Metropolitan Hospital v. United States Department of Health & Human Services

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 13a0076p.06

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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X
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METROPOLITAN HOSPITAL, a Michigan

Plaintiff-Appellee/Cross-Appellant, --
non-profit corporation,

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Nos. 11-2465/2466

,
>
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v.

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UNITED STATES DEPARTMENT OF HEALTH
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AND HUMAN SERVICES; KATHLEEN SEBELIUS,
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Secretary of the United States Department of

Defendants-Appellants/Cross-Appellees. -
Health and Human Services,
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Appeal from the United States District Court
for the Western District of Michigan at Grand Rapids.
No. 1:09-cv-128—Paul Lewis Maloney, Chief District Judge.
Argued: January 23, 2013
Decided and Filed: March 27, 2013
Before: CLAY, GILMAN, and McKEAGUE, Circuit Judges.

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COUNSEL
ARGUED: Stephanie R. Marcus, UNITED STATES DEPARTMENT OF JUSTICE,
Washington, D.C., for Appellants/Cross-Appellees. Leah E. Pogoriler, COVINGTON
& BURLING LLP, Washington, D.C., for Appellee/Cross-Appellant. ON BRIEF:
Stephanie R. Marcus, Anthony J. Steinmeyer, UNITED STATES DEPARTMENT OF
JUSTICE, Washington, D.C., for Appellants/Cross-Appellees. Leah E. Pogoriler,
Caroline M. Brown, COVINGTON & BURLING LLP, Washington, D.C., for
Appellee/Cross-Appellant. Kenneth R. Marcus, HONIGMAN MILLER SCHWARTZ
AND COHN LLP, Detroit, Michigan, Jeffrey A. Lovitky, Washington, D.C., for Amici
Curiae.
GILMAN, J., delivered the opinion of the court, in which CLAY, J. joined.
McKEAGUE, J. (pp. 34–42), delivered a separate dissenting opinion.

1
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 2

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OPINION
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RONALD LEE GILMAN, Circuit Judge. This case involves a challenge to
regulation 42 C.F.R. § 412.106(b), promulgated in 2004 by the United States Department
of Health and Human Services (HHS). The regulation deals with the amount that certain
hospitals are entitled to receive as enhancements to their regular reimbursement
payments from the Medicare program. In connection with this program, Congress has
created a statutory formula to identify hospitals that serve a disproportionate number of
low-income patients and to calculate the increased payments due such hospitals.

Metropolitan Hospital (Metro) challenges the way that the Secretary of HHS
(Secretary) interprets this statutory formula to exclude certain patients who are
simultaneously eligible for benefits under both Medicare and Medicaid. According to
the Complaint, the exclusion of such dual-eligible patients cost Metro more than
$2.1 million in the 2005 fiscal year.

Addressing the parties’ cross-motions for summary judgment, the district court
ruled that the challenged HHS regulation is invalid because it violates the statute that it
purports to implement. Metro. Hosp., Inc. v. U.S. Dep’t of Health & Human Servs.,
702 F. Supp. 2d 808, 825-26 (W.D. Mich. 2010). HHS then timely filed this appeal, and
Metro timely filed a cross-appeal regarding the district court’s decision to remand the
case to HHS for the calculation of damages and interest due Metro. For the reasons set
forth below, we REVERSE the judgment of the district court and REMAND the case
with instruction to enter judgment in favor of HHS. Metro’s cross-appeal is
DISMISSED as moot.
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 3

I. BACKGROUND

A. Regulatory background

The Medicare program’s Prospective Payment System (PPS) reimburses a
hospital a fixed dollar amount for each Medicare patient it discharges on the basis of the
patient’s diagnosis, regardless of the actual cost of the treatment provided. Good
Samaritan Hosp. v. Shalala, 508 U.S. 402, 406 n.3 (1993). Recognizing “the higher
costs incurred by hospitals that serve a large number of low income patients,” Jewish
Hosp., Inc. v. Sec’y of Health & Human Servs., 19 F.3d 270, 272 (6th Cir. 1994),
Congress in 1983 required the Secretary to make “exceptions and adjustments to the PPS
program” that would account for these higher costs, id. at 280 (Batchelder, J., dissenting)
(internal quotation marks omitted).

But the Secretary failed to establish “a system to estimate the number of poor
patients served in such hospitals and [to] issue payments,” and again failed to act when
subsequent legislation set a deadline of December 31, 1984 for the Secretary to define
and identify the “disproportionate share hospitals” (DSHs) that would receive these
adjusted payments. See id.; see also Deficit Reduction Act, Pub. L. 98-369, § 2315(h),
98 Stat. 494, 1080 (1984) (setting the year-end 1984 deadline). Congress in 1985
therefore established its own measure for assessing whether a hospital “serves a
significantly disproportionate number of low income patients.” See 42 U.S.C.
§ 1395ww(d)(5)(F)(v). That measure is called the “disproportionate patient
percentage” (DPP). 42 U.S.C. § 1395ww(d)(5)(F)(vi).

The DPP is the sole variable in the “disproportionate share adjustment
percentage” that ultimately determines the dollar amount of any enhanced payment due
to a DSH. Id. § 1395ww(d)(5)(F)(vii). A higher DPP produces a higher adjustment
percentage, which in turn produces a larger adjustment payment. See id. In sum, the
DPP is the key figure in determining whether a hospital will receive additional Medicare
dollars for serving low-income patients and, if so, in what amount.
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 4

Two separate fractions are added together to produce the DPP: the Medicare
fraction and the Medicaid fraction. Id. § 1395ww(d)(5)(F)(vi). The basic unit of
measurement in both fractions is a hospital’s “patient days.” Id. In the numerator of the
Medicare fraction is the number of patient days in a cost-reporting period that are
attributable to patients who were both “entitled to benefits under [Medicare] part A” and
“entitled to supplemental security income [SSI] benefits.” Id. § 1395ww(d)(5)(F)(vi)(I).
The denominator is the total number of patient days in the fiscal year that are attributable
to patients who were “entitled to benefits under [Medicare] part A.” Id. In other words,
the Medicare fraction measures the portion of a hospital’s Medicare-entitled patient
population that is also entitled to SSI, a cash benefit provided to low-income elderly,
blind, or disabled individuals. See id. §§ 1381-1383f. This fraction can be expressed
visually as follows:

# of a hospital’s patient days for people
Medicare entitled to both Medicare and SSI
=
fraction
# of a hospital’s patient days for people
entitled to Medicare

The Medicaid fraction has both a different numerator and a different
denominator. Its numerator is the number of patient days in a cost-reporting period that
are attributable to patients who were “eligible for [Medicaid] . . . but who were not
entitled to benefits under [Medicare] part A.” Id. § 1395ww(d)(5)(F)(vi)(II). The
denominator is the total number of the hospital’s patient days in the same cost-reporting
period for all patients. Id. This fraction measures the proportion of a hospital’s total
patient population that is Medicaid-eligible, with the caveat of excluding patients who
are also entitled to Medicare benefits. The Medicaid program, codified at 42 U.S.C.
§§ 1396-1396w, is a federal-state cooperative program that “provides financial
assistance to low-income individuals seeking medical care.” Marka v. Haveman, 317
F.3d 547, 550 (6th Cir. 2003). This fraction can be expressed visually as follows:
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 5

# of a hospital’s patient days for people eligible
for Medicaid, but not entitled to Medicare
Medicaid
=
fraction # of all the hospital’s patient days

The Medicare fraction and the Medicaid fraction are expressed as percentages
and then added together to produce the DPP. 42 U.S.C. § 1395ww(d)(5)(F)(vi). These
fractions summarize the following relevant portion of the DPP statute:

In this subparagraph, the term “disproportionate patient percentage”
means, with respect to a cost reporting period of a hospital, the sum of–
(I) the 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 part A
of this subchapter and were entitled to supplementary security income
benefits (excluding any State supplementation) under subchapter XVI of
this chapter, 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 part A of this
subchapter, and
(II) the 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 plan approved under subchapter XIX of this chapter, but who
were not entitled to benefits under part A of this subchapter, and the
denominator of which is the total number of the hospital’s patient days
for such period.

Id.

The Medicaid fraction’s numerator accounts for the fact that some Medicaid-
eligible patients are also entitled to Medicare benefits (known as dual-eligible patients).
Central to the dispute in the present case is which fraction, if any, is the appropriate
place to count the patient days of dual-eligible patients who have exhausted their
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 6

Medicare benefits for inpatient hospital care during a particular “spell of illness.” See
id. § 1395d.

All Medicare beneficiaries—not just dual-eligible patients—are entitled to have
Medicare pay for inpatient hospital services for up to 90 days during any spell of illness
(the period from when a person enters a hospital for an injury or illness until he or she
has been out of the hospital for 60 consecutive days). Id.; see also id. § 1395x(a)
(defining the term “spell of illness”). They also receive an additional 60 days of such
coverage that can be spread across all spells of illness during a beneficiary’s lifetime.
Id. § 1395d. In other words, Medicare will cover: (1) hospital services for any spell of
illness lasting up to 90 days; and (2) an additional lifetime cap of 60 days for hospital
services for care in excess of 90 days per spell of illness.

This means that a Medicare patient who receives 150 days of Medicare-paid
inpatient care for a single spell of illness (90 + 60) is limited to 90 days of such care for
every subsequent spell of illness. The same is true of a patient who uses, for example,
110 Medicare-covered days during one spell of illness (90 + 20) and 130 such days
during another spell (90 + 40). Once a patient reaches the 90th day of a spell of illness
and has exhausted his or her 60-day supply of post-90th day coverage, Medicare will no
longer pay for the patient’s hospital services during that same spell of illness. See id.
§ 1395d(b)(1).

