Gentiva Health Services, Inc. v. Becerra

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 7, 2022 Decided April 15, 2022

No. 21-5091

GENTIVA HEALTH SERVICES, INC.,
APPELLANT

v.

XAVIER BECERRA, IN HIS OFFICIAL CAPACITY AS SECRETARY
OF THE U.S DEPARTMENT OF HEALTH AND HUMAN SERVICES,
APPELLEE

Appeal from the United States District Court
for the District of Columbia
(No. 1:19-cv-02271)

W. Jerad Rissler argued the cause for appellant. With him
on the briefs was Adriaen M. Morse, Jr.

William A. Dombi was on the brief for amicus curiae
National Association for Home Care & Hospice in support of
appellant.
 2
McKaye L. Neumeister, Attorney, U.S. Department of
Justice, argued the cause for appellee. With her on the brief
was Brian M. Boynton, Acting Assistant Attorney General at
the time the brief was filed, Michael S. Raab, Attorney, Janice
L. Hoffman, Associate General Counsel, U.S. Department of
Health & Human Services, Susan Maxson Lyons, Deputy
Associate General Counsel for Litigation, and W. Charles
Bailey, Jr., Attorney. Alisa B. Klein, Attorney, U.S.
Department of Justice, entered an appearance.

Before: ROGERS, MILLETT and PILLARD, Circuit Judges.

Opinion for the Court by Circuit Judge ROGERS.

ROGERS, Circuit Judge: Every year, millions of
Americans — most of them Medicare beneficiaries — receive
hospice care. Br. for Nat’l Ass’n for Home Care & Hospice as
Amicus Curiae at 5–6 (citing Nat’l Hospice & Palliative Care
Org., NHCPO Facts and Figures 6–11, 22 (2020),
https://bit.ly/3gTXpmx). For eligible Medicare beneficiaries,
the Medicare program reimburses hospice providers for
services at per-diem rates in periodic disbursements throughout
the fiscal year. That reimbursement is subject to certain fiscal-
year-end adjustments, including a cap on the total
reimbursement a provider may receive for inpatient hospice
care (“inpatient cap”) and a cap on the total reimbursement a
provider may receive for all hospice services (“aggregate
cap”).

In 2013, budget sequestration under the Budget Control
Act of 2011 forced spending reductions in nearly all federal
programs, including Medicare, requiring a 2% reduction in all
Medicare spending. Periodic disbursements to hospice
providers were accordingly reduced by 2%. Because
calculation of the aggregate cap was unaffected, the
methodology initially used by Medicare’s hospice
 3
reimbursement contractors meant a hospice that exceeded its
aggregate cap would receive the same total annual
reimbursement — the cap amount — as in a non-sequestration
year, while a hospice that came in under its aggregate cap for
the year would receive the full 2% cut. To remedy this
problem, the Centers for Medicare and Medicaid Services
(“CMS”) adopted a methodology for end-of-year
reconciliation whereby overpayments were to be calculated as
if sequestration had not been in effect, and any resulting
overpayment was to be reduced by 2% to account for the
already reduced preliminary disbursements.

Gentiva Health Services, Inc., a hospice provider,
challenges CMS’s methodology, contending that it violates
both the Medicare statute and the Budget Control Act, and that
CMS did not follow the required administrative procedures for
adopting it. For the following reasons, we affirm the district
court’s grant of summary judgment because the Secretary
correctly interpreted the Medicare statute and the Budget
Control Act in devising the sequestration methodology, and
because adoption of the methodology did not deprive hospice
providers of adequate notice or procedural protections.

I.

This case arises out of the interaction of two statutory
schemes: the Medicare statute (specifically, the provision
governing reimbursements to hospice care providers) and the
Budget Control Act.

A.

CMS, a division of the Department of Health and Human
Services, administers the Medicare program, including hospice
benefits for terminally ill patients under Medicare Part A. See
42 U.S.C. § 1395c. Hospice coverage under Medicare takes
 4
the form of a per-patient, per-day, per-category-of-care
reimbursement to the hospice care provider — that is, a flat
daily rate — determined by Congress and the Secretary. Id.
§ 1395f(i)(1); see also 42 C.F.R. §§ 418.302, .306. The total
amount of reimbursement a hospice provider may receive from
Medicare in a year is subject to two caps: a cap on
reimbursements for inpatient services, 42 U.S.C.
§ 1395x(dd)(2)(A)(iii); see 42 C.F.R. § 418.302(f), and, as
relevant here, an “aggregate cap” on total reimbursements for
all hospice services, 42 U.S.C. § 1395f(i)(2); see 42 C.F.R.
§§ 418.301(b), .308(a).

