
same statute are generally presumed to have the same
meaning.”), with Envtl. Def. v. Duke Energy Corp., 549 U.S.
561, 574 (2007) (“[T]he ‘natural presumption that identical
words used in different parts of the same act are intended to
have the same meaning . . . is not rigid and readily yields
whenever there is such variation in the connection in which
the words are used as reasonably to warrant the conclusion
that they were employed in different parts of the act with
6
Under the Secretary’s interpretation, however, the fraction
works perfectly because a person entitled to benefits under Part A
does not lose that entitlement when he enrolls in Part C. That is, the
denominator of the fraction is unaffected by enrollments in Part C.
Suppose again that there are 50 million people eligible to enroll in
Part C and 30 million of them do. The fraction would then equal: 30
million / 50 million = .6. That would in turn make the “Medicare +
Choice” portion of $100,000,000 equal: $100,000,00 * .6 =
$60,000,000.
20
different intent.’” (quoting Atl. Cleaners & Dyers, Inc. v.
United States, 286 U.S. 427, 433 (1932))). Here, we need
only say that § 1395w-27(e)(2)(E) shows that the Medicare
statute sometimes uses the phrase “entitled to benefits under
Part A” in a way that encompasses M+C enrollees, which
supports our conclusion that the statute does not
unambiguously foreclose the Secretary’s current
interpretation. Whether the Secretary can enforce that
interpretation against Northeast for the period before 2004 is a
separate question that we address below.
Finally, § 1395w-27a(f)(4)(A) instructs the Secretary to
determine annually a “statutory national market share
percentage” that equals “the proportion of [Medicare +
Choice] eligible individuals nationally who were not enrolled
in an [M+C] plan.” If M+C enrollees are not entitled to
benefits under Part A and thus not “Medicare + Choice
eligible individuals,” then the proportion of “Medicare +
Choice eligible individuals” not enrolled in an M+C plan is
always 100 percent. Surely Congress did not mean to tell the
Secretary to annually calculate a number that is always equal
to 1. Northeast’s interpretation makes this provision nonsense.
We are thus faced with two inconsistent sets of statutory
provisions. Northeast points us to provisions that tie
entitlement to payment and state that once a person enrolls in
Part C, payments are no longer made under Part A. The
Secretary points us to other provisions that assume it is
possible to be both entitled to benefits under Part A and
enrolled in Part C. Under these circumstances, we conclude
that the Medicare statute does not unambiguously foreclose
the Secretary’s interpretation.
Nothing about the DSH provision itself compels a
different result. Our concurring colleague emphasizes that the
21
DSH fractions “require[] HHS to focus retrospectively on
specific patient days.” Concurring Op. 3; see 42 U.S.C.
§ 1395ww(d)(5)(F)(vi)(I) (counting “patient days . . . which
were made up of patients who (for such days) were entitled to
benefits under [P]art A”); id. § 1395ww(d)(5)(F)(vi)(II)
(counting “patient days . . . which consist of patients who (for
such days) were eligible for medical assistance under a State
[Medicaid] plan . . . but who were not entitled to benefits
under [P]art A”). But this does not prove that Congress
unambiguously intended “entitled” to mean “paid.” Moreover,
the fractions’ focus on specific patient days works perfectly
well under the Secretary’s view that “entitled” means
“meeting the statutory criteria in § 426(a) and (b).” Not every
patient who meets the criteria in those paragraphs during
some portion of his hospital stay will meet those criteria for
all of the stay. For instance, a person who collects Social
Security and who turns 65 during his hospital stay will
become “entitled” to benefits under Part A on his sixty-fifth
birthday. See 42 U.S.C. § 426(a). Or, a person under age 65
who reaches his twenty-fifth calendar month of entitlement to
disability benefits under § 423 during his hospital stay will
become “entitled” to benefits under Part A upon reaching his
twenty-fifth month of disability entitlement. See id. § 426(b).
That Congress tied the DSH calculation to individual days of
entitlement does not foreclose the Secretary’s interpretation.
Nor is the fact that the DSH fractions speak of
“eligibility” for Medicaid but “entitlement” to Medicare
enlightening. See id. § 1395ww(d)(5)(F)(vi)(II) (stating that
the numerator of the Medicaid fraction “consist[s] of” patients
“eligible” for Medicaid but not “entitled” to benefits under
Part A). Northeast argues that Congress’s disparate use of
these two words indicates it intended “entitled” to mean
something different from “eligible” and that the Secretary’s
interpretation of “entitled” as “meeting the statutory criteria
22
for entitlement” conflates the terms. See Pillsbury v. United
Eng’g Co., 342 U.S. 197, 199 (1952) (identifying
presumption that Congress means different things when it
uses different words, especially when “the two words are used
in the same sentence”).
But the Secretary’s interpretation does not actually
collapse the terms. Section 1395i-2(a) provides that
individuals who have reached age 65, are enrolled in Part B,
and are lawful U.S. residents but are “not otherwise entitled to
benefits” under Part A, “shall be eligible to enroll in the
insurance program established by [Part A].” Similarly,
§ 1395i-2a(a) provides that individuals who have not reached
age 65 and are not “otherwise entitled to benefits” under Part
A but who meet certain other criteria “shall be eligible to
enroll” in Part A. Both provisions further specify that after
such persons enroll in Part A they become “entitled to
benefits” under Part A during their period of enrollment. See
42 U.S.C. §§ 1395i-2(a), 1395i-2a(c)(1). Thus, even under the
Secretary’s view that “entitled to benefits” means “meeting
the statutory criteria for entitlement to benefits,” it is possible
to be “eligible” for, but not “entitled” to, Part A benefits
because one has not yet “enrolled” in the program.
Moreover, the usual rule that Congress intends different
meanings when it uses different words has little weight here.