Both parties refer to such patients as having “exhausted their Medicare Part A
coverage” for inpatient hospital services. If a dual-eligible patient exhausts his or her
coverage for a particular spell of illness, then the subsequent patient days are called
“dual-eligible exhausted benefit days” and are generally paid by Medicaid as the payor
of last resort. See 42 U.S.C. § 1396a(a)(25) (mandating that state Medicaid plans
identify any third parties liable to pay for medical care available under the plan and to
seek reimbursement from such parties if the Medicaid program has already paid for such
care); see also State Plan Requirement and Other Provisions Relating to State Third
Party Liability Programs, 55 Fed. Reg. 1423-02, 1429 (Jan. 16, 1990) (“[W]hen an
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 7

individual is entitled to Medicare and eligible for Medicaid, Medicare, like any other
third party, is the primary payor.”).

The Secretary’s current regulation that implements the DPP statute interprets the
language “entitled to benefits under [Medicare] part A” as including the patient days
of all Medicare beneficiaries, regardless of whether a beneficiary has exhausted
Medicare coverage for any particular patient day. See 42 C.F.R. § 412.106(b). As a
result, all such days are included in the Medicare fraction—either in the denominator
only, or in the numerator as well if the Medicare beneficiary is also entitled to SSI. Prior
to the 2004 amendment of this regulation, however, the dual-eligible exhausted benefit
days were excluded from the Medicare fraction. See 42 C.F.R. § 412.106(b) (2003)
(counting only “covered” days in the Medicare fraction); see also Changes to the
Hospital Inpatient PPS and FY 2005 Rates, 69 Fed. Reg. 48916-01, 49099 (Aug. 11,
2004) (codified at 42 C.F.R. pt. 412) (“[W]e are adopting a policy to include the days
associated with dual-eligible beneficiaries in the Medicare fraction, whether or not the
beneficiary has exhausted Medicare Part A hospital coverage.”).

This interpretation of the phrase “entitled to benefits under [Medicare] part A”
also affects the Medicaid fraction. As noted above, the Medicaid fraction’s numerator
excludes patient days attributable to individuals who are also entitled to Medicare
benefits. 42 U.S.C. § 1395ww(d)(5)(F)(vi)(II). Because the Secretary views Medicare
beneficiaries who have exhausted their Part A coverage for inpatient hospital services
during a particular spell of illness as still being “entitled to benefits under [Medicare]
part A,” HHS excludes dual-eligible exhausted benefit days from the Medicaid fraction’s
numerator, even though such days are paid only by Medicaid.

Excluding such days from the Medicaid fraction’s numerator comports with the
Secretary’s current interpretation of the phrase “entitled to benefits under [Medicare]
part A,” but HHS contends that it had excluded these days from the fraction even before
the 2004 change to the regulation. See Centers for Medicare & Medicaid Services,
Ruling No. CMS-1498-R 7-8 (April 28, 2010) (noting that the Secretary’s original policy
excluded dual-eligible exhausted benefit days from the Medicaid fraction’s numerator).
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 8

The Secretary’s pre-2004 position on whether to count dual-eligible exhausted benefit
days in the Medicaid fraction is less than clear, however, as is HHS’s explanation in this
litigation for why such days were supposedly viewed as excluded.

At bottom, the current regulatory framework relevant to the present case can be
summarized as follows: (1) a dual-eligible exhausted benefit day is counted in the
DPP’s Medicare fraction, provided that the patient was also entitled to SSI on that day;
and (2) under no circumstances may a dual-eligible exhausted benefit day be counted in
the DPP’s Medicaid fraction. With that established, we turn next to the nature of
Metro’s challenge to that framework.

B. Nature of the present case

Metro has operated an Assisted Breathing Center since 1985, providing care to
ventilator-dependent patients that is generally unavailable in nursing homes. Virtually
all of these patients are eligible for Medicaid, many are dual-eligible patients, and a few
are entitled to SSI. Each Medicaid-eligible patient that the Center admits must be pre-
approved by the state agency that administers Michigan’s Medicaid program. One of
the agency’s “considerations for pre-admission authorization” is that a dual-eligible
patient’s Medicare Part A coverage be exhausted, leaving Medicaid as the sole payor for
what is typically long-term care at the Center. Because of these patients, a significant
portion of Metro’s patient days are dual-eligible exhausted benefit days. How these days
should be accounted for under the DPP is what has led to the dispute in this case.

Pursuant to the Medicare regulations, Metro submits annual cost reports to the
“fiscal intermediary” between Metro and HHS. (A fiscal intermediary is a contractor,
generally a private insurance company, that acts on behalf of HHS.) Consistent with
previous cost reports, Metro’s report for 2005 included in the Medicaid fraction of its
DPP calculation the patient days of dual-eligible patients in its Assisted Breathing Center
who had exhausted their Medicare Part A coverage for a particular spell of illness. The
fiscal intermediary audited the 2005 report and determined that Metro could not count
these patient days in the Medicaid fraction, nor could most of these days be counted in
the Medicare fraction because very few of the patients were entitled to SSI. As a result,
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 9

Metro’s DPP for 2005 was reduced from 26.28% (as calculated by Metro) to 14.06% (as
calculated by the fiscal intermediary). According to the fiscal intermediary, this
overstatement of Metro’s DPP caused Medicare to overpay Metro by $2,179,740 in
2005, which funds were subsequently recouped by HHS.

Metro now challenges the Secretary’s interpretation of the DPP statute that led
to this alleged overpayment. The district court ruled in Metro’s favor, holding that
42 C.F.R. § 412.106(b) is invalid because the regulation’s interpretation of the phrase
“entitled to benefits under [Medicare] part A” is contrary to the meaning of the phrase
in the DPP statute. Metro. Hosp., Inc. v. U.S. Dep’t of Health & Human Servs., 702 F.
Supp. 2d 808, 825-26 (W.D. Mich. 2010). In reaching this conclusion, the district court
relied primarily on this court’s opinion in Jewish Hospital v. Secretary of Health &
Human Services, 19 F.3d 270 (6th Cir. 1994), an opinion that struck down an earlier
version of the same regulation because of its impermissible interpretation of the word
“eligible” in the Medicaid fraction. See id. at 811-16, 825.

HHS has timely appealed the district court’s decision on the merits. Metro has
timely cross-appealed to challenge the court’s remand order for the calculation of
damages and interest.

II. ANALYSIS

A. Standard of review

An agency’s interpretation of a statute that is reflected in a regulation adopted
through notice-and-comment rulemaking (as was 42 C.F.R. § 412.106(b) in question
here) is reviewed using the two-step framework outlined in Chevron, U.S.A., Inc. v.
Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). See United States v.
Mead Corp., 533 U.S. 218, 226-27 (2001) (requiring analysis under the Chevron
framework for regulations adopted through notice-and-comment rulemaking). “First,
always, is the question whether Congress has directly spoken to the precise question at
issue. If the intent of Congress is clear, that is the end of the matter; for the court, as
well as the agency, must give effect to the unambiguously expressed intent of Congress.”
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 10

Chevron, 467 U.S. at 842-43. The reviewing court employs “traditional tools of
statutory construction” to ascertain whether “Congress had an intention on the precise
question.” Id. at 843 n.9. But “if the statute is silent or ambiguous with respect to the
specific issue, the question for the court is whether the agency’s answer is based on a
permissible construction of the statute.” Id. at 843. The agency’s construction need not
be the only possible permissible interpretation of the statute, nor must it be “even the
reading the court would have reached if the question initially had arisen in a judicial
proceeding.” Id. at 843 n.11. Our review of this interpretation dispute will be de novo
because the district court ruled as a matter of law in granting summary judgment to
Metro. See Lefevers v. GAF Fiberglass Corp., 667 F.3d 721, 723 (6th Cir. 2012).

B. Congress has not “directly spoken” to how the DPP calculation
should account for dual-eligible exhausted benefit days

1. Plain-language arguments

Metro contends, and the district court agreed, that the plain language of the DPP
statute unambiguously provides that a dual-eligible exhausted benefit day must be
counted in the Medicaid fraction and that no exhausted benefit day (whether dual-
eligible or not) may be counted in the Medicare fraction. See Metro. Hosp., Inc., 702 F.
Supp. 2d at 822, 825. The foundation for this argument is that Congress purposefully
used the term “entitled” in reference to Medicare benefits rather than “eligible” (the term
it chose for counting Medicaid patient days), and therefore the term “entitled” must
signify the actual payment for hospital services rather than merely being eligible for such
services. See id. at 820-22. HHS, on the other hand, argues that the phrase “entitled to
benefits under [Medicare] part A” has a clear, consistent meaning throughout the
Medicare statute; i.e., covering any individual who meets the statutory criteria set out
in 42 U.S.C. § 426. Congress used that phrase in the DPP provision, HHS contends, to
invoke this specific meaning. We conclude that the statute’s plain language does not
unambiguously endorse either party’s interpretation.

No definition of the phrases “entitled to benefits under [Medicare] part A” or
“eligible for [Medicaid]” is provided in the DPP provision or elsewhere in the statutory
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 11

section in which the DPP appears. See 42 U.S.C. § 1395ww. But this court has
previously concluded that “eligibility” as used in the Medicaid fraction does not refer
to the actual payment of benefits. Jewish Hosp., 19 F.3d at 274-75. Metro relies on the
Jewish Hospital opinion in two ways: (1) as controlling precedent; and (2) alternatively,
as persuasive authority for Metro’s plain-language argument that a patient is “entitled”
to a Medicare benefit only when he or she has the right to the payment of an in-patient
hospital service by Medicare.

i. Jewish Hospital does not foreclose the
Secretary’s interpretation of the statutory
phrase, “entitled to benefits under [Medicare]
part A” as a matter of stare decisis

The Supreme Court recognized in National Cable & Telecommunications
Association v. Brand X Internet Services, 545 U.S. 967 (2005), that formal adherence to
stare decisis must sometimes yield to the recognition of agency expertise in interpreting
the statutes that an agency administers. See id. at 983 (noting that an agency is “the
authoritative interpreter” of a statute that it is charged with administering and that
placing stare decisis above Chevron deference “would lead to the ossification of large
portions of our statutory law” (internal quotation marks omitted)). As such, not every
holding from a prior case that interprets statutory language will foreclose a subsequent
agency interpretation of that language (or related language). Brand X limits the stare
decisis effect of prior judicial statutory interpretations to those constructions that
“follow[] from the unambiguous terms of the statute and thus leave[] no room for agency
discretion.” 545 U.S. at 982. This rule is a direct reference to Chevron step one. See
id. (“The better rule is to hold judicial interpretations contained in precedents to the same
demanding Chevron step one standard that applies if the court is reviewing the agency’s
construction on a blank slate . . . . ”); see also Carpenter Family Invs., LLC, 136 T.C.
373, 400 (2011) (Halpern and Holmes, JJ., concurring) (explaining the inquiries that a
court must make when “applying Brand X to find a [Chevron] step one holding”).