With respect to the aggregate cap, the Medicare statute
provides that reimbursements for hospice services are capped
annually: “The amount of payment made under this part for
hospice care provided by (or under arrangements made by) a
hospice program for an accounting year may not exceed the
‘cap amount’ for the year . . . multiplied by the number of
[M]edicare beneficiaries in the hospice program in that year.”
42 U.S.C. § 1395f(i)(2)(A); see 42 C.F.R. § 418.309. “The
intent of the [aggregate] cap was to ensure that payments for
hospice care would not exceed what would have been
expended by [M]edicare if the patient had been treated in a
conventional setting.” H.R. REP. NO. 98-333, at 1 (1983).

Medicare reimbursements for hospice services follow a
two-step process. The Medicare Administrative Contractors
that process reimbursements to providers make regular
disbursements throughout the cap year (November 1 to October
31) based on the per-diem reimbursement rates. See 42 C.F.R.
§ 418.302(d)–(e). Then, at the end of the cap year, the hospice
provider works with the contractor on a reconciliation process
to determine, among other things, whether those periodic
disbursements exceeded the aggregate cap (which can only be
determined after the end of the cap year). See 42 C.F.R.
 5
§ 418.308(c)–(d); 79 Fed. Reg. 50,452, 50,472–73 (Aug. 22,
2014). Hospices must repay any overpayments. 42 C.F.R.
§ 418.308(d). If a hospice concludes a contractor’s
determination of its overpayment obligation (if any) is
mistaken, it can administratively challenge that determination
before the Provider Reimbursement Review Board. See 42
U.S.C. § 1395oo(a); 42 C.F.R. § 418.311.

The Budget Control Act of 2011, Pub. L. No. 112-25, 125
Stat. 240, aimed to reduce federal government spending via
certain budgetary devices. The Act provides that, should
Congress fail to enact legislation that reduces the deficit by a
specified amount, sequestration is triggered, meaning that
federal government spending must be reduced by a certain
percentage across the board (with certain programs exempted).
See 2 U.S.C. § 901a. The Office of Management and Budget
(“OMB”) calculates, and the President implements, the
percentage reduction based on statutory guidelines. Id.

Medicare spending is subject to sequestration, but enjoys
certain special rules, including that the maximum percentage
reduction that may be applied to Medicare spending is 2%.
2 U.S.C. § 901a(6)(A). With respect to Medicare Parts A and
B, the Budget Control Act provides that “[t]o achieve the total
percentage reduction in those programs required by section 902
or 903 of this title . . . OMB shall determine, and the applicable
Presidential order . . . shall implement, the percentage
reduction that shall apply . . . to individual payments for
services furnished during the one-year period beginning on the
first day of the first month beginning after the date the order is
issued . . . such that the reduction made in payments under that
order shall achieve the required total percentage reduction in
those payments for that period.” Id. § 906(d)(1).
 6
B.

On March 1, 2013, the conditions for sequestration were
triggered and OMB determined that the maximum 2%
reduction to Medicare spending was required. See Office of
Management & Budget, OMB Report to Congress on the Joint
Comm. Sequestration for Fiscal Year 2013, at 1, 5 (2013),
https://go.usa.gov/xVMJb (“OMB 2013 Sequestration
Report”). CMS soon announced how this would impact
Medicare providers, explaining that claims “with dates-of-
service or dates-of-discharge on or after April 1, 2013, will
incur a 2 percent reduction in Medicare payment.” Provider
Reimbursement Review Board Decision, Case No. 15-
3457GC, at 5 n.32 (May 31, 2019). But at the time, CMS did
not specifically address how the reduction would interact with
the hospice care reimbursement process.

On March 3, 2015, CMS issued to its contractors a
Technical Direction Letter providing additional guidance on
the sequestration methodology for hospice reimbursement
calculations while sequestration was in effect. The contractors
would first determine the amount by which a given provider’s
periodic reimbursements were reduced by sequestration and
add that figure to the net payments actually disbursed to the
provider during the year, arriving at the amount that would
have been disbursed in the absence of sequestration (infra
“Figure A”). Then the contractors were to determine the
provider’s aggregate cap and apply the aggregate cap to Figure
A, resulting in the amount of overpayment the provider would
owe were sequestration not in effect (infra “Figure B”).
Finally, to account for the sequestration reduction that had
already been applied to the periodic disbursements, the
contractors were to reduce Figure B by 2%, arriving at the
amount of overpayment actually owed under sequestration
(infra “Figure C”). As the district court illustrated by a
 7
simplified example, that process resulted in uniform 2%
reductions in Medicare reimbursements to hospice providers,
whether or not the providers had received excess disbursements
during the year and thus exceeded their aggregate cap:

Sequestration Methodology

Hospice A Hospice B

Aggregate Cap $1,000 $1,000

Net
$980 $1,176
Disbursements
Amount
Withheld for $20 $24
Sequestration
Reimbursement
Without
$1,000 $1,200
Sequestration
(“Figure A”)
Overpayment
Without
$0 $200
Sequestration
(“Figure B”)
2% Reduced
Overpayment $0 $196
(“Figure C”)
Final Amount
Paid by $980 $980
Medicare

Gentiva Health Servs., Inc. v. Cochran, 523 F. Supp. 3d 81, 88
(D.D.C. 2021).
 8
Gentiva Health Services operates hospices nationwide,
including the six Gentiva-affiliated hospices here. After the
2013 cap year, the hospices initially received cap
determinations prior to the issuance of the Technical Direction
Letter that accordingly did not use the sequestration
methodology. Once the Technical Direction Letter was shared
with the contractors, the cap determinations were reopened and
revised determinations were issued using the sequestration
methodology. The six Gentiva-affiliated hospices were
determined to owe overpayments under the sequestration
methodology.

Gentiva appealed those determinations to the Provider
Reimbursement Review Board. Before the Board, Gentiva
argued that the Medicare statute, 42 U.S.C. § 1395f(i)(2), and
the implementing regulation, 42 C.F.R. § 418.308, precluded
CMS from calculating overpayments using the sequestration
methodology. Instead, Gentiva argued, CMS and its
contractors were required to calculate overpayments by
looking only at the difference between the aggregate cap and
the sum of the preliminary disbursements throughout the
year — that is, by how much the preliminary payments actually
received exceeded the aggregate cap (“net payments
methodology”). Under this methodology the contractors
would not have added back the sequestration reduction
withheld from the preliminary disbursements, nor reduced the
final overpayment amount by 2%, instead considering only the
funds actually disbursed as compared to the aggregate cap:
 9

Net Payments Methodology

Hospice A Hospice B

Aggregate
$1,000 $1,000
Cap
Net
$980 $1,176
Disbursements
Overpayment
$0 $176
Amount
Final Amount
Paid by $980 $1,000
Medicare

Gentiva, 523 F. Supp. 3d at 89. As this example demonstrates,
Gentiva’s net payments methodology produces different
results than the sequestration methodology for a hospice that
exceeds its aggregate cap, resulting in a lower amount of
overpayment due. Under the sequestration methodology, the
most any hospice can retain is 98% of its aggregate cap,
because the methodology looks to the amount of allowable
reimbursement in the absence of sequestration and then reduces
that amount — which is, at most, equal to the aggregate cap —
by 2%. But under the net payments methodology, a hospice
can retain up to 100% of its aggregate cap.

According to Gentiva, the sequestration methodology
violated the statute and the regulation by adding back the
sequestration reduction withheld from the preliminary
disbursements into the equation, such that — for overpayment
purposes — funds the providers did not actually receive were
being counted against them. As a result, the providers asserted,
 10
they were required to repay as overpayments money they had
never actually received.

The Board upheld the 2013 cap determinations,
concluding that nothing in the statute or the regulation required
CMS to use the net payments methodology and that the
sequestration methodology was permissible. Board Decision
at 9. The Board explained that the periodic disbursements are
merely preliminary; they are “a proxy for costs subject to an
annual cap.” Id. at 4. Because the aggregate cap, among other
possible adjustments, can only be determined and applied at the
end of each fiscal year, the Board concluded, “the aggregate
cap then becomes the Medicare allowable payment for the . . .
cap year and, therefore, sequestration must be applied to the
resulting Medicare allowable payment.” Id. at 9. Contrary to
the providers’ position, the Board ruled that the sequestration
methodology did not “‘double dip’ from any hospices” because
it “reverses and adds back any sequestration amounts already
deducted during the year . . . to ensure that the aggregate cap is
applied separately from sequestration . . . .” Id. at 13.

The Board noted that the simplest way to apply the
sequestration reduction would have been to issue the
preliminary disbursements as usual, without any reduction, and
then apply the 2% reduction “to a full cap year . . . [after] the
cap year has ended.” Id. at 11. That calculation would be
straightforward: apply the aggregate cap, then apply the 2%
sequestration reduction to the resulting amount. Id. But the
problem with this method, the Board recognized, was that it
required CMS “to knowingly overpay providers” by making
full preliminary disbursements and waiting to reduce them at
cap-year end, leading to “assessing and collecting
overpayments on all Medicare-participating hospices[,] which
would not be administratively practical.” Id. at 12. CMS’s
solution — the sequestration methodology — permissibly
 11
achieved the same result without the substantial administrative
burden, the Board concluded. Id. at 13.