As Judges Luttig and Batchelder both recognized in an earlier
line of DSH cases, “Congress has, throughout the various
Medicare and Medicaid statutory provisions, consistently
used the words ‘eligible’ to refer to potential Medicaid
beneficiaries and ‘entitled’ to refer to potential Medicare
beneficiaries for no reason whatever that anyone (including
the Secretary, who is intimately familiar with the statutes . . .)
has been able to divine.” Cabell Huntington Hosp., Inc. v.
Shalala, 101 F.3d 984, 992 (4th Cir. 1996) (Luttig, J.,
23
dissenting); see also Jewish Hosp., Inc. v. Sec’y of Health &
Human Servs., 19 F.3d 270, 278 (6th Cir. 1994) (Batchelder,
J., dissenting).7 To the extent Congress was merely borrowing
7
In this earlier line of DSH cases, four circuits concluded that
the terms “eligible” and “entitled” as used in the DSH provision
carry different meanings. See Cabell Huntington Hosp., 101 F.3d at
988 (majority opinion) (“Congress chose the word entitled for the
Medicare proxy and the word eligible for the Medicaid proxy.
Congress’ use of separate words demonstrates it intended for each
to have a separate meaning.”); see also Legacy Emanuel Hosp. &
Health Ctr. v. Shalala, 97 F.3d 1261, 1265 (9th Cir. 1996);
Deaconess Health Servs. Corp. v. Shalala, 83 F.3d 1041, 1041 (8th
Cir. 1996) (per curiam); Jewish Hosp., 19 F.3d at 275 (majority
opinion). Indeed, not only did these circuits conclude that the terms
carry different meanings, but they also interpreted “entitled to
benefits” to mean that a person has a right to have payment made.
See Jewish Hosp., 19 F.3d at 275 (“To be entitled to some benefit
means that one possesses the right or title to that benefit. Thus, the
Medicare [fraction] fixes the calculation upon the absolute right to
receive an independent and readily defined payment.”); see also
Legacy Emanuel Hosp., 97 F.3d at 1265; cf. Cabell Huntington
Hosp., 101 F.3d at 988. We decline to follow these cases for three
reasons. First, the meaning of the phrase “entitled to benefits under
Part A” was not directly at issue in any of the cases. Rather, the
issue was whether the Secretary had properly interpreted the phrase
“eligible for [Medicaid]” to include only patient days that were
actually paid by a state Medicaid plan, an interpretation the
Secretary abandoned in 1997. Health Care Fin. Admin. Ruling 97-2
(Feb. 27, 1997). The interpretations of “entitled to benefits” in these
cases were therefore dicta. Second, the cases were all decided
before Part C was enacted and so spoke of entitlement to payment
under Medicare generally without reference to the particular “Part”
under which payment would occur. Third, the cases failed to
grapple with Judge Luttig’s and Judge Batchelder’s observations
that Congress has, for no readily apparent reason, chosen to use the
word “eligible” for Medicaid beneficiaries and “entitled” for
Medicare beneficiaries.
24
these terms from elsewhere in the statute, it would be a
mistake to read too much into the difference in nomenclature.
The terms might carry different meanings here, but the
inference is weak.
Given the Medicare statute’s inconsistent and specialized
use of the phrase “entitled to benefits under Part A,” the
concurrence’s appeal to “[c]ommon parlance” has little force.
Concurring Op. 7. Although a typical M+C enrollee might not
describe himself as “entitled to benefits under Part A,” a
person familiar with the Medicare statute’s varying and
inconsistent uses of that phrase might. Statutes “addressed to
specialists . . . must be read by judges with the minds of
specialists,” Felix Frankfurter, Some Reflections on the
Reading of Statutes, 47 COLUM. L. REV. 527, 536 (1947), and
few provisions are more specialized than the ones at issue
here, which the Fourth Circuit once described as “among the
most completely impenetrable texts within human
experience,” Rehab. Ass’n of Va. v. Kozlowski, 42 F.3d 1444,
1450 (4th Cir. 1994).
In sum, Congress has not clearly foreclosed the
Secretary’s interpretation that M+C enrollees are entitled to
benefits under Part A. Rather, it has left a statutory gap, and it
is for the Secretary, not the court, to fill that gap. See
Catawba Cnty., N.C. v. EPA, 571 F.3d 20, 35 (D.C. Cir. 2009)
(per curiam).
B
At Chevron step two we ask whether the agency’s
interpretation of the statute is “reasonable.” Abington Crest
Nursing & Rehab. Ctr. v. Sebelius, 575 F.3d 717, 719 (D.C.
Cir. 2009). In this case, however, we do not reach that
question, because even if the Secretary’s present
25
interpretation is reasonable, it cannot be applied retroactively
to fiscal years 1999-2002.
It is well settled that an agency may not promulgate a
retroactive rule absent express congressional authorization.
See Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208
(1988). Rulemaking, moreover, “includes not only the
agency’s process of formulating a rule, but also the agency’s
process of modifying a rule.” Alaska Prof’l Hunters Ass’n v.
FAA, 177 F.3d 1030, 1034 (D.C. Cir. 1999); see also 5 U.S.C.
§ 551(5) (“‘[R]ule making’ means agency process for
formulating, amending, or repealing a rule[.]”); Paralyzed
Veterans of Am. v. D.C. Arena L.P., 117 F.3d 579, 586 (D.C.
Cir. 1997) (“Under the APA, agencies are obliged to engage
in notice and comment before formulating regulations, which
applies as well to ‘repeals’ or ‘amendments.’” (emphasis
omitted)). Thus, the rule against retroactive rulemaking
applies just as much to amendments to rules as to original
rules themselves.
To determine whether a rule is impermissibly retroactive,
“we first look to see whether it effects a substantive change
from the agency’s prior regulation or practice.” Nat’l Mining
Ass’n v. Dep’t of Labor, 292 F.3d 849, 860 (D.C. Cir. 2002).
If the rule departs from established practice, we then examine
its impact, if any, on the legal consequences of prior conduct.