Recognizing that Brand X gives stare decisis effect to a prior judicial
construction of a statute only when made as a Chevron step-one holding has two
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 12

important implications: First, courts often describe statutory language as “clear” or
“unambiguous” without making a Chevron step-one holding. See Note, Implementing
Brand X: What Counts as a Step One Holding?, 119 Harv. L. Rev. 1532, 1538 (2006)
(noting that courts use these terms outside the context of Chevron and that “a later judge
does not know for sure whether [prior courts] intended the terms to have the same
meaning they would have had in the Chevron context”). Second, and more important
to the present case, a Chevron step-one holding answers only a very specific question;
i.e., “whether Congress has directly spoken to the precise question at issue.” Chevron
467 U.S. at 842. Answers to other questions that an opinion might provide, even ones
that purport to define the allegedly unambiguous terms of related statutory language, are
therefore not part of the Chevron step-one holding and thus do not foreclose future
agency interpretations under Brand X’s analysis.

The Brand X opinion thus requires us to determine whether Jewish Hospital
made a Chevron step-one holding and, if so, to ascertain the content of that holding. We
first note that the only explicit statements of a holding that appear in Jewish Hospital are
expressed in terms of Chevron step two. See 19 F.3d at 275, 276 (“We hold that, even
if the language of the statute can be deemed silent or ambiguous, the Secretary’s
construction of the statute is not permissible. . . . Therefore, we hold that the Secretary’s
construction of the Medicaid proxy, as represented by its promulgated regulation is
impermissible.” (emphasis in the original)); see also Chevron, 467 U.S. at 843
(describing the second step of the analysis as asking “whether the agency’s answer” to
a statute’s silence or ambiguity “is based on a permissible construction of the statute”).

To be sure, the Jewish Hospital opinion suggests that the statutory language at
issue in that case expresses a clear legislative mandate. 19 F.3d at 274. But rather than
this clear mandate constituting “the end of the matter” as a step-one holding, see id.
(citing Chevron, 467 U.S. at 843), the opinion proceeds in the Chevron analysis to
conclude that the Secretary’s interpretation was impermissible. Id. at 275-76. The
opinion is thus unclear regarding whether the court’s Chevron step-one discussion is a
holding. And even if that discussion amounts to a holding, we find it far from clear that
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 13

the discussion constituted the “principal holding” as determined by our dissenting
colleague (see Dissenting Op. at 38), given that the opinion’s only explicit expressions
of a holding are in terms of Chevron step two.

But even if we were to read Jewish Hospital as making a Chevron step-one
holding, we must further assess whether that holding construes the statutory language
central to the present case. The “precise question at issue” for Chevron step-one
purposes in Jewish Hospital was HHS’s interpretation of particular language from the
Medicaid fraction to mean that Medicaid inpatient days included only those days for
which a state’s Medicaid program rendered payment. Jewish Hospital focuses on the
following phrase from that fraction at the beginning of its Chevron analysis:

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].

See 19 F.3d at 274 (quoting 42 U.S.C. § 1395ww(d)(5)(F)(vi)(II)) (emphasis added in
Jewish Hosp.).

Because a Chevron step-one holding is by definition limited to the scope of the
“precise question at issue,” the Chevron step-one holding in Jewish Hospital, if any, is
limited to the court’s answer to that question. And the court’s answer is that “it appears
that all days for which an individual is capable of receiving Medicaid should be figured
into the proxy calculation,” rather than only the days of care for which Medicaid actually
paid. See Jewish Hosp. 19 F.3d at 274.

The Jewish Hospital court gave several rationales in support of this answer,
starting with two aspects of the above-quoted statutory language. First, the court noted
that “the word ‘eligible’ refers to whether a patient is capable of receiving [Medicaid]”
and that the statute does not suggest congressional intent “to impute any special meaning
to the term, eligible.” Jewish Hosp., 19 F.3d at 274. Second, the court explains that “the
parenthetical ‘for such days’ serves only as the antecedent to the initial phrase ‘the
number of the hospital’s patient days for such period’” and thus does not restrict or
otherwise qualify the meaning of the term “eligible.” Id. Supporting this interpretation
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 14

of the statutory language was the court’s recognition that “Congress sought to structure
a proxy that is definable and accessible, one that would not be subject to yearly
budgetary constraints of individual states that may threaten a PPS hospital’s ability to
continue to provide services to low income persons.” Id. at 274-75. The court’s
interpretation of “the notion of ‘eligibility’” was consistent with this intent, such that the
court would not strain to interpret the statutory language in a manner that would allow
“crucial federal legislation” to be “readily altered by state legislative fiat.” Id. at 274.
This analysis strikes us as the essential rationale for the Jewish Hospital decision.

As additional support for its conclusion, the Jewish Hospital court went on to
note that “eligibility” in the Medicaid proxy must mean something different than
“entitlement” in the Medicare proxy, and that “[t]o be entitled to some benefit means that
one possesses the right or title to that benefit.” Id. at 275 (emphases in original). Metro
argues that this supporting rationale is itself part of a Chevron step-one holding and
therefore forecloses the Secretary’s current interpretation of the statutory phrase
“entitled to benefits under [Medicare] part A.” But a Chevron step-one holding
addresses only “the precise question at issue,” Chevron 467 U.S. at 842, and that
question in Jewish Hospital was the meaning of the phrase “eligible for [Medicaid],” not
the phrase “entitled to benefits under [Medicare] part A.”

Accordingly, we decline to hold that Jewish Hospital’s “back-up” analysis
contrasting the phrase “entitled to benefits under [Medicare] part A” with the phrase
“eligible for [Medicaid]”—the contrast being neither “the precise question at issue” nor
essential to the court’s disposition of the case—forecloses the Secretary’s interpretation
of that phrase as reflected in 42 C.F.R. § 412.106(b). See Northeast Hosp. Corp. v.
Sebelius, 657 F.3d 1, 12 n.7 (D.C. Cir. 2011) (concluding that Jewish Hospital’s
discussion of the term “entitled” was dicta). And we, for the same reasons, are no more
bound by Jewish Hospital than is the Secretary in determining whether Congress
unambiguously expressed what that phrase means with regard to counting dual-eligible
exhausted benefit days. See Brand X, 545 U.S. at 983-84.
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 15

Our dissenting colleague, however, concludes that Jewish Hospital requires us
to invalidate the challenged HHS regulation as a matter of stare decisis. We have no
quarrel with the dissent’s description of the stare decisis doctrine and its fundamental
importance. Nor do we dispute that “the line between holding and dictum is not always
clear” (Dissenting Op. at 40), with judges of this court and our sister circuits disagreeing
with regard to where that line should be drawn. See, e.g., United States v. Stevenson,
676 F.3d 557, 562 (6th Cir. 2012) (noting that language from a prior opinion was
“dictum because it was not necessary to the holding”); United States v. Hardin, 539 F.3d
404, 438-440 (6th Cir. 2008) (Batchelder, J., concurring in part and dissenting in part)
(invoking Black’s Law Dictionary’s definition of the term “holding,” which is “[a]
court’s determination of a matter of law pivotal to its decision; a principle drawn from
such a decision,” to disapprove of the majority opinion’s conclusion that a principle from
a prior case was dicta); United States v. Johnson, 256 F.3d 895, 914-16 (9th Cir. 2001)
(opinion of Kozinski, J.) (disapproving of Judge Tashima’s characterization of Judge
Kozinski’s opinion as dicta).

But we part ways with our dissenting colleague in his attempt to elevate Jewish
Hospital’s brief discussion of the contrast between the terms “eligible” and “entitled”
from mere “obiter dictum” to “judicial dictum,” and then to effectively a full-fledged
holding. See Dissenting Op. at 40-41. The definitions he provides may be useful in
drilling down to an opinion’s holding as a general matter, but Brand X and Chevron give
us specific direction in the context of potential conflicts between agency interpretations
and prior judicial constructions of statutory language. And that direction informs us that
a prior judicial construction trumps a subsequent agency interpretation only if the court
held as a result of Chevron step-one analysis that the statutory language provides a clear
congressional answer to the “precise question at issue.” See Brand X, 545 U.S. at 982;
Chevron, 467 U.S. at 842. To the extent that Jewish Hospital provided a step-one
holding, it decided only that the phrase “eligible for [Medicaid]” means that “a patient
is capable of receiving . . . Medicaid” regardless of whether a state’s Medicaid plan
actually paid for the patient’s medical care. 19 F.3d at 274. The meaning of that
statutory phrase, and not the phrase “entitled to benefits under [Medicare] part A,” was
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 16

the “precise question at issue” in Jewish Hospital and thus defines the scope of any
Chevron step-one holding that the court could have made.