The Board not only found the sequestration methodology
permissible, but also explained why the net payments
methodology would not effectuate the sequestration mandate
of the Budget Control Act. While “the sequestration order
requires that all Medicare payments, without exception, be
reduced,” id. at 17, under the net payments methodology “no
portion of the aggregate cap payments would be sequestered,”
which the Board found “would violate the President’s
sequestration order, ” id. The same example illustrates how the
net payments methodology would operate in the absence of
sequestration and under sequestration:

Without Sequestration

Hospice A Hospice B

Aggregate
$1,000 $1,000
Cap
Net
$1,000 $1,200
Disbursements
Overpayment
$0 $200
Amount
Final Amount
Paid by $1,000 $1,000
Medicare
 12

With 2% Sequestration

Hospice A Hospice B

Aggregate
$1,000 $1,000
Cap
Net
$980 $1,176
Disbursements
Overpayment
$0 $176
Amount
Final Amount
Paid by $980 $1,000
Medicare

Gentiva, 523 F. Supp. 3d at 89.

Using Gentiva’s net payments methodology under
sequestration, hospices that do not exceed their aggregate cap
— e.g., Hospice A — experience a 2% reduction in their total
annual reimbursement. But hospices that do exceed their
aggregate cap — e.g., Hospice B — experience no reduction in
total annual reimbursement compared with a non-sequestration
year. Even with the 2% reduction in periodic disbursements,
Hospice B’s total preliminary payments still exceed its
aggregate cap, so its total annual reimbursement is $1,000 —
the same as it would have been in the absence of sequestration.
As a result, the net payments methodology fails to reduce
Medicare spending as to Hospice B, whereas the sequestration
methodology reduces Medicare spending for both Hospice A
and Hospice B.

The CMS administrator declined to review the Board’s
decision, which therefore became the Secretary’s final
 13
determination, 42 U.S.C. § 1395oo(f)(1). Gentiva timely
sought review of the Board’s decision in the district court,
moving for summary judgment, and the Secretary cross-moved
for summary judgment. Gentiva, 523 F. Supp. 3d at 90. The
district court granted summary judgment to the Secretary and
denied summary judgment to Gentiva, ruling that the
sequestration methodology did not violate either the Medicare
statute or the Budget Control Act and that the providers had not
shown they were deprived of adequate notice of a change in
agency policy. Id. at 91. The district court concluded that “the
Board’s decision was not only reasonable, but . . . it reflect[ed]
the best reading of the Medicare statute, as well as the Budget
Control Act.” Id. at 92. Gentiva appeals.

II.

On appeal, Gentiva contends that CMS was required to use
the net payments methodology instead of the sequestration
methodology for three reasons: First, the plain meaning of the
Medicare statute required the net payments methodology.
Second, the plain meaning of the Budget Control Act — the
source of the sequestration mandate — independently required
the net payments methodology. And third, even if none of the
relevant statutes compelled one methodology over another,
CMS changed its interpretation of the hospice cap provision
when it directed the sequestration methodology and failed to
adhere to the required administrative procedures for giving
notice of the change.

This court reviews the district court’s grant of summary
judgment de novo, Grossmont Hosp. Corp. v. Burwell, 797
F.3d 1079, 1082–83 (D.C. Cir. 2015), and the underlying
decision of the Board pursuant to the “considerable deference”
standard of the Administrative Procedure Act, Marymount
Hosp., Inc. v. Shalala, 19 F.3d 658, 661 (D.C. Cir. 1994). To
 14
the extent the Board’s decision is based “on the [text] of the
Medicare Act itself, [the court] owe[s] deference [to the Board]
under Chevron U.S.A. Inc. v. Natural Resources Defense
Council, 467 U.S. 837, 843–45 [(1984)].” Id. Under Chevron,
the court considers two questions: first, whether Congress
“directly addressed” the issue in dispute, id. (quoting Chevron,
467 U.S. at 843), and second, if “the statute is silent or
ambiguous with respect to the specific issue,” id., whether “the
agency’s answer is based on a permissible construction of the
statute,” id. (quoting Chevron, 467 U.S. at 843).

A.