A rule that “alter[s] the past legal consequences of past
actions” is retroactive; a rule that alters only the “future
effect” of past actions, in contrast, is not. Mobile Relay
Assocs. v. FCC, 457 F.3d 1, 11 (D.C. Cir. 2006) (quoting
Bowen, 488 U.S. at 219 (Scalia, J., concurring)) (internal
quotation marks omitted). Put differently, “[i]f a new rule is
‘substantively inconsistent’ with a prior agency practice and
attaches new legal consequences to events completed before
26
its enactment, it operates retroactively.” Arkema Inc. v. EPA,
618 F.3d 1, 7 (D.C. Cir. 2010).
The Secretary’s present interpretation stems from a 2004
rulemaking in which she said she was “adopting a policy” of
counting M+C days in the Medicare fraction because M+C
enrollees “are still, in some sense, entitled to benefits
under . . . Part A.” 69 Fed. Reg. 48,916, 49,099 (Aug. 11,
2004). Accordingly, the Secretary revised 42 C.F.R.
§ 412.106, the HHS regulation that governs calculation of
DSH fractions, to state expressly that M+C patient days
should be counted in the Medicare fraction.8 See 42 C.F.R.
§ 412.106(b)(2) (2007) (providing that a hospital’s Medicare
fraction is determined by dividing “the number of patient
days . . . furnished to patients who . . . were entitled to both
Medicare Part A (or Medicare Advantage (Part C)) and SSI”
by “the total number of days . . . furnished to patients entitled
to Medicare Part A (or Medicare Advantage (Part C))”). Prior
to 2004, the regulation did not specify where M+C enrollees
should be counted. See id. § 412.106(b)(2) (2003) (providing
that a hospital’s Medicare fraction is determined by dividing
“the number of covered patient days . . . furnished to patients
who . . . were entitled to both Medicare Part A and SSI” by
“the total number of patient days . . . furnished to patients
entitled to Medicare Part A”).
The Secretary argues that just because she amended
§ 412.106 to state explicitly that M+C days should be counted
in the Medicare fraction does not mean she omitted M+C
days prior to the amendment. See Baptist Mem’l Hosp.–
Golden Triangle v. Sebelius, 566 F.3d 226, 229 (D.C. Cir.
8
Because of a clerical error, the text of § 412.106 was not
actually revised until 2007. See 72 Fed. Reg. 47,130, 47,384 (Aug.
22, 2007) (explaining that the failure to change the text in 2004 was
“inadvertent[]”).
27
2009) (“[W]hen a legislative or executive body adopts a new
clarifying law or rule, it does not necessarily follow that an
earlier version did not have the same meaning.”). Rather, she
says, the amendment merely confirmed her longstanding view
that M+C days should be included in the Medicare fraction
because M+C enrollees are still “entitled to benefits under
Part A.”
A brief look at the Secretary’s treatment of M+C days
prior to 2004, however, belies her claim that the revision to
§ 412.106 codified a longstanding policy. In two recent PRRB
hearings, providers submitted evidence based on hundreds of
cost reports from numerous hospitals that between 1999 and
2004, the Secretary routinely excluded M+C days from the
Medicare fraction. See Sw. Consulting DSH Medicare +
Choice Days Grps. v. BlueCross BlueShield Ass’n, PRRB
Dec. No. 2010-D52, 2010 WL 4211391, at *12 (Sept. 30,
2010), reprinted in Medicare & Medicaid Guide (CCH)
¶ 82,679 (reviewing evidence that from 1999 to 2004, the
Secretary “never count[ed] M+C days in the [Medicare]
fraction except rarely, and then by mistake”), rev’d, Review
of PRRB Dec. No. 2010-D52, 2010 WL 5571037 (Nov. 22,
2010), reprinted in Medicare & Medicaid Guide (CCH)
¶ 82,703; see also Sw. Consulting DSH SSI Grp. Appeals v.
BlueCross BlueShield Ass’n, PRRB Dec. No. 2010-D48, 2010
WL 4211376, at *9 (Sept. 24, 2010), reprinted in Medicare &
Medicaid Guide (CCH) ¶ 82,675. The intermediary did not
challenge the evidence in either hearing, see Sw. Consulting
DSH Medicare + Choice, 2010 WL 4211391, at *12; Sw.
Consulting DSH SSI, 2010 WL 4211376, at *10, and the
PRRB expressly stated in its decision on the second hearing
that it “[found] the evidence persuasive that [the Secretary’s]
actual practice was to not count the M+C days in the
[Medicare] fraction prior to 2004,” Sw. Consulting DSH
Medicare + Choice, 2010 WL 4211391, at *12.
28
Moreover, in 1998, the year after Congress enacted M+C,
the Secretary instructed non-teaching hospitals not to file “no-
pay” bills for services furnished to M+C patients. See
Program Memorandum (Intermediaries), HCFA Pub. 60A,
Transmittal No. A-98-21 (July 1, 1998). According to
Northeast, the Secretary needs these bills to count M+C days
in the Medicare fraction, and the Secretary does not claim
otherwise. Perhaps for this reason, in 2007 the Secretary
reversed course and directed all hospitals to begin submitting
“no-pay” bills for M+C patients. Change Request 5647, CMS
Pub. 100-04, Transmittal No. 1331 (July 20, 2007). It further
appears that prior to 2004, the Secretary was not even using
the data field for managed care days in the program file for
calculating Medicare fractions. See Baystate Med. Ctr. v. Mut.
of Omaha Ins. Co., PRRB Dec. No. 2006-D20, 2006 WL
752453, at *31 (Mar. 17, 2006), reprinted in Medicare &
Medicaid Guide (CCH) ¶ 81,468 (“[HHS’s hospital inpatient
database] programmer . . . testified that the field on [the
database] for HMO days ‘hasn’t been used since the time that
I started running the [database in 1995].’”). According to the
PRRB, this means such days “could not have been included in
the [Medicare] fraction in any case, even if a no-pay bill had
been submitted.” Id.