Moreover, the Brand X rule is grounded in the sound policy that the meaning of
statutory language should not be judicially ossified unless it has been carefully
considered by a court and held to be unambiguous under Chevron step one. See Brand
X, 545 U.S. at 983. This rule also constrains the courts to their proper institutional role,
i.e., deciding only the issues presented in the case or controversy before them. See, e.g.,
Flast v. Cohen, 392 U.S. 83, 94-95 (1968) (explaining that “limit[ing] the business of
federal courts to questions presented in an adversary context . . . define[s] the role
assigned to the judiciary in a tripartite allocation of power”). If a court is to decide that
statutory language is unambiguous and leaves no gap for an agency’s interpretation to
fill, then the question of that language’s meaning must be directly before the court. For
this reason, we do not believe that the Jewish Hospital decision definitively fixed the
meaning of the phrase “entitled to benefits under [Medicare] part A” when the meaning
of that language was not the issue presented and, as our dissenting colleague concedes
(see Dissenting Op. at 36, 40), was not necessary to define in order to determine the
meaning of the phrase “eligible for [Medicaid].”

ii. The analysis in Jewish Hospital does not
demonstrate that the portion of the DPP statute
at issue in the present case conveys clear
congressional intent

Even if Jewish Hospital does not resolve the present case as a matter of stare
decisis, Metro alternatively argues that the opinion is persuasive in its analysis of the
relevant statutory language and supports the argument that Congress used different
words to convey different meanings. See Jewish Hosp., 19 F.3d at 275 (“Adjacent
provisions utilizing different terms . . . must connote different meanings.”). Metro also
notes the decisions from other federal courts of appeals that have agreed with the Jewish
Hospital decision and placed even greater reliance on the “entitled v. eligible”
distinction in the DPP. See Cabell Huntington Hosp., Inc. v. Shalala, 101 F.3d 984, 988
(4th Cir. 1996) (agreeing with the Jewish Hospital decision); Legacy Emanuel Hosp. &
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 17

Health Ctr. v. Shalala, 97 F.3d 1261, 1265 (9th Cir. 1996) (agreeing with the Jewish
Hospital decision and basing its conclusion “on Congress’s use of the word ‘eligible’
rather than ‘entitled’”); Deaconess Health Servs. Corp. v. Shalala, 83 F.3d 1041 (8th
Cir. 1996) (per curiam) (agreeing with the Jewish Hospital decision).

The analysis from Jewish Hospital that Metro urges us to adopt has surface
plausibility, but it is overly narrow. Only by examining the language of the DPP
provision in isolation does Metro’s argument appear persuasive. But “[p]lain meaning
is examined by looking at the language and design of the statute as a whole,” United
States v. Parrett, 530 F.3d 422, 429 (6th Cir. 2008), and this court “mak[es] every effort
not to interpret a provision in a manner that renders other provisions of the same statute
inconsistent,” Carafelli v. Yancy, 226 F.3d 492, 499 (6th Cir. 2000). Viewing the
Medicare statute as a whole, the “entitled v. eligible” dichotomy loses its persuasiveness.

The lengthy statute in which the DPP appears, 42 U.S.C. § 1395ww, governs
“[p]ayments to hospitals for inpatient hospital services” generally, not just the special
adjustments for hospitals serving a disproportionately low-income population. Notably,
the phrase “entitled to benefits under [Medicare] part A” appears seven times throughout
the statute other than in the DPP provision. See 42 U.S.C. § 1395ww. But the phrase
“eligible for [Medicaid],” on which Metro’s plain-language argument exclusively relies,
appears only in the DPP provision and nowhere else in § 1395ww.

This leaves a statutory interpreter applying Metro’s construction of “entitled to
benefits under [Medicare] part A” with two unattractive options: (1) interpret every
instance of that phrase in § 1395ww consistent with Metro’s construction in the DPP
provision, or (2) interpret each instance of that phrase in the context of its specific
subsection. The first option is problematic because nothing in the language or structure
of § 1395ww suggests that the use of the phrase in the DPP provision should dictate the
meaning of that same phrase elsewhere in the statute. Indeed, the DPP provision is not
the first place that the phrase appears, nor does the DPP provision purport to define the
phrase. And applying Metro’s construction of the phrase elsewhere in § 1395ww makes
little sense substantively.
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 18

For instance, part of the statute’s definition of a “sole community hospital” is that
such a hospital be the only source of inpatient services reasonably available to
individuals “who are entitled to benefits under [Medicare] part A.” Id.
§ 1395ww(d)(5)(D)(iii)(II). We can perceive of no reason why Congress would intend
that a hospital’s status as a sole community hospital depend on that hospital’s
accessibility only to those Medicare beneficiaries who have not exhausted their benefit
days for a particular spell of illness, as opposed to all Medicare beneficiaries generally.
But that is precisely what Metro argues is the import of Congress’s choice to use the
phrase “entitled to benefits under [Medicare] part A.” Metro’s interpretation of this
phrase as employed in the DPP provision similarly does not make sense in other
§ 1395ww contexts in which the phrase appears. See, e.g., id. § 1395ww(d)(5)(K)(viii)
(using the phrase in reference to new services or technologies qualifying for coverage);
id. § 1395ww(f)(1)(B)(ii) (using the phrase in describing hospitals for which HHS may
waive the requirement of implementing a standardized electronic cost-reporting format).

This leaves the second option—interpreting each instance of the phrase in the
context of its specific subsection. The pitfall of this method is that it would lead to
inconsistent meanings of the same phrase within the same statute. See First City Bank
v. Nat’l Credit Union Admin. Bd., 111 F.3d 433, 438 (6th Cir. 1997) (“It is a basic canon
of statutory construction that phrases within a single statutory section be accorded a
consistent meaning.”). Moreover, the phrase “entitled to benefits under [Medicare] part
A” appears in more than 30 other sections of the Medicare statute, indicating that the
phrase has a specific, consistent meaning throughout the statutory scheme, rather than
a varying, context-specific meaning in each section and subsection. See Ali v. Fed.
Bureau of Prisons, 552 U.S. 214, 222 (2008) (noting that statutory construction “must,
to the extent possible, ensure that the statutory scheme is coherent and consistent”).

And these other uses of the phrase within the Medicare statute are similarly
inconsistent with Metro’s restrictive interpretation. See, e.g., 42 U.S.C. § 1395b-
9(c)(2)(A) (requiring the Medicare Beneficiary Ombudsman to hear complaints from
“individuals entitled to benefits under [Medicare] part A,” with no indication of an intent
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 19

to exclude complaints from Medicare beneficiaries who have exhausted their benefit
days for a particular spell of illness). Two of the references even more directly refute
Metro’s interpretation by clearly recognizing the difference between a patient who has
exhausted his or her Medicare coverage for a particular spell of illness and a patient who
is not entitled to Medicare benefits at all. See id. § 1395l(t)(1)(B)(ii) (providing
coverage for certain outpatient-department services that are “furnished to a hospital
inpatient who (I) is entitled to benefits under [Medicare] part A . . . but has exhausted
benefits for inpatient hospital services during a spell of illness, or (II) is not so entitled”
(emphasis added)); id. § 1395l(a)(8)(B)(i) (using the same language as
§ 1395l(t)(1)(B)(ii) in providing for the payment of certain outpatient services).

iii. HHS’s plain-language arguments likewise fail

In contrast to Metro’s DPP-specific argument, HHS contends that the phrase
“entitled to benefits under [Medicare] part A” indeed has a specific and consistent
meaning throughout the Medicare statutory scheme; i.e., that the individual meets the
statutory criteria set out in 42 U.S.C. § 426. Entitlement to Medicare is established by
§ 426 for two populations: (1) individuals over the age of 65 who are eligible for Social
Security retirement benefits, and (2) individuals under the age of 65 who have been
entitled to Social Security disability benefits for at least two years. See 42 U.S.C.
§ 1395c.

Section 426, which is captioned “Entitlement to hospital insurance benefits,”
provides that individuals who meet one of those two sets of criteria “shall be entitled to
hospital insurance benefits under [Medicare] part A.” Id. § 426(a)-(b). HHS argues that
the meaning of this phrase in the DPP provision is no different than its meaning in the
statute that establishes and defines the phrase. And because exhaustion of benefit days
during a particular spell of illness does not bear on whether a patient meets the § 426
criteria, such exhaustion likewise does not bear on whether a patient is “entitled to
benefits under [Medicare] part A” on a given day for the purpose of calculating the DPP.

HHS’s appeal to the consistency of its interpretation within the Medicare
statutory scheme, though persuasive, is not conclusive regarding the proper treatment
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 20

of dual-eligible exhausted benefit days. In fact, an HHS regulation concerning another
part of § 1395ww interpreted “entitled to benefits under [Medicare] part A” precisely as
Metro construes the term in the DPP until the regulation was amended in 2010.
Compare Changes to the Hospital Inpatient PPS and FY 1991 Rates, 55 Fed. Reg.
35990, 35996 (Sept. 4, 1990) (“Since patients who have exhausted their part A benefits
are no longer entitled to payment under part A, we do not believe such stays should be
counted.”) with Hospital Inpatient PPS for Acute Care Hospitals and FY 2011 Rates,
75 Fed. Reg. 50042, 50287 (Aug. 16, 2010) (modifying the 1990 interpretation and
amending the relevant regulation to include individuals who have exhausted their
Medicare coverage).

This former interpretation of the same phrase used in the same statute, which was
contrary to the Secretary’s current interpretation of that language in the DPP, shows that
even the Secretary has not always viewed the phrase as unambiguously encompassing
Medicare patients who have exhausted their Part A benefits for a particular spell of
illness. And looking back to 2003, the Secretary was interpreting this language in the
DPP provision to exclude exhausted benefit days. See 42 C.F.R. § 412.106(b) (2003).
To be sure, an agency may change its interpretation of a statute and still warrant
deference at the second step of the Chevron analysis, see Chevron, 467 U.S. at 863-64,
but such change clearly casts doubt on the idea that Congress “unambiguously expressed
[its] intent” through the statutory language. See id. at 843.