“In addressing a question of statutory interpretation, we
begin with the text.” Eagle Pharms., Inc. v. Azar, 952 F.3d
323, 330 (D.C. Cir. 2020) (quoting City of Clarksville v. FERC,
888 F.3d 477, 482 (D.C. Cir. 2018)); see Engine Mfrs. Ass’n v.
S. Coast Air Quality Mgmt. Dist., 541 U.S. 246, 252 (2004).
The Medicare statute provides that reimbursements for hospice
care are subject to a cap:

The amount of payment made under [Medicare Part A]
for hospice care provided by (or under arrangements
by) a hospice program for an accounting year may not
exceed the “cap amount” for the year (computed under
subparagraph (B)) multiplied by the number of
[M]edicare beneficiaries in the hospice program in that
year (determined under subparagraph (C)).

42 U.S.C. § 1395f(i)(2)(A). The parties agree that this
provision establishes a figure known as the “aggregate cap” —
the total reimbursement a hospice care provider is entitled to
receive from Medicare in any given fiscal year. The provision
also sets out a formula for calculating a hospice’s aggregate
cap: the fixed annual cap amount in § 1395f(i)(2)(B), which is
tied to the Consumer Price Index, multiplied by the number of
 15
eligible patients the hospice cared for in the relevant year as
defined in § 1395f(i)(2)(C). According to the Secretary, that is
all the provision does. According to Gentiva, it does more —
it also sets out a formula for calculating overpayments.

Gentiva maintains that the plain meaning of the hospice
cap statute mandates that fiscal-year-end reconciliation use the
net payments methodology instead of the sequestration
methodology. On Gentiva’s reading, the statute’s requirement
that the “amount of payment made . . . may not exceed the ‘cap
amount’ for the year,” § 1395f(i)(2)(A), serves to define
overpayments as the difference between the net periodic
payments actually disbursed over the fiscal year (the “amount
of payment made”) and the aggregate cap. To calculate the
amount of overpayment that a hospice must return, Gentiva
reasons, CMS and its contractors must therefore compare the
hospice’s net disbursements to its aggregate cap without regard
to any other factor.

Critical to Gentiva’s interpretation is the view that the
phrase “amount of payment made” refers to the total periodic
payments actually disbursed during the relevant year. That is
not, however, the most natural way to read the text. Cf., e.g.,
HollyFrontier Cheyenne Refin., LLC v. Renewable Fuels
Ass’n, 141 S. Ct. 2172, 2176 (2021). In the hospice cap
provision, the word “made” functions not as a past-tense verb,
as Gentiva asserts, but rather as an adjectival past participle
modifying “amount of payment.” See The Chicago Manual of
Style Online § 5.90 (17th ed. 2017). The phrase “amount of
payment made” thus should not be read as referring to a
discrete historical amount, as Gentiva suggests; rather, it refers
to “the amount of payment that is made,” not “the amount of
payment that was made.” Indeed, reading the phrase in the past
tense, as Gentiva does, renders the rest of the provision
ungrammatical and incoherent; the statute goes on to provide
 16
that hospice reimbursement “may not exceed” the aggregate
cap — a present-tense prohibition. The plain meaning of the
statute is simply that hospice reimbursements are capped; while
the statute teaches how to calculate the aggregate cap, no
particular formula is given for applying the aggregate cap.
Gentiva’s view that the plain meaning of the statute requires
the net payments methodology is therefore incorrect.

The Supreme Court considered similar statutory language
in Henson v. Santander Consumer USA Inc., 137 S. Ct. 1718
(2017), and reached the same conclusion. At issue there was
the Fair Debt Collection Practices Act’s definition of “debt
collector” as “anyone who ‘regularly collects or attempts to
collect . . . debts owed or due . . . another.’” Id. at 1721
(quoting 15 U.S.C. § 1692a(6)). The consumer-plaintiffs
maintained that this definition covered not only third parties
who collect debts belonging to another creditor, but also those
who purchase debts from the originating creditor and seek to
collect them on their own behalf. Id. at 1721–22. This
followed from the text, they argued, because the use of the past-
tense “owed” meant that “the statute’s definition of debt
collector captures anyone who regularly seeks to collect debts
previously ‘owed . . . another.’” Id. at 1722 (quoting 15 U.S.C.
§ 1692a(6)). The Court rejected that reading, explaining that
“[p]ast participles like ‘owed’ are routinely used as adjectives
to describe the present state of a thing — so, for example, burnt
toast is inedible, a fallen branch blocks the path, and (equally)
a debt owed to a current owner may be collected by him or her.”
Id. Further, the Court pointed out, reading “owed” in the past
tense did not fit with the statutory context: “due” was plainly
in the present tense, and it was not plausible that “Congress set
two words cheek by jowl in the same phrase but meant them to
speak to entirely different periods of time.” Id. Just so here —
“made” simply “describe[s] the present state,” id., of the
“amount of payment” in question. And reading “made” as
 17
past-tense puts it out of step with the present-tense “may not
exceed.”