The Secretary admits that she routinely failed to count
M+C patient days in the Medicare fraction prior to 2004, but
attributes this failure to “errors in [HHS’s] data systems” that
she says have now been resolved. Reply Br. 26. Thus, she
claims, “the failure to count the days was not intentional, and
[hence] not consistent with any alleged prior policy.” Id. at
27. The Secretary’s explanation is not convincing. As just
described, in 1998 she instructed non-teaching hospitals not to
submit information that she needed to count M+C days in the
Medicare fraction, and between at least 1995 and 2004 she
did not even use the managed care field in the hospital
29
inpatient database. The failure to count M+C days in the
Medicare fraction was not the result of data system errors.
Aside from the Secretary’s actual treatment of M+C days,
her statements in the 2004 rulemaking and in a subsequent
2007 technical revision confirm that she changed her
interpretation of the DSH provision in 2004. As noted above,
in the 2004 rulemaking she announced that she was “adopting
a policy” of counting M+C days in the Medicare fraction. 69
Fed. Reg. at 49,099. And in a 2007 technical revision to
§ 412.106 that made changes she had inadvertently omitted
three years earlier, she called her 2004 decision to include
M+C days in the Medicare fraction a “policy change.” 72 Fed.
Reg. 47,130, 47,384 (Aug. 22, 2007).
The Secretary does not even attempt to reconcile these
statements with her claim that her present position is
“longstanding.” Rather, she points to a 1990 rulemaking in
which she stated that “HMO” days should be counted in the
Medicare fraction. See 55 Fed. Reg. 35,990, 35,994 (Sept. 4,
1990) (“Based on the language of [§ 1395ww(d)(5)(F)(vi)],
which states that the disproportionate share adjustment
computation should include ‘patients who were entitled to
benefits under Part A,’ we believe it is appropriate to include
the days associated with Medicare patients who receive care
at a qualified HMO. . . . Therefore, since [December 1987],
we have been including HMO days in [the Medicare]
percentage.”). Prior to enactment of M+C in 1997, Medicare
payments to HMOs were governed under § 1395mm, which
provided for two types of contracts: (1) “cost” contracts,
under which the Secretary reimbursed an HMO for its
reasonable costs; and (2) “risk” contracts, under which the
Secretary made fixed monthly payments to the HMO. 42
U.S.C. § 1395mm(a), (g), (h); see also 42 C.F.R. §§ 417.530-
.576 (cost contracts), 417.580-.598 (risk contracts). As with
30
M+C, Medicare payments for HMO patients went to the
managed care plan, which then paid the provider, rather than
to the provider directly. See 42 U.S.C. § 1395mm(a)(6)
(“Subject to [certain exceptions] . . . if an individual is
enrolled under this section with an eligible organization
having a risk-sharing contract, only the eligible organization
shall be entitled to receive payments from the Secretary under
this subchapter for services furnished to the individual.”).
The Secretary argues that the 1990 rulemaking shows she
has long interpreted the Medicare fraction to include managed
care days and has never limited the calculation to
reimbursements paid directly to hospitals under Part A.
Again, however, her actual practice belies this claim. At least
as early as 1995, she was not using the managed care field in
the program file for calculating Medicare fractions, making it
impossible to count HMO days in the Medicare fraction. See
Baystate Med. Ctr., 2006 WL 752453, at *31. Moreover, even
if the 1990 rulemaking accurately reflected the Secretary’s
policy regarding § 1395mm HMO days, M+C was not
enacted until 1997. See Balanced Budget Act § 4001, 111
Stat. at 275-327 (codified at 42 U.S.C. § 1395w-21 et seq.).
Any support the 1990 rulemaking provides the Secretary’s
argument is thus indirect at best. This contrasts with the
evidence about the Secretary’s treatment of M+C days during
the fiscal years in dispute.
In light of the foregoing, it is apparent that the
Secretary’s decision to apply her present interpretation of the
DSH statute to fiscal years 1999-2002 violates the rule against
retroactive rulemaking. The Secretary’s interpretation, as set
forth in the 2004 rulemaking and resulting amendment to
§ 412.106, contradicts her former practice of excluding M+C
days from the Medicare fraction. Moreover, the amendment
attaches new legal consequences to hospitals’ treatment of
31
low-income patients during the relevant time period.
Hospitals that serve a disproportionately large number of such
patients receive a statutorily mandated “additional payment”
from the Secretary, 42 U.S.C. § 1395ww(d)(5)(F)(i), and
whether a particular hospital qualifies for this payment, and
the size of the payment the hospital receives, depends on the
hospital’s DSH fractions. Any rule that alters the method for
calculating those fractions, therefore, changes the legal
consequences of treating low-income patients.
We are aware of no statute that authorizes the Secretary
to promulgate retroactive rules for DSH calculations. Absent
such authorization, the Secretary’s present interpretation,
which marks a substantive departure from her prior practice
of excluding M+C days from the Medicare fraction, may not
be retroactively applied to fiscal years 1999-2002.
C
We are puzzled by the concurrence’s suggestion that we
have “twisted [ourselves] into a knot” by holding, on the one
hand, that the DSH provision does not unambiguously
foreclose the Secretary’s interpretation that M+C enrollees are
entitled to benefits under Part A, while also holding, on the
other hand, that the Secretary cannot retroactively apply her
interpretation to pre-2004 DSH calculations. Concurring Op.
13. The concurrence points out that none of the problems we
identify above surfaced while the Secretary took the view
Northeast now urges. But the Secretary avoided those
problems by reading the phrase “entitled to benefits under
Part A” to mean different things in different places. See 63
Fed. Reg. 34,968, 34,979 (June 26, 1998) (describing
Secretary’s practice of interpreting “entitled” to mean
different things in different provisions). How the Secretary
read other provisions before 2004 is not before us, and is
32
irrelevant to the disposition in this case. We express no
opinion as to whether the Secretary must read the phrase
“entitled to benefits under Part A” to always mean the same
thing throughout the Medicare statute. For present purposes, it
is enough to conclude that other provisions of the Medicare
statute make clear that the phrase sometimes includes M+C
enrollees and that nothing in the DSH provision compels a
different result.