We conclude that neither Metro nor HHS has demonstrated that the plain
language of the phrase “entitled to benefits under [Medicare] part A,” as used in the DPP
provision and read in light of the statute as a whole, has a plain meaning that answers
“the precise question at issue.” See id. at 842. Yet both parties argue that the
overarching statutory purpose of the DPP and the DSH adjustment evidences a clear
congressional intent regarding the contested language that favors their diametrically
opposite interpretations. See, e.g., Dole v. United Steelworkers of Am., 494 U.S. 26, 35
(1990) (using a statute’s “object and policy” as a “traditional tool of statutory
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 21

construction” for determining congressional intent in a Chevron analysis). We address
these arguments immediately below.

2. Statutory-purpose arguments

Metro argues that the purpose of the DPP provision is to supplement the
Medicare reimbursement payments going to hospitals serving low-income patients. It
emphasizes that Congress created the specific formulas for calculating DSH adjustments
(of which the DPP is the sole variable) in response to the Secretary’s failure to comply
with previous legislative mandates to develop a methodology for identifying and paying
DSHs. See Part II.A. above. The purpose of the DPP’s two fractions, Metro argues, is
to measure two different low-income patient populations, using Medicaid eligibility as
one proxy for being a low-income patient and entitlement to Medicare and SSI as the
other proxy. And the Medicaid numerator’s exclusion of days attributable to patients
who were “entitled to benefits under [Medicare] part A” is meant to prevent the same
patient day from being counted in both fractions. Metro concludes that the statutory
purpose is to count, but not double-count, low-income patient days, and argues that only
its interpretation of the DPP fits that purpose.

HHS, on the other hand, does not dispute Metro’s characterization of the DPP’s
overarching purpose, but focuses on Congress’s intent “that the Medicare/SSI fraction
serve as a proxy for low-income Medicare patients” and that only non-Medicare patient
days should be counted in the Medicaid fraction. A dual-eligible patient, HHS contends,
cannot by definition be a “non-Medicare” patient. And because a Medicare beneficiary
remains a Medicare beneficiary even when he or she has exhausted coverage for a
particular spell of illness, HHS argues that its regulation appropriately assesses a dual-
eligible patient day in the Medicare fraction. HHS thus contends that its regulation
effectuates, and Metro’s proposed construction undermines, the DPP statute’s purpose.

But designating the relevant low-income patient populations as “Medicare” and
“non-Medicare” is purely HHS’s description of the statute and reveals nothing about the
DPP’s purpose. Indeed, Metro does not dispute that the Medicaid fraction is designated
to exclude Medicare patient days. Rather, the key issue is to determine what constitutes
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 22

a Medicare patient day—any day of care provided to a patient who is a Medicare
beneficiary, or only those days of care actually paid for by Medicare. The statutory
purpose that HHS cites is equally consistent with Metro’s proposed construction of the
DPP provision. That construction would define patients who have exhausted their
Medicare coverage for a particular spell of illness as “non-Medicare” patients and
therefore assess their “non-Medicare” patient days in the Medicaid fraction, just as HHS
suggests is intended by the statute. In short, this identified statutory purpose offers little
guidance in arriving at the meaning of the statute as advocated by HHS.

To be sure, the DPP provision’s general purpose is relatively clear: to provide
enhanced payments to hospitals based on the disproportionate share of low-income
patients they serve as determined by the Medicare fraction and the Medicaid fraction.
See Jewish Hosp., 19 F.3d at 272. Also clear from the statute is that these two fractions
are exclusive of one another. As noted above, the Medicaid fraction’s numerator
excludes the hospital days of patients who are entitled to Medicare Part A benefits.
42 U.S.C. § 1395ww(d)(5)(F)(vi)(II). Such days are instead counted in the
Medicare fraction’s numerator if the patient is also entitled to SSI benefits. Id.
§ 1395ww(d)(5)(F)(vi)(I). The two fractions are then added together to arrive at the
DPP, suggesting that the fractions are intended to represent different portions of a
hospital’s low-income patient population. As such, HHS does not dispute Metro’s
contention that patient days should not be double-counted in the DPP, and
congressional intent is also sufficiently clear on this point.

But knowing the statute’s general purpose and that the two DPP fractions are
mutually exclusive is insufficient to divine a clear congressional intent regarding
whether a Medicare patient who has exhausted his or her days of inpatient services for
a particular spell of illness is “entitled to benefits under [Medicare] part A.” Even if we
were to assume that Congress intended the DPP to account for all of a hospital’s low-
income Medicare and Medicaid patients in one or the other of the two fractions, such
intent still would not favor Metro’s proposed interpretation over that of the Secretary,
or vice versa.
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 23

As we will explain below, each party’s interpretation of the statute would exclude
from the DPP calculation a group of low-income patients—defined by either entitlement
to SSI or by eligibility for Medicaid—that the other party’s interpretation would include.
Because either interpretation would necessarily exclude certain low-income patients
from the DPP calculation, we can find no support for a clear statutory mandate to
account for all low-income patients between the two fractions. The inclusion or
exclusion of patient days attributable to particular subsets of low-income patient
populations that results from either party’s interpretation thus neither effectuates nor
frustrates such a mandate.

As the present case demonstrates, the Secretary’s current regulation excludes one
subset of low-income patient days from both numerators: the dual-eligible exhausted
benefit days of patients who were not entitled to SSI on those days. Yet dual-eligible
patients are not only Medicaid-eligible on such days; Medicaid actually pays for their
hospital services. Eligibility for Medicaid is a proxy for being a low-income patient that
the DPP statute employs, and the Secretary does not dispute that these patients are, in
fact, low-income. Nor does she suggest any reason why Congress would intend for the
patient days of this particular low-income patient population to be excluded from the
DPP calculation.

But Metro’s proposed interpretation fares no better. It proposes that any
Medicare patient who has exhausted his or her days of inpatient hospital services for a
particular spell of illness is no longer “entitled to benefits under [Medicare] part A.”
This interpretation has two consequences: (1) such a Medicare patient cannot be
counted in the Medicare fraction; and (2) such a Medicare patient can be counted in the
Medicaid fraction only if he or she is also eligible for Medicaid (that is, he or she is a
dual-eligible patient). As the regulation now stands, patient days of Medicare
beneficiaries who are entitled to SSI are counted in the Medicare fraction whether or not
they have exhausted their benefits for a particular spell of illness. See 42 C.F.R.
412.106(b). But if the statute were to be read as Metro proposes, then the exhausted
benefit days of Medicare patients who are not dual-eligible would be totally excluded
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 24

from the DPP calculation. These are low-income patients as evidenced by their
entitlement to SSI, a proxy (like eligibility for Medicaid) that the DPP provision
employs. Metro offers no reason why Congress would intend for the patient days of this
particular low-income patient population to be excluded from the DPP calculation. In
sum, Metro’s interpretation of the DPP provision is no more consistent with the alleged
statutory purpose of including all low-income patient days than is HHS’s current
regulatory interpretation.

We do note, however, that Metro’s proposed interpretation would not exclude
this subset of low-income patient days if patients entitled to SSI were automatically
eligible for Medicaid. This is because every such patient day that Metro’s interpretation
would exclude from the Medicare fraction would necessarily be a dual-eligible
exhausted benefit day and therefore included in the Medicaid fraction. But an individual
entitled to SSI, though generally eligible for Medicaid, see 42 U.S.C. § 1396a(a)(10)(A),
is by no means guaranteed such eligibility. See Schweiker v. Gray Panthers, 453 U.S.
34, 38 (1981) (explaining the general requirement that SSI-recipients be entitled to
Medicaid). But since the SSI program’s inception in 1972, states have had the option
to make Medicaid eligibility more restrictive than the qualifications for receiving SSI
benefits. See Social Security Amendments of 1972, Pub. L. No. 92-603, § 209(b), 86
Stat. 1329, 1381 (codified at 42 U.S.C. § 1396a(f) (2011)). Eleven states currently
employ this so-called “§ 209(b)” option, see Medicaid and the SSI Program, Social
Security Program Operations Manual System SI 01715.010, available at
https://secure.ssa.gov/poms.nsf/lnx/0501715010 (last visited Mar. 26, 2013), but more
have done so in the past. See Gray Panthers, 453 U.S. at 39 n.6 (listing 15 states using
the § 209(b) option). Because not all SSI recipients are eligible for Medicaid due to the
§ 209(b) option, Metro’s proposed interpretation would indeed exclude patient days from
the DPP calculation that the current regulation includes.

This analysis also shows how the present case differs substantially from the
circumstances in Jewish Hospital. The contested regulation in that case counted patient
days in the Medicaid fraction only if a state Medicaid program actually paid for the
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 25

hospital care provided on that day. See Jewish Hosp., 19 F.3d at 272. This
interpretation of “eligible for [Medicaid]” was unquestionably more restrictive than the
alternative interpretation of that statutory language, which would count a Medicaid-
eligible patient’s day of hospital care in the Medicaid fraction regardless of whether the
state Medicaid program actually paid for such care. Id. at 276. The regulation in Jewish
Hospital thus “unnecessarily restrict[ed] the available subsidy” to hospitals across the
board, whereas the regulation that Metro contests does not uniformly restrict DSH
adjustments. Rather, the regulation’s interpretation of the DPP provision counts patient
days that will presumably increase some hospitals’ DSH adjustments while excluding
other patient days that decrease the DSH adjustments of hospitals like Metro.

The reason, by the way, that Metro is so adversely affected by HHS’s regulation
is because most of Metro’s dual-eligible patients are not entitled to SSI benefits. This
means that the patient days of these non-SSI recipients cannot be counted alternatively
in the Medicare fraction. The exclusion of these same patient days from the Medicaid
fraction (because the patients are dual-eligible) thus means exclusion from the DPP
calculation altogether, thereby significantly decreasing Metro’s DSH adjustment.