Gentiva’s attempts to bolster its plain meaning argument
fare no better. It points to the Medicare regulations, which
provide that “[p]ayments made to a hospice during a cap period
that exceed the cap amount are overpayments and must be
refunded.” 42 C.F.R. § 418.308(d). As with the hospice cap
statute, however, Gentiva reads too much into the regulation,
which announces that payment in excess of the aggregate cap
must be refunded without providing any formula for
calculating overpayments. Nor does the relevant Department
guidance support Gentiva’s reading: it states that “[t]he total
actual Medicare payments made for services furnished to
Medicare beneficiaries during the cap year . . . are compared to
the aggregate cap for this period.” Medicare Benefit Policy
Manual, ch. 9, § 90.2. But the following section explains that
“‘[t]otal actual Medicare payments made for services furnished
to Medicare beneficiaries during the cap year’ refers to
Medicare payments for services rendered beginning November
1 and ending October 31, regardless of when payment is
actually made.” Id. § 90.2.1 (emphasis added). That
undermines Gentiva’s position that overpayments must be
calculated strictly by comparing the sum of checks actually cut
during the cap year to the aggregate cap; in fact, the policy
manual recognizes that the amount of reimbursement that is
subject to the cap may embrace other “amount[s] of payment”
as well.

Ultimately, the regulations and guidance do not support
Gentiva’s contention that the statute unambiguously requires
the net payments methodology. Section 1395f(i)(2)(A) does
not mandate any one methodology for applying the aggregate
cap. Gentiva also maintains that those regulations and policy
statements are entitled to deference. But because these
 18
provisions cannot bear the meaning Gentiva ascribes to them,
any deference to them would not help Gentiva.

Because the plain meaning of the statute gives no
instruction as to how overpayments should be calculated, the
court concludes the statute is “silent . . . with respect to the
specific issue” of what methodology CMS must use in applying
the aggregate cap. Marymount Hosp., 19 F.3d at 661 (quoting
Chevron, 467 U.S. at 843). Further, Gentiva offers no reason
to doubt that “the [Secretary’s] answer is based on a
permissible construction of the statute,” id. (quoting Chevron,
467 U.S. at 843). Nothing in the text of § 1395f(i)(2)(A)
suggests the sequestration methodology may not be used; in a
non-sequestration year, it achieves the same result as the net
payments methodology. And the sequestration methodology
harmonizes the Medicare statute with the requirements of the
Budget Control Act. See infra Part II.B. Furthermore, the
court concludes that the Board’s decision represents a
reasonable understanding of the statute.

B.

In 2011, Congress passed the Budget Control Act, Pub. L.
No. 112-25, 125 Stat. 240, amending the Balanced Budget and
Emergency Deficit Control Act of 1985, Pub. L. No. 99-177,
99 Stat. 1038. The amended statute provided a mechanism of
“budget enforcement,” 2 U.S.C. § 900(b), known as
sequestration, that would automatically be triggered if
Congress failed to achieve certain deficit-reduction thresholds,
see id. § 901a.

Under the Budget Control Act, when sequestration is
triggered, federal spending must be reduced by a certain
percentage across the board (with certain kinds of spending
exempted from sequestration altogether). See id.; id. §§ 905,
906(d)(7). Medicare is in a special category: It is subject to
 19
sequestration, but only up to a point. If the Act requires an
overall reduction in spending greater than 2%, Medicare will
experience only a 2% reduction, id. § 901a(6)(A), and all other
non-exempt federal programs can be subject to a greater
reduction to compensate for the lesser reduction in Medicare
spending, id. § 901a(7).

When sequestration is triggered under the Act, OMB
calculates the reduction in Medicare payment amounts needed
to meet the overall percentage reduction required:

To achieve the total percentage reduction in those
programs required by section 902 or 903 of this
title . . . , OMB shall determine, and the applicable
Presidential order under section 904 of this title shall
implement, the percentage reduction that shall
apply . . . to individual payments for services furnished
during the one-year period beginning on the first day
of the first month beginning after the date the order is
issued . . . such that the reduction made in payments
under that order shall achieve the required total
percentage reduction in those payments for that period.