III
As we conclude our analysis, a passage from Learned
Hand lamenting the complexity of another regulatory
behemoth—the Internal Revenue Code—comes to mind:
I know that these [provisions] are the result of fabulous
industry and ingenuity . . . yet at times I cannot help
recalling a saying of William James about certain
passages of Hegel: that they were no doubt written with a
passion of rationality; but that one cannot help wondering
whether to the reader they have any significance save that
the words are strung together with syntactical
correctness. Much of the law is now as difficult to
fathom, and more and more of it is likely to be so; for
there is little doubt that we are entering a period of
increasingly detailed regulation, and it will be the duty of
judges to thread the path . . . through these fantastic
labyrinths.
Learned Hand, In Memoriam: Thomas Walter Swan, 57 YALE
L.J. 167, 169 (1947). Having wound our way through the
intricate tangle of DSH fractions, Medicare + Choice
requirements, and more, we hold that Congress has not
unambiguously foreclosed the Secretary’s interpretation that
M+C enrollees are entitled to benefits under Part A. But we
also hold that the Secretary’s present interpretation, even if it
33
would pass Chevron step two (an issue upon which we do not
opine), may not be retroactively applied to Beverly’s 1999-
2002 DSH adjustments. We affirm the district court’s grant of
summary judgment for Northeast for this second reason.
So ordered.
KAVANAUGH, Circuit Judge, concurring in the judgment:
Although the legal question presented here is embedded
within a very complex legal scheme and has significant
financial ramifications, the question itself is straightforward:
If a hospital patient receives Medicare benefits under
Medicare Part C for a particular “patient day,” is that patient
also “entitled” for that same “patient day” to Medicare
benefits under Medicare Part A? In my view, the text of the
Medicare statute tells us the answer is no. I agree with the
careful analysis by Judge Bates in the District Court:
Medicare beneficiaries must choose between government-
subsidized private insurance plans under Part C and
government-administered insurance under Part A, and after
they choose, they are obviously not entitled on the same
“patient day” to benefits from both kinds of plans. HHS
rejected that interpretation of the text and, as a result,
significantly undercompensated Beverly Hospital (and many
other hospitals) for the costs of treating Medicare patients.
Because HHS misapplied the statute, I would rule for Beverly
Hospital and affirm the judgment of the District Court on that
ground.
I
Through the Medicare program, the Federal Government
provides health insurance to, among others, Americans who
are 65 or older. Medicare has several “parts,” two of which
are central to this case: Part A provides hospitalization
benefits through government-administered fee-for-service
hospital insurance, and Part C (previously called
“Medicare+Choice” and now called “Medicare Advantage”)
provides government-subsidized enrollment in private
insurance plans.
The Department of Health and Human Services manages
Medicare Part A by paying hospitals a pre-determined sum for
2
each covered inpatient hospitalization service, without regard
to the actual cost incurred by the hospitals. HHS is required
by statute to disburse extra Part A funds to hospitals that serve
a “significantly disproportionate number of low-income
patients.” 42 U.S.C. § 1395ww(d)(5)(F)(i)(I). The theory is
that, for a variety of reasons, it costs hospitals more to treat
significant numbers of low-income patients, and hospitals that
do so should therefore receive higher reimbursements. A
statutory provision known as the “disproportionate share
hospital adjustment” provides a convoluted (to put it
charitably) formula for calculating how much extra money
HHS must pay to hospitals that disproportionately serve the
poor. The formula is designed to measure the proportion of
low-income patients at a given hospital for a particular cost-
reporting period.
Without delving into too much numbing detail, it suffices
here to say that the statutory calculation relevant to this case
requires a determination for each hospital of the number of
patient days “made up of patients who (for such days) were
entitled to benefits under part A of [Medicare].” 42 U.S.C.
§ 1395ww(d)(5)(F)(vi)(I).
Beverly Hospital treated a disproportionately high
number of low-income patients during fiscal years 1999
through 2002, and therefore was due to receive extra
payments for doing so. The Hospital challenges HHS’s
calculation of those payments. The Hospital contends that
HHS, when applying the formula, improperly counted patients
enrolled in Medicare Part C as patients “entitled to benefits
under part A,” even though Medicare Part C recipients do not
receive benefits under Part A. According to the Hospital,
HHS’s misinterpretation of that component of the statutory
formula caused the agency to undercompensate the Hospital.
3
This case boils down to a straightforward question of
statutory interpretation: If a person is enrolled in and receives
hospitalization benefits for a particular “patient day” through a
Medicare+Choice plan pursuant to Part C of Medicare, is that
person also “entitled” for that same “patient day” to
hospitalization “benefits under part A” of Medicare? In other
words, can a patient be both enrolled in Part C and entitled to
Part A benefits for the same day? The answer is no.
Four mutually reinforcing textual points support that
conclusion.
First, the language of the key statutory provision requires
HHS to focus retrospectively on specific patient days. To
reiterate, the statute requires HHS to calculate the number of
patient days “made up of patients who (for such days) were
entitled to benefits under part A.” 42 U.S.C.
§ 1395ww(d)(5)(F)(vi)(I) (emphasis added). The words “for
such days” in the statute make clear that HHS must count
specific hospital days for patients who, on those specific days,
were entitled to Part A benefits. The word “were” makes
clear that this is a backward-looking calculation designed to
determine what kind of benefits a specific patient received on
a specific day. The statute requires HHS to isolate hospital
days attributable to patients who were, on those days,
receiving benefit payments through Part A of Medicare. A
patient who is receiving benefits under Part A for a given day
cannot also receive benefits under Part C for that day.
Therefore, in calculating the formula, HHS is required to
differentiate Part-C-attributable patient days from Part-A-
attributable patient days.