In sum, the current regulation’s practical effect of excluding some low-income
patient days from the DPP calculation does not demonstrate that it is contrary to
Congress’s clear intent because Metro’s alternative interpretation of the phrase “entitled
to benefits under [Medicare] part A” would have the same exclusionary effect on a
different set of low-income patient days. Metro has thus failed to show why the
Secretary’s interpretation of the DPP calculation is any more of an “absurd result” than
the one proposed by Metro. We therefore conclude that Congress has not directly
spoken to the question of how exhausted benefit days should be counted in the DPP,
leading us to analyze the second step of the Chevron analysis.

C. The Secretary’s interpretation of the DPP provision is a permissible
construction of 42 U.S.C. § 1395ww

Having determined that § 1395ww is, at best, ambiguous with respect to the
treatment of dual-eligible exhausted benefit days, our analysis proceeds to Chevron’s
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 26

second step. If the Secretary’s interpretation of the DPP provision is based on a
permissible construction of the statute, then we must defer to that interpretation and
uphold the regulation. See Chevron, 467 U.S. at 843. A permissible construction is one
that is not “arbitrary, capricious, or manifestly contrary to the statute.” Id. at 844.

Metro argues that the Secretary’s interpretation of the phrase “entitled to benefits
under [Medicare] part A” is contrary to the statute, inconsistent with prior agency
interpretations of the same language in the DPP provision and elsewhere in § 1395ww,
and is the result of an arbitrary rulemaking process. Each of these arguments is analyzed
in turn below.

1. Sections 426(c) and 1395d do not preclude the
Secretary’s interpretation

Metro first takes aim at HHS’s argument that 42 U.S.C. § 426 supports
interpreting the phrase “entitled to benefits under [Medicare] part A” as describing
individuals who meet § 426’s old-age or disability-based criteria. Subsection 426(c)
instead “fully negate[s]” HHS’s reliance on § 426(a)-(b), Metro argues, because § 426(c)
explains that entitlement to a benefit consists of the right to have payment made for a
service. The relevant portion of that subsection provides that “entitlement of an
individual to hospital benefits for a month shall consist of entitlement to have payment
made under, and subject to the limitations in, part A of title XVIII on his behalf for
inpatient hospital services . . . during such month.”

Metro further argues that the following language from another Medicare statute,
42 U.S.C. § 1395d, confirms that “entitlement” to Medicare benefits is synonymous with
the right to have payment made for such benefits: “The benefits provided to an
individual by the insurance program under this part shall consist of entitlement to have
payment made on his behalf . . . for [inpatient hospital services and other specified
benefits].” 42 U.S.C. § 1395d(a). In addition, the statute sets forth the limitation on
days of coverage for a spell of illness that is at the heart of this case. See id.
§ 1395d(a)(1).
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 27

But neither § 426(c) nor § 1395d(a), properly analyzed, are inconsistent with the
Secretary’s interpretation of the DPP provision. Metro wrongly conflates what are
limitations on the scope of a benefit with the qualifications that an individual must
possess to be entitled to the benefit in the first place. In other words, where the
Medicare statute explains what is and is not part of a benefit, Metro implicitly argues
that the statute is actually providing criteria for the initial entitlement to that benefit. But
the statute does no such thing.

Subections 426(a) and (b) define who is entitled to hospital insurance benefits
under Medicare. The next subsection, titled “Conditions,” then explains that “hospital
insurance benefits” means the right to have payment made for certain hospital services,
subject to the limitations in Medicare Part A. See id. § 426(c). An individual who meets
the § 426 criteria is obviously not entitled to have unlimited payments made for
unlimited hospital services. Medicaid Part A describes the substance and limitations of
hospital insurance benefits and § 426(c) clarifies that an individual who is entitled to
Medicare will receive only those benefits as described in Part A. The limitations that
appear in Medicare Part A are thus limitations on the substance of a Medicare
beneficiary’s hospital insurance benefits, not on who is entitled to those benefits.

One such limitation that appears in Medicare Part A is § 1395d’s limitation on
the days of inpatient hospital services during a spell of illness, explained above in Part
II.A. Section 1395d’s title, “Scope of benefits,” confirms that its limitations apply to
benefits, not to beneficiaries. An exhausted benefit day, like purely cosmetic surgery,
is therefore a service to which no Medicare beneficiary is entitled. See id.
§ 1395y(a)(10) (excluding coverage for cosmetic surgery). And just as a Medicare
beneficiary who receives no Medicare coverage for cosmetic surgery is nonetheless
“entitled to benefits under [Medicare] part A” as defined in § 426, so too is a Medicare
beneficiary who receives no Medicare coverage for inpatient services rendered on an
exhausted benefit day. Moreover, § 1395d’s limitations apply only to enumerated
services such as inpatient and critical access hospital care, see id. § 1395d(a)(1), and not
to other care that Medicare might cover, such as certain physician or skilled nursing
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 28

services. See CMS Ruling No. CMS-1498-R at 10 (Apr. 28, 2010) (noting that other
Medicare-covered services are still available to a beneficiary after exhausting inpatient
hospital benefits). So contrary to Metro’s argument, nothing in § 1395d provides that
individuals who exhaust their benefit days for a particular spell of illness lose their
entitlement to all Medicare benefits.

2. Changes in the Secretary’s interpretation of the relevant
statutory language do not preclude judicial deference

Metro next contends that the Secretary’s current interpretation of the DPP
provision conflicts with earlier interpretations, thus warranting “considerably less
deference than a consistently held agency view.” See INS v. Cardoza-Fonseca, 480 U.S.
421, 448 n.30 (1987) (internal quotation marks omitted). But Metro overstates these
conflicts and inconsistencies. Moreover, “an initial agency interpretation is not instantly
carved in stone,” and “informed rulemaking” requires consideration of “the wisdom of
its policy on a continuing basis.” Chevron, 467 U.S. at 863-64.

In support of its argument on this issue of deference, Metro contends that the
current regulation’s exclusion of dual-eligible exhausted benefit days from the Medicaid
fraction is a complete reversal of the Secretary’s prior position. See Catholic Health
Initiatives-Iowa, Corp. v. Sebelius, 841 F. Supp. 2d 270, 278 (D.D.C. 2012) (“[T]he
Secretary was for including dual-eligible exhausted benefit days in the Medicaid fraction
before she was against it.”). The administrative materials that Metro relies on for this
conclusion are a 1995 HHS rulemaking decision and a 1996 decision by HHS’s
administrator of the Centers for Medicare and Medicaid Services (CMS) that are cited
in Catholic Health Initiatives. See id. at 279-80 (citing Changes to the Hospital Inpatient
PPS and FY 1996 Rates, 60 Fed. Reg. 45778, 45811 (Sept. 1, 1995); Presbyterian Med.
Ctr. of Phila. v. Aetna Life Ins. Co., CMS Adm’r Dec., 1996 WL 887683, reprinted in
Medicare & Medicaid Guide (CCH) ¶ 45,032 (Nov. 29, 1996)).

But the propriety of including dual-eligible exhausted benefit days in the
Medicaid fraction was not the subject of either proceeding. The issue in the cited portion
of the 1995 rulemaking was the use of a hospital’s “cost reporting year” versus the
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 29

“Federal fiscal year.” 60 Fed. Reg. at 45811. And the issue in the Presbyterian Medical
Center of Philadelphia decision was the same issue decided in Jewish Hospital; i.e.,
whether days of care provided to Medicaid-eligible patients should be counted in the
Medicaid fraction only if the state Medicaid program paid for the care. See 1996 WL
887683, at *1. Moreover, a CMS Administrator’s decision that squarely addressed the
issue concluded that dual-eligible exhausted benefit days did not belong in the Medicaid
fraction. See Edgewater Med. Ctr. v. Blue Cross & Blue Shield Ass’n, CMS Adm’r
Dec., 2000 WL 1146601, at *4 (June 19, 2000). In the absence of a definitive agency
rule or regulation, and in light of these conflicting CMS Administrator decisions, the
Secretary’s position on this issue was, at worst, ambiguous. The 2004 amendment to 42
C.F.R. § 412.106(b) cleared up this ambiguity. It did not squarely contradict a former
interpretation.

Metro next points to HHS’s former regulation that allowed only “covered” days
(unexhausted benefit days) to be counted in the Medicare fraction. See 42 C.F.R.
§ 412.106(b) (2003). While acknowledging the change in policy that the 2004
amendment to this regulation brought, HHS contends the change was not a result of a
new interpretation of the phrase “entitled to benefits under [Medicare] part A.” The
agency instead argues that it has always understood that phrase to refer to an individual’s
meeting the § 426 criteria. What changed was its understanding, in light of this court’s
decision in Jewish Hospital and the decisions of other courts of appeal that followed, of
the phrase “for such days” in the following language that describes the Medicare
fraction’s numerator: “the number of the hospital’s patient days for such period which
were made up of patients who (for such days) were entitled to benefits under part A.”
See 42 U.S.C. § 1395ww(d)(5)(F)(vi)(I).

Previously, the Secretary read the parenthetical phrase “for such days” to “act[]
as a restrictive qualifier,” which meant that the formula applied only to the days actually
paid by the program referenced. See Jewish Hosp., 19 F.3d at 274. Such was HHS’s
rationale for previously counting only paid Medicaid days in the Medicaid fraction. That
policy was not based solely on an interpretation of the phrase “eligible for [Medicaid],”
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 30

but rather on that term’s interaction with the phrase “for such days.” Id. After this court
and others determined that this interpretation was contrary to the statute, HHS contends
that it reconsidered and reversed its interpretation of the Medicare fraction because the
prior interpretation likewise depended on reading the phrase “for such days”
restrictively. It now interprets the phrase, consistent with Jewish Hospital, as merely a
reference back to a preceding phrase in the Medicare fraction; i.e., “the number of such
hospital’s patient days for such period.” See 42 U.S.C. § 1395ww(d)(5)(F)(vi)(I).