2 U.S.C. § 906(d)(1) (hereinafter, the “total reduction
provision”).

According to Gentiva, independent of the Medicare
statute, the total reduction provision mandates the net payments
methodology because it provides that the percentage reduction
required for sequestration applies “to individual payments for
services,” id. Gentiva maintains that CMS should have applied
the 2% reduction to each periodic payment disbursed and
stopped there, as those are the only “individual payments” in
the hospice reimbursement process. By using the sequestration
methodology, CMS instead applied the 2% reduction to a
figure other than the “individual payments for services” in
 20
violation of the Budget Control Act, Gentiva maintains. Again,
Gentiva’s focus is too narrow.

“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.’” Nat’l
Ass’n of Home Builders v. Defs. of Wildlife, 551 U.S. 644, 666
(2007) (quoting FDA v. Brown & Williamson Tobacco Corp.,
529 U.S. 120, 132–33 (2000)). Viewing the phrase “individual
payments” in isolation ignores key statutory indications of the
meaning of the total reduction provision as a whole. Indeed,
“individual payments” lies between two other phrases that
contradict Gentiva’s interpretation. The provision opens by
explaining that “[t]o achieve the total percentage reduction in
[the affected programs],” OMB is to calculate the percentage
reduction required. 2 U.S.C. § 906(d)(1) (emphasis added).
And it closes by explaining that OMB is to calculate that
percentage reduction “such that the reduction made in
payments under that order shall achieve the required total
percentage reduction in those payments for that period.” Id.
(emphasis added). Read in its full context, the provision makes
clear that whatever reductions are made, they must achieve the
“total percentage reduction” demanded to effectuate the
sequestration. Here, OMB determined that a 2% reduction in
Medicare spending was required. OMB 2013 Sequestration
Report at 1, app. Any methodology of calculating
overpayments that resulted in a less than 2% reduction of
Medicare spending as a whole would have been impermissible
under the total reduction provision.

Using the net payments methodology that Gentiva
advocates would have brought the total reduction of Medicare
spending below 2%, violating the clear mandate of the total
reduction provision. As the district court ably illustrated, see
Gentiva, 523 F. Supp. 3d at 88–89, and as explained above by
 21
reference to Hospice B, hospices that exceeded their aggregate
cap for the year during which sequestration was in effect would
see no reduction in their total reimbursement under Gentiva’s
net payments methodology, and in turn the Medicare program
would see no reduction in spending as to those hospices under
sequestration. To achieve an overall 2% reduction program-
wide, Medicare must reduce reimbursements to each and every
hospice (and each and every non-hospice Medicare provider)
by the full 2%. If, for example, 90 below-cap hospices
experience a 2% cut and 10 above-cap hospices experience no
cut, the “total percentage reduction” across those 100 hospices
would amount to only 1.8%. Not only would that result fail to
achieve the “total percentage reduction” required, it would
violate the mandate of § 906(d)(2) that “[r]eductions in
payments . . . pursuant to a sequestration order . . . shall be at a
uniform rate . . . across [Medicare] programs and activities.”

Read as a whole, the statute permits the sequestration
methodology, which “achieve[s] the total percentage
reduction” required, 2 U.S.C. § 906(d)(1). Considering the
sequestration process in light of the Medicare scheme confirms
this interpretation. As the Secretary points out, the Medicare
statute governing hospice reimbursements “deals with such
payments on an aggregate, annual basis with respect to
individual providers.” Appellee’s Br. 23. Final, binding
determinations as to the amount of the reimbursement a
provider is owed are made on an annual basis. See 42 U.S.C.
§ 1395f(i)(1)(A), (2)(A). In the context of hospice
reimbursements, therefore, “individual payments” is best
understood to refer to the final Medicare allowable payment for
an individual hospice after cap-year-end reconciliation, rather
than to the periodic disbursements, which are merely
preliminary. Even as to the narrow question of the meaning of
“individual payments,” therefore, the court does not agree that
 22
the plain meaning of the statute requires the net payments
methodology.

Gentiva takes issue with the view that the periodic
disbursements are preliminary and that any reconciliation takes
place under the hospice reimbursement scheme, as hospices are
paid at a flat per diem rate, as opposed to a fee-for-service or
cost-based model under which a year-end review might deem
certain costs unallowable and adjust reimbursement
accordingly. But, as the Secretary explains, there are a number
of adjustments that might take place at cap-year end even under
the flat-rate hospice system — a beneficiary might be
retroactively determined ineligible for hospice benefits, see
42 C.F.R. § 418.302(e)(1), or another source of hospice care
coverage might be discovered for some beneficiaries, see
42 U.S.C. § 1395y(b)(2), or the application of the inpatient cap
might reduce the hospice’s total reimbursement even before
application of the aggregate cap, see 42 C.F.R. § 418.302(f)(5).
Thus, while the periodic reimbursements issued throughout the
year are something more than mere estimates of the amount
owed to the hospice providers, they are also something less
than “payments,” as the issuance of any given disbursement is
not an agreement by CMS that the provider will actually be
entitled to that amount in the final analysis.