Second, the Medicare statute establishes that “each
Medicare+Choice eligible individual . . . is entitled to elect to
receive benefits . . . through the original [M]edicare fee-for-
4
service program under parts A and B . . . , or . . . through
enrollment in a Medicare+Choice plan under [part C].” 42
U.S.C. § 1395w-21(a)(1) (emphasis added). In other words, a
Medicare recipient makes a choice between the different parts
of Medicare for purposes of obtaining Medicare coverage.
The statute indicates that a patient cannot be enrolled in Part
A and Part C at the same time. Once the Medicare recipient
chooses a part and enrolls, he or she becomes entitled to
benefits under that part, and only under that part. Even
though a Part-C-enrolled patient maintains the right to cancel
enrollment in Part C and switch to Part A (or vice versa) in a
future open enrollment period, on any given day the patient is
entitled to hospitalization benefits under only the part of
Medicare in which he or she is currently enrolled. A
Medicare patient enrolled in Part C on a particular day is
therefore entitled to receive benefits under Part C, and not
under Part A, for that day. Similarly, a Medicare patient
enrolled in Part A on a particular day is entitled to receive
benefits under Part A, and not under Part C, for that day.
Third, the Medicare statute provides that “payments
under a contract with a Medicare+Choice organization . . .
with respect to an individual electing a Medicare+Choice plan
offered by the organization shall be instead of the amounts
which (in the absence of the contract) would otherwise be
payable under [Medicare] parts A and B.” 42 U.S.C.
§ 1395w-21(i)(1) (emphasis added). All Part C enrollees
could, if they chose, be enrolled in Part A instead. Section
1395w-21(i)(1) establishes that HHS makes benefit payments
under Part C instead of payments the agency would otherwise
make under Part A, and that Part C enrollees receive Part C
benefit payments instead of Part A benefit payments. As a
result, a patient enrolled in Part C on a particular day does not
receive benefit payments under Part A for that day.
5
Fourth, the Medicare statute defines “entitlement” to Part
A benefits as follows: “entitlement of an individual to
[Medicare part A] benefits for a month shall consist of
entitlement to have payment made under, and subject to the
limitations in, [Medicare] part A . . . during such month.” 42
U.S.C. § 426(c)(1). In other words, “entitlement” is not just
an abstract ability to sign up for Part A or Part C. Rather, it is
entitlement to have payment made, and a patient at any given
time can have payment made under Part A or Part C but not
both. Put another way, a Medicare patient enrolled in a Part C
plan does not have the right “to have payment made under,
and subject to the limitations in, [Medicare] part A.” 1
That interpretation of “entitlement” as meaning
entitlement to be paid is consistent, moreover, with the
decisions of the four courts of appeals that have previously
interpreted that term in this formula. See Cabell Huntington
Hosp. v. Shalala, 101 F.3d 984 (4th Cir. 1996); Legacy
Emanuel Hosp. & Health Ctr. v. Shalala, 97 F.3d 1261 (9th
Cir. 1996); Deaconess Health Svcs. Corp. v. Shalala, 83 F.3d
1041 (8th Cir. 1996); Jewish Hosp. v. Sec’y of HHS, 19 F.3d
1
HHS rejects this interpretation of the word “entitled” in the
phrase “entitled to benefits under part A,” but accepts the same
interpretation in the phrase “entitled to supplemental security
income benefits,” even though both phrases are found in the same
sentence of the statute. See 42 U.S.C. § 1395ww(d)(5)(F)(vi)(I)
(“patients who (for such days) were entitled to benefits under part
A . . . and were entitled to supplemental security income benefits”);
75 Fed. Reg. 50,042, 50,280-81 (Aug. 16, 2010) (patients are
“entitled” to SSI benefits only when they actually receive SSI
payments). HHS thus interprets the word “entitled” differently
within the same sentence of the statute. The only thing that unifies
the Government’s inconsistent definitions of this term is its
apparent policy of paying out as little money as possible. I
appreciate the desire for frugality, but not in derogation of law.
6
270 (6th Cir. 1994). 2 As the Sixth Circuit explained in the
first of this line of cases, to be “entitled” to some benefit
means that “one possesses the right or title to that benefit.”
Jewish Hosp., 19 F.3d at 275 (emphasis omitted). The phrase
“entitled to benefits under part A” thus “fixes the calculation
upon the absolute right to receive an independent and readily
defined payment.” Id. (emphasis omitted); see also Legacy
Emanuel, 97 F.3d at 1265 (“Both parties agree that the
Medicare proxy only counts patient days paid by Medicare.”);
cf. Cabell Huntington, 101 F.3d at 988 (“a patient who is
‘eligible’ for Medicaid becomes ‘entitled’ to payment only
after using one of the covered medical services”).
Although it’s not binding on HHS, a recent decision of
HHS’s own Provider Reimbursement Review Board also
persuasively supports the Hospital’s interpretation here. In a
straightforward opinion, the Board reasoned that “once an
individual has enrolled in a Medicare+Choice plan under part
C, he or she is no longer ‘entitled to benefits under part A,’
because he or she is no longer entitled to have payment made
under part A for the days at issue.” Southwest Consulting
DSH Medicare+Choice Day Groups v. BlueCross BlueShield
Ass’n NHIC Corp., PRRB Dec. No. 2010-D52 at 12, reprinted
in Medicare & Medicaid Guide (CCH) ¶ 82,679 (Sept. 30,
2010), rev’d, CMS Adm’r Dec. (Nov. 22, 2010).
And of course, it is quite telling that, until 2004, HHS
itself interpreted the statute as the Hospital does here. In
2004, HHS abruptly changed course, apparently because of an
overriding desire to squeeze the amount of money paid to
2
Those courts were focused on a different phrase in the statute
– “eligible for” Medicaid rather than “entitled to” Medicare – but
had occasion to discuss the meaning of “entitled to” Medicare as
contrasted with “eligible for” Medicaid.
7
Medicare providers (and beneficiaries) in light of the
country’s increasingly precarious fiscal situation. But this
statute does not permit HHS to pursue fiscal balance on the
backs of Medicare providers and beneficiaries in this way.