HHS’s response to Metro’s argument, though internally consistent, has little
support in the administrative materials. No mention, for example, is made of the phrase
“for such days” in the 2004 final rule that amended 42 C.F.R. § 412.106(b). See
Changes to the Hospital Inpatient PPS and FY 2005 Rates, 69 Fed. Reg. 48916-01,
49099 (Aug. 11, 2004). But even if HHS’s amendment to the regulation was in fact
based on a changed interpretation of the phrase “entitled to benefits under [Medicare]
part A” as Metro contends, Metro has not shown that such change renders the current
interpretation arbitrary or manifestly contrary to the DPP provision. See Chevron, 467
U.S. at 863-64. The change instead appears to be the result of a reasoned deliberative
process, reflecting HHS’s experience in case-by-case administrative adjudications and
in federal-court litigation, and its benefitting from stakeholder input through notice-and-
comment rulemaking.

3. The Secretary consistently interprets the phrase
“entitled to benefits” elsewhere in the DPP provision
and other parts of § 1395

Metro further claims that alleged inconsistencies exist between the Secretary’s
interpretation of the phrase “entitled to benefits under [Medicare] part A” in the DPP
provision and (1) a similar phrase, “entitled to [SSI] benefits,” in that same provision;
and (2) the “entitled to benefits” phrase in another part of § 1395ww. Neither argument,
however, provides a basis for concluding that 42 C.F.R. § 412.106(b) is an
impermissible construction of the DPP provision under Chevron.
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 31

HHS has determined that the patient days of an individual who is eligible for SSI,
but not receiving SSI benefit payments, should be excluded from the Medicare fraction’s
numerator. See Hospital Inpatient PPS for Acute Care Hospitals and FY 2011 Rates,
75 Fed. Reg. 50042, 50280-81 (Aug. 16, 2010). Although seemingly in tension with the
interpretation of the similar phrase “entitled to benefits under [Medicare] part A,” the
differences in the language used in the SSI and Medicare statutory schemes explain this
apparent inconsistency.

The Secretary reasonably views the Medicare statute’s consistent use of the
phrase “entitled to benefits under [Medicare] part A” as giving that phrase a specialized,
statute-specific meaning, which is set forth in § 426. In contrast, the SSI statute refers
to both eligibility and entitlement, with the two terms being used interchangeably. See,
e.g., 42 U.S.C. § 1381a (titled “Basic entitlement to benefits,” but describing persons
determined “to be eligible on the basis of [] income and resources”). And whereas
individuals meeting the § 426 criteria for Medicare “shall be entitled to hospital
insurance benefits,” id. § 426 (emphasis added), individuals meeting the § 1382 criteria
for SSI “shall be an eligible individual,” id. § 1382(a) (emphasis added).

This comparison reflects a key distinction between the two programs. An
individual who meets the § 426 criteria is automatically entitled to Medicare Part A
benefits; filing an application is not a prerequisite to entitlement. See 42 C.F.R.
§ 406.6(b) (using the § 426 criteria to describe “[i]ndividuals who need not file an
application for hospital insurance” under Medicare Part A). In contrast, an “eligible
individual” under the SSI program must file an application before that individual’s
benefits are “effective.” See 42 U.S.C. § 1382(c)(7) (providing that an application for
benefits is not effective until the later of (1) the individual becoming eligible for
benefits, and (2) “the first day of the month following the date such application is filed”).
Such an individual is thus eligible for, but not entitled to, SSI benefits during any period
in which he or she meets the criteria set forth in § 1382(a) but has no application on file.
See Hospital Inpatient PPS for Acute Care Hospitals and FY 2011 Rates, 75 Fed. Reg.
50042, 50280 (Aug. 16, 2010) (discussing this distinction between SSI entitlement and
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 32

Medicare entitlement). The Secretary’s nuanced interpretation of the Medicare
fraction’s numerator appropriately reflects this difference between the two benefit
programs.

Metro’s potentially stronger point is that, as explained above in Part V.B.1., the
Secretary previously interpreted the phrase “entitled to benefits under [Medicare] part
A” elsewhere in § 1395ww as excluding exhausted benefit days. See 42 U.S.C.
§ 1395ww(d)(5)(G)(iv) (using the phrase as part of the definition for the term “medicare-
dependent, small rural hospital”); see also Changes to the Hospital Inpatient PPS and FY
1991 Rates, 55 Fed. Reg. 35990, 35996 (Sept. 4, 1990) (explaining HHS’s view that
“entitlement to payment under part A ceases” upon exhaustion of benefit days). But the
Secretary recognized this inconsistency and, rather than change her interpretation of that
phrase in the DPP provision and everywhere else in the Medicaid statutes, instead
amended her interpretation of the phrase as used in § 1395ww(d)(5)(G)(iv). This
correction further demonstrates that the Secretary’s interpretation of this statutory phrase
is the product of a reasoned analysis of its terms, not an ad hoc determination meant to
unduly restrict DSH adjustments.

4. The 2004 amendment to HHS’s regulation was not the
product of arbitrary rulemaking

Finally, Metro argues that the 2004 rulemaking that amended 42 C.F.R.
§ 412.106(b) was arbitrary because (1) HHS did not explain why its interpretation of the
DPP formula to not account for all dual-eligible patient days was permissible, and
(2) HHS followed the lead of commenters who raised irrelevant issues. We find Metro’s
arguments unpersuasive.

The first argument presumes that 42 U.S.C. § 1395ww(d)(5)(F)(vi) has a clear
purpose of accounting for all dual-eligible patient days in the DPP calculation. But as
explained in our discussion with regard to the first step of the Chevron analysis, no such
statutory purpose is apparent. See Part II.B.2. above. Furthermore, Metro’s proposed
interpretation of the phrase “entitled to benefits under [Medicare] part A” likewise fails
to account for all such days. See id. The exclusion of at least some dual-eligible patient
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 33

days thus appears to be inevitable based on how Congress has structured the DPP.
Because of this inevitability, no explanation was necessary for why the HHS regulation
fails to account for all such days, and the lack of such explanation does not render the
rulemaking process arbitrary.

Metro’s second argument is also unavailing because the issues raised by the
commenters had at least some relevancy to the proper interpretation of the DPP, and
there is no suggestion that HHS placed undue weight on any of these comments. See
Changes to the Hospital Inpatient PPS and FY 2005 Rates, 69 Fed. Reg. 48916-01,
49098 (Aug. 11, 2004). “One commenter observed that a patient who exhausts coverage
for inpatient hospital services still remains entitled to other Medicare Part A benefits.”
Id. Others noted that the construction of the DPP provision in HHS’s 2003 proposed
rule (which is the construction that Metro advocates) would increase the administrative
burden on hospitals and would reduce some hospitals’ DSH adjustments.

HHS appropriately considered these comments, but there is no evidence that it
blindly accepted them as true. See id. (“[W]e note that we disagree with the
commenter’s assertion that including days in the Medicaid fraction instead of the
Medicare fraction always results in a reduction in DSH payments.”). In sum, we
conclude that the rulemaking process was not arbitrary and that the resulting regulation
is a permissible construction of the DPP provision that warrants judicial deference under
Chevron.

III. CONCLUSION

For all of the reasons set forth above, we REVERSE the judgment of the district
court and REMAND the case with instruction to enter judgment in favor of HHS.
Metro’s cross-appeal is DISMISSED as moot.
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 34

__________________

DISSENT
__________________

McKEAGUE, Circuit Judge, dissenting. The majority undertakes a well-
reasoned effort to uphold the Secretary’s interpretation of the term “entitled to” as
neither contrary to Congress’s clear intent nor an impermissible construction of the term.
We do not, however, write on a blank slate. We have already wrestled with the very
statutory provision at issue and arrived at definitive conclusions as to its meaning. In
my opinion, stare decisis demands greater respect for our ruling in Jewish Hospital v.
Sec’y of Health & Human Servs., 19 F.3d 270, 272 (6th Cir. 1994).

A. Doctrine of Stare Decisis

Stare decisis, “to stand by things decided” in Latin, is “the doctrine of precedent,
under which a court must follow earlier decisions when the same points arise again in
litigation.” Black’s Law Dictionary (9th ed. 2009). “The obligation to follow precedent
begins with necessity[;] . . . no judicial system could do society’s work if it eyed each
issue afresh in every case that raised it.” Planned Parenthood of Southeastern
Pennsylvania v. Casey, 505 U.S. 833, 854 (1992) (citing B. Cardozo, The Nature of the
Judicial Process 149 (1921)). “Time and time again,” the Supreme Court has
“recognized that ‘the doctrine of stare decisis is of fundamental importance to the rule
of law.’” Hilton v. South Carolina Public Railways Comm’n, 502 U.S. 197, 202 (1991)
(quoting Welch v. Texas Dep’t of Highways and Public Transp., 483 U.S. 468, 494
(1987)). “Adherence to precedent promotes stability, predictability, and respect for
judicial authority.” Id. Accordingly, a court may disregard stare decisis and depart from
established precedent only upon “some compelling justification.” Id. These
considerations have “special force in the area of statutory interpretation, . . . [where] the
legislative power is implicated, and Congress remains free to alter what we have done.”
Id. (quoting Patterson v. McLean Credit Union, 491 U.S. 164, 172-73 (1989)).

Moreover, stare decisis plays a defined role in the present context, i.e., where an
agency charged with implementing statutory authority has interpreted the statute in a
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 35

manner at odds with a court’s prior pronouncement: “Once we have determined a
statute’s clear meaning, we adhere to that determination under the doctrine of stare
decisis, and we judge an agency’s later interpretation of the statute against our prior
determination of the statute’s meaning.” Sandusky Mall Co. v. NLRB, 242 F.3d 682, 688
n.6 (6th Cir. 2001) (quoting Lechmere, Inc. v. NLRB, 502 U.S. 527, 536-37 (1992)).
Thus, “[a] court’s prior judicial construction of a statute trumps an agency construction
otherwise entitled to Chevron deference,” but “only if the prior court decision holds that
its construction follows from the unambiguous terms of the statute and thus leaves no
room for agency discretion.” National Cable & Telecommunications Ass’n v. Brand X
Internet Servs., 545 U.S. 967, 982 (2005).