Because the Secretary’s chosen methodology comports
with the statutory text, purpose, and operation, Gentiva has not
shown that the Board’s decision was “arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law.”
Marymount Hosp., 19 F.3d at 661 (quoting 5 U.S.C.
§ 706(2)(A)).

C.

Finally, Gentiva maintains that CMS changed its existing
policy — the net payments methodology — when it adopted
 23
the sequestration methodology, and failed to provide a
reasoned explanation for such a change. Specifically, Gentiva
asserts that the process behind the adoption of the sequestration
methodology deprived Gentiva of fair notice of how
sequestration would affect its reimbursements. Even assuming
that Gentiva was entitled to fair notice before application of the
sequestration methodology, Gentiva’s position is without
merit.

When an agency changes its “existing polic[y],” it must
“provide a reasoned explanation for the change.” Encino
Motorcars, LLC v. Navarro, 579 U.S. 211, 221 (2016). This
requires “at least ‘display[ing] awareness that it is changing
position’ and ‘show[ing] that there are good reasons for the
new policy.’” Id. (quoting FCC v. Fox Television Stations,
Inc., 556 U.S. 502, 515 (2009)).

This, however, was no “‘[u]nexplained inconsistency’ in
agency policy,” Encino Motorcars, 579 U.S. at 222 (quoting
Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs.,
545 U.S. 967, 981 (2005)). Gentiva’s objection rests on the
unstated assumption that the adoption of the sequestration
methodology represented a reinterpretation of the Medicare
statute when, in fact, it represented a blank-slate
implementation of the Budget Control Act. The sequestration
methodology therefore was not a change in agency policy at
all.

Nor has Gentiva demonstrated that the net payments
methodology was the agency’s policy prior to sequestration.
For much the same reasons, the statutes, regulations, and policy
statements governing hospice care reimbursements do not
mandate the net payments methodology, so Gentiva’s reliance
on those provisions as evidence of the agency’s pre-
sequestration policy is misplaced. Similarly, the few individual
 24
aggregate-cap determination notices Gentiva offers as
examples of the net payments methodology do not establish a
“longstanding practice” of using that methodology,
Appellant’s Br. 29. Gentiva points to the hospices’ original cap
determinations from 2013 — before the issuance of the
Technical Direction Letter adopting the sequestration
methodology — as evidence that the net payments
methodology was CMS policy before sequestration. As the
district court correctly observed, those cap determinations
issued by the contractors were subject to revision (even in a
non-sequestration year) and the contractors’ initial, erroneous
approach did not represent agency policy. See Gentiva, 523 F.
Supp. 3d at 99. Similarly, the single cap determination Gentiva
has identified from before 2013 — the year sequestration was
in effect — could not by itself establish any longstanding
practice. That revised determination, moreover, does not
appear to use the net payments methodology, contrary to
Gentiva’s characterization; in fact, it appears to use the
sequestration methodology, albeit with zeros for every
sequestration-related line item, as sequestration was not in
effect that year.

To the extent Gentiva maintains that the Secretary was
required to act by notice-and-comment rulemaking, Gentiva
misperceives the interplay between the Medicare statute and
the Budget Control Act. Gentiva invokes the Medicare
statute’s requirement that “[n]o rule, requirement, or other
statement of policy (other than a national coverage
determination) that establishes or changes a substantive legal
standard governing . . . the payment for services . . . under this
subchapter shall take effect unless it is promulgated by the
Secretary by regulation under paragraph (1),” 42 U.S.C.
§ 1395hh(a)(2); see also id. §§ 1395hh(c)(1), (e)(1). But as the
Secretary points out, the statute makes those requirements
applicable to changes promulgated “under this subchapter,”
 25
that is, the Medicare statute. Id. § 1395hh(a)(2). When CMS
adopted the sequestration methodology, it did not act pursuant
to its authority to effectuate the Medicare statute, but rather
pursuant to the mandate of the Budget Control Act. The formal
procedures that accompany rulemaking under the Medicare
statute were therefore inapplicable. Cf. Azar v. Allina Health
Servs., 139 S. Ct. 1804, 1816–17 (2019).

Accordingly, the court affirms the district court’s grant of
summary judgment to the Secretary and denial of summary
judgment to Gentiva.