Common parlance and common sense also are consistent
with the Hospital’s interpretation of the text. For example, an
active-duty member of the military is not permitted to speak at
a political rally. You might be entitled to serve in the military,
and you might be entitled to speak at political rallies. But you
are not entitled to do both at the same time. When a retiree
elects a pension benefit when retiring, the retiree is entitled to
choose an annuity or a lump sum, but not both. Or consider
the NFL’s rules on the coin toss: If you win the toss, you are
entitled to choose possession or which goal to defend, but not
both. So it is with Part A and Part C of Medicare.
II
The majority opinion does not directly take issue with any
of the above textual analysis showing that, for purposes of
§ 1395ww(d)(5)(f)(vi), a Part C beneficiary is not “entitled” to
Part A benefits for a specific patient day. 3 According to the
majority opinion, the Hospital’s interpretation of “entitled”
nonetheless cannot be accepted because it would cause
problems for or anomalies in the implementation of certain
other statutory provisions. And those problems or anomalies
show, the majority opinion says, that the Hospital’s
interpretation of § 1395ww(d)(5)(f)(vi) is not correct. I
3
Part II.A of the majority opinion rejects the Hospital’s
Chevron step one argument, but then Part II.B of the majority
opinion rules for the Hospital anyway because HHS had a different
position back before 2004. Part II.A of the majority opinion thus is
unnecessary given the majority opinion’s conclusion.
8
disagree with the majority opinion’s bank-shot approach to
interpreting § 1395ww(d)(5)(f)(vi).
A
The majority opinion cites § 1395w-21(d)(2)(A), a
provision that requires annual notice to Part A beneficiaries
(those “entitled” to benefits under Part A) of their option to
enroll in Part C. See Maj. Op. at 12. The majority opinion
expresses concern that, under the Hospital’s approach, this
provision might not require notice to Part C enrollees. That
concern is misplaced because HHS puts all of the relevant
information on its website and in practice notifies both Part A
and Part C beneficiaries of their available options. That’s
presumably because a different subsection of this provision
requires that HHS “broadly disseminate information to
medicare beneficiaries (and prospective medicare
beneficiaries) on the coverage options provided under this
section in order to promote an active, informed selection.” 42
U.S.C. § 1395w-21(d)(1). The apparent point of the precise
statutory notice requirement in subsection (d)(2)(A) is simply
to ensure that non-Part C individuals learn about Part C
options, which is precisely what would still be required under
the Hospital’s interpretation. In short, contrary to the majority
opinion’s suggestion, subsection (d)(2)(A) creates no barrier
to the Hospital’s interpretation.
Probably more important in the bigger picture here, the
majority opinion’s reliance on the relatively minor open-
season notice provision to interpret the hugely significant
statutory reimbursement formula, which involves hundreds of
millions of dollars annually, amounts to using a very small tail
to wag a very large dog. Even if the Hospital’s interpretation
would create an anomaly (as the majority opinion sees it) in
the open-season notice provision, that anomaly would be
9
inconsequential, as explained above, and in any event would
not be a good reason to rewrite the statutory text of the
reimbursement formula and thereby shift responsibility for
hundreds of millions of dollars in costs from the government
to hospitals and Medicare beneficiaries.
Next, citing § 1395w-22(c)(2), the majority opinion
suggests that Part C enrollees would not be able to obtain plan
information from their Part C plans under the Hospital’s
interpretation. See Maj. Op. at 13. HHS did not rely on this
statutory provision in its brief, and for good reason. The
preceding subsection, § 1395w-22(c)(1), requires Part C plans
to give similar information to all of their Part C enrollees.
The difference in language between §§ 1395w-22(c)(1) and
1395w-22(c)(2) actually supports the Hospital’s approach
here.
Next, the majority opinion cites § 1395w-21(h)(1). See
Maj. Op. at 14. This is another provision that HHS has not
relied upon. In any event, this provision, too, does not cause
any problems if applied only to non-Part C enrollees. Under
the Hospital’s interpretation, the provision would require
HHS’s approval before Part C plans send marketing materials
to Medicare beneficiaries who are not yet signed up for such a
Part C plan. Contrary to the majority opinion, I find nothing
odd about that.
The majority opinion then turns to § 1395w-24(e)(1)(B)
and (e)(4)(B). See Maj. Op. at 15. Again, the majority
opinion has dredged up statutory provisions that HHS has
declined to rely on. (HHS was well-represented in this case,
so the majority opinion is not making up for deficiencies of
counsel. Rather, it is citing provisions that even HHS – which
has been dealing with this issue for years – has not relied
upon.) I frankly see no anomaly with respect to these
10
provisions that would result from the Hospital’s interpretation.
What those provisions mean quite simply and quite obviously
is that Part C enrollees cannot be forced to pay more than Part
A and Part B beneficiaries for the same benefits.
The majority opinion cites § 1395w-21(e)(2)(D) and
claims that the Hospital’s interpretation would mean that an
institutionalized Part C patient could not change plans. See
Maj. Op. at 16. But an institutional patient who dropped his
Part C plan would then be entitled to Part A benefits and thus
eligible to sign up for a different Part C plan. So there’s no
problem or anomaly there.
The majority opinion cites § 1395w-23(o)(3)(B)(ii), a
provision about qualifying counties. See Maj. Op. at 17.
This, too, is yet another provision that HHS has not cited. I
again fail to see the confusion the majority opinion thinks
would be created here if we accepted the Hospital’s
interpretation. It is quite clear that the determination of
qualifying counties examines whether 25% of those in a
particular area who could sign up for Medicare Part C did sign
up for Medicare Part C.