In other words, if a court has already decided that a statutory provision or term
is unambiguous, an agency’s conflicting construction is foreclosed, and the question of
Chevron deference is essentially preempted. See Lechmere, 502 U.S. at 536-37
(observing that stare decisis has controlling effect under these circumstances before ever
reaching any question of deference to the agency under Chevron). This is because the
court has determined there is no room for agency discretion to fill a statutory gap where
there is no gap. Brand X, 545 U.S. at 982-83. See also, United States v. Home Concrete
& Supply, LLC, 132 S.Ct. 1836, 1843 (2012) (Breyer, J., plurality opinion). “If a court,
employing traditional tools of statutory construction, ascertains that Congress had an
intention on the precise question at issue, that intention is the law and must be given
effect.” Home Concrete, 132 S.Ct. at 1844 (quoting Chevron U.S.A., Inc. v.Nat’l
Resources Defense Council, Inc., 467 U.S. 837, 843 n.9 (1984) (emphasis added by
Justice Breyer deleted)).1

1
In fact, according to Justice Scalia’s concurring opinion in Home Concrete (which was decisive
in the Court’s 5-4 ruling), a court’s prior construction of a statute is binding as law, irrespective of whether
the court expressly purported to be resolving an ambiguity. Home Concrete, 132 S.Ct. at 1846-48 (Scalia,
J., concurring in part). In Justice Scalia’s view, “[o]nce a court has decided upon its de novo construction
of a statute, there no longer is a different construction that is consistent with the court’s holding and
available for adoption by the agency.” Id. at 1846 (quoting Brand X, 545 U.S. at 1018, n.12 (Scalia, J.
dissenting)). Justice Scalia thus concludes that stare decisis dictates that a court abide by prior judicial
precedent over and against a contrary interpretation by an agency, irrespective of the grounds for the
court’s prior ruling.
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 36

These venerable principles of stare decisis, “the everyday working rule of our
law,” B. Cardozo, The Nature of the Judicial Process 21 (1921), are effectively codified
in our Sixth Circuit Rule 32.1(b): “Published panel opinions are binding on later panels.
A published opinion is overruled only by the court en banc.” See United States v.
McMurray, 653 F.3d 367, 383-84 (6th Cir. 2011) (McKeague, J., dissenting) (collecting
cases abiding by rule). Simply put, prior published decisions of the Sixth Circuit are
binding on other Sixth Circuit panels unless and until overruled by the Supreme Court
or by the Sixth Circuit sitting en banc. Id.

B. Jewish Hospital Ruling

With these undisputed principles of stare decisis in mind, we turn to the import
of our ruling in Jewish Hospital. At issue in Jewish Hospital was the meaning of
“eligible for” in the Medicaid fraction of an earlier version of the disproportionate
patient percentage (DPP) statute, the same provision at issue in this case. 42 U.S.C.
§ 1395ww(d)(5)(F)(vi). The Jewish Hospital court defined “eligible for” with reference
to and in contradistinction from “entitled to,” another term appearing in the DPP statute.
The court interpreted “eligible for” as meaning “‘qualification’ for benefits or the
capability of receiving those benefits.” Jewish Hospital, 19 F.3d at 274. In contrast, the
court held that “[t]o be entitled to some benefit means that one possesses the right or title
to that benefit.” Id. at 275 (emphasis in original). The court stated that the “entitled to”
language “fixes the calculation upon the absolute right to receive an independent and
readily defined payment.” Id. (emphasis in original). It is true that the Jewish Hospital
court was not required to define “entitled to” in order to define “eligible for.” However,
its definition of “entitled to” was no mere dictum; it was integral to its determination of
the definition of “eligible for.”

This is important because the HHS regulation at issue in this case defines
“entitled to,” as used in the Medicare fraction of the DPP statute, in a manner contrary
to the Jewish Hospital definition of “entitled to,” assigning instead the same meaning
that Jewish Hospital held Congress assigned to “eligible for.” That is, the HHS
regulation applies “entitled to” in the Medicare fraction as though it means “eligible for”
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 37

irrespective of whether the patient had “the absolute right to receive an independent and
readily defined payment.” The HHS regulation thus undeniably flies in the face of the
teaching of our opinion in Jewish Hospital.

In Jewish Hospital, we invalidated the HHS regulation because it conflated
“eligible for” and “entitled to,” giving the two terms similar meaning even though
Congress’s use of the two different terms in close proximity to each other in the same
provision indicated they mean different things. Id. at 275 (“Adjacent provisions utilizing
different terms, however, must connote different meanings.”). The Jewish Hospital
court thus held that the HHS regulation failed to qualify for Chevron deference because
it was contrary to the “unambiguously expressed intent of Congress” as expressed in the
clear statutory language. Id. at 274-75 (“The Secretary’s interpretation runs counter to
the language of the statute. . . . [T]he Secretary’s promulgated regulation runs counter
to this clear intent by unnecessarily restricting the available subsidy, without foundation
in the statute.”).

Alternatively, the court held that, even if the statutory language were “deemed
silent or ambiguous” on the precise question at issue, the HHS regulation would still fail
to garner deference under the second prong of Chevron’s framework because “the
Secretary’s construction is not permissible.” Id. at 275 (emphasis in original).2 With
reference to legislative history, the court explained that the Secretary’s interpretation
was impermissible because it was “more restrictive than that intended by Congress and
thus runs counter to the statutory language.” Id. at 276. The second rationale for
invalidating the HHS regulation, like the principal rationale, is premised on the same
conclusion that the Secretary’s definition was contrary to Congress’s intent as expressed
in the statutory language. Id. at 275-76. The alternative rationale does not in any way
undermine the integrity of the court’s principal holding, but rather buttresses it.

2
The Jewish Hospital court offered this second rationale for the manifest purpose of correcting
a misstatement of law evident in the district court ruling being reversed. See id. at 275. The court
recognized that, upon holding the HHS regulation contrary to the unambiguous language of the statute
under the first prong of the Chevron framework, “that is the end of the matter.” Id. (quoting Chevron
U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843 (1984)). Nonetheless, the court
explained why the district court’s ruling was in error under both prongs of the Chevron framework.
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 38

The district court took Jewish Hospital seriously, viewing its teaching as both
binding and persuasive and concluding that the HHS regulation at issue is contrary to
Congress’s intent as revealed in the clear and unambiguous language of the DPP statute.
Metropolitan Hosp. v. U.S. Dep’t of Health & Human Servs., 702 F. Supp. 2d 808, 825
(W.D. Mich. 2010). Hence, in order to find error in the district court’s ruling, consonant
with the dictates of stare decisis, we must identify “some compelling justification.”
Hilton, 502 U.S. at 202. In my opinion, the majority fails to do so.

C. Holding and Dictum

To be sure, the majority does not ignore Jewish Hospital. Nor do I mean to
suggest that the majority is oblivious to the importance of stare decisis. The majority
proposes that Jewish Hospital’s definition of “entitled to” does not trump the HHS’s
contrary definition because Jewish Hospital’s definition does not “follow from the
unambiguous terms of the statute.” Brand X, 545 U.S. at 982.

As indicated above, a fair reading of Jewish Hospital indicates that the HHS
definition of “eligible for” was invalidated primarily because it improperly conflated the
meaning of “eligible for” and “entitled to” in a manner contrary to the “unambiguously
expressed intent of Congress” as expressed in the “plain language” of the statute. Jewish
Hospital, 19 F.3d at 274-75. This principal rationale for the Jewish Hospital court’s
decision is set forth under the heading, “The Legislative Mandate is Clear from the
Statutory Language.” Id. at 274. I take the Jewish Hospital opinion to mean what it
says and conclude that its definition of “entitled to” does follow, in the Brand X
formulation, from the unambiguous terms of the statute, and therefore controls. As
Brand X recognizes, a court’s prior interpretation of a statute overrides an agency’s
interpretation—before reaching any issue of deference under Chevron—if the court held
the statute unambiguous. Brand X, 545 U.S. at 984 (citing Lechmere, 502 U.S. at 536-
37).

The majority attempts to marginalize Jewish Hospital’s principal rationale by
characterizing it as a “suggestion,” because the court did not explicitly formalize its
conclusion by so “holding.” The majority proposes that the court’s secondary or
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 39

alternative rationale is really the decision’s primary holding. Again, the Jewish Hospital
opinion speaks for itself. As explained above, the language of the court’s opinion
clearly defeats the majority’s suggestion that the court did not hold that the language of
the DPP statute was unambiguous. The majority’s semantic critique is unavailing.

Yet, the majority proposes that, even if Jewish Hospital purports to derive a clear
definition of “entitled to” from the unambiguous language of the DPP statute, that
definition is not part of its holding and is not binding. The majority views the definition
of “eligible for” as the precise question addressed in Jewish Hospital. The court’s
reliance on its definition of “entitled to” to determine, by contradistinction, the meaning
of “eligible for” is said to be mere dictum. In support, the majority cites Northeast
Hosp. Corp. v. Sebelius, 657 F.3d 1, 12 n.7 (D.C. Cir. 2011) (declining to follow Jewish
Hospital and finding the meaning of “entitled to” ambiguous).

The D.C. Circuit’s dismissal of the Jewish Hospital definition of “entitled to” as
dictum is entitled to little weight. The D.C. Circuit was not obliged to follow Jewish
Hospital by stare decisis generally or by 6th Cir. R. 32.1. Moreover, the Northeast
Hospital decision did not uphold the HHS regulation’s definition of “entitled to.” It held
that the term was not clear and unambiguous. In this respect, it departed from the
analysis of Jewish Hospital, preferring the reasoning of the dissent—a view which did
not and has not prevailed in the Sixth