The majority opinion points to § 1396d(p)(1) and says
that the Hospital’s interpretation would cause Medicare rather
than Medicaid to pay for poor Part C patients. See Maj. Op. at
17. (Medicaid typically pays for the hospital expenses of poor
Medicare patients.) Putting aside the fact that there are
relatively few poor Part C patients, a separate statutory
provision, § 1395w-22(a)(7), makes abundantly clear that
Medicaid and not Medicare will pick up the costs for such
patients. So the majority opinion’s far-afield citation to
§ 1396d(p)(1) does not pose any barrier to or inconsistency
with the Hospital’s interpretation of the term “entitled” in the
11
statutory reimbursement formula contained in 42 U.S.C.
§ 1395ww(d)(5)(F)(vi).
The majority opinion also cites § 1395w-27(e). See Maj.
Op. at 18-19. Here, the majority opinion is on particularly
shaky ground. This statute sets forth a formula that allowed
HHS to collect fees from Part C plans, subject to certain caps,
for fiscal years 2001 to 2005. The problem is that the
majority opinion here has accepted the Hospital’s
interpretation of this statute for the years before 2004. The
majority opinion thus blesses the Hospital’s interpretation for
fiscal years 2001, 2002, and 2003 and yet says simultaneously
that the Hospital’s interpretation would create a “nonsensical
result” with respect to § 1395w-27(e)(2)(B), which applies to
those same years. Maj. Op. at 19. How can that be?
The majority opinion then cites § 1395w-27a(f)(4)(A).
See Maj. Op. at 20. This is still another provision that the
majority opinion cites but HHS did not. And this provision
likewise does not cause any problems under the Hospital’s
interpretation. Indeed, the majority opinion’s attempt to
create confusion about this provision appears severely strained
in context (which is probably why HHS did not cite it). This
provision in context asks a simple question: How many
people in the area could have signed up for Part C but didn’t?
B
To summarize the prior discussion: The majority opinion
has cited a series of statutory provisions on the theory that the
Hospital’s interpretation of § 1395ww(d)(5)(F)(vi) – that a
Part C beneficiary is not entitled to Part A benefits for a
particular patient day – would cause anomalies in other
provisions of the statute. But there are no such anomalies.
Neither in isolation nor in combination do those provisions
12
undermine the straightforward interpretation of
§ 1395ww(d)(5)(F)(vi) advanced by the Hospital and accepted
by the District Court. 4
Moreover, there is a serious overarching problem with the
majority opinion’s approach that is perhaps easier to explain.
The majority opinion confidently proclaims that the
Hospital’s interpretation, if accepted, would apply to a host of
other provisions and cause problems or “nonsensical” results
with respect to everything from open-season notices to caps
on hospitals’ payments for the costs of counseling programs.
But then, the majority opinion turns around and says that the
Hospital’s interpretation actually controls for the years up
until 2004. How can both things be true? How can the
majority opinion endorse – at least for all the years up until
2004 – the same “nonsensical” results that it simultaneously
decries?
I think the explanation is that the majority opinion has
vastly overblown the supposed inconsistencies that the
Hospital’s interpretation would cause with respect to other
4
In response to my opinion, the majority opinion raises doubt
about the Hospital’s interpretation of the statute but declines to say
whether HHS’s interpretation of the statute is permissible. See Maj.
Op. at 24 (“we do not reach that question”). In D.C. Circuit
parlance, the majority opinion leaves open the possibility that
HHS’s interpretation might fail at Chevron step two. From my
perspective, HHS’s interpretation violates the statute, whether at
Chevron step one or Chevron step two. In any event, it’s important
to underscore that this critical statutory question remains open, at
least under Chevron step two analysis, for resolution in future cases
that involve reimbursement for the years after 2004 – that is, for the
years after the years at issue in this case and after HHS adopted its
current interpretation of the statute.
13
statutory provisions. Indeed, it is plain that the majority
opinion’s concerns are misplaced because there is a historical
record against which to check its dire predictions of
“nonsensical” and “strange” and “odd” results. As the
majority opinion says, HHS itself accepted the Hospital’s
interpretation until 2004. Yet HHS, while accepting the
Hospital’s interpretation of § 1395ww(d)(5)(F)(vi), managed
to implement the rest of the statutory provisions cited by the
majority opinion without any apparent confusion or
meltdown. I am not aware of – and the majority opinion
certainly cites no – “nonsensical” or “strange” or “odd” results
that occurred before 2004 with respect to those other
provisions. So it turns out that the majority opinion is wrong
in saying that the Hospital’s interpretation, if accepted, would
cause tumult in other parts of the statute.
By attempting to say that the Hospital’s interpretation (i)
was controlling until 2004 and (ii) cannot be right because of
all the “nonsense” that would ensue, the majority opinion has
twisted itself into a knot. The way to untie the knot, in my
respectful view, is to recognize that the Hospital’s
interpretation not only was controlling until 2004 but is
correct even now. At a bare minimum, the majority opinion
cannot plausibly rely on the supposed anomalies that the
Hospital’s interpretation would cause for other provisions of
the statute and simultaneously endorse the Hospital’s
interpretation for the pre-2004 years.
* * *
The majority opinion says that the Medicare statute is
complicated. True enough. But the question here concerns a
specific provision, not the entire Medicare code. Complexity
in the code as a whole does not mean ambiguity in a specific
provision. No one can fault the majority opinion’s time and
14
effort in examining this statute. But the fact that it takes a
while to figure out the meaning of a specific statutory
provision based on its text and context is not the same as
ambiguity. What matters for the Chevron analysis is not how
long it takes to climb the statutory mountain; what matters is
whether the view is sufficiently clear at the top. Here, despite
HHS’s effort to fog it up, § 1395ww(d)(5)(F)(vi) is
sufficiently clear in establishing that a Part C beneficiary is
not simultaneously entitled to benefits under Part A for any
specific patient day.
The Medicare statute provides a very specific, carefully
reticulated formula for calculating supplemental payments to
hospitals that serve a disproportionate number of low-income
Medicare patients. By counting patients enrolled in Part C
plans as “entitled to benefits under part A” for specific patient
days, HHS misapplied the statute and undercompensated
Beverly Hospital. On that ground, I would affirm the District
Court’s decision to vacate and remand this matter to HHS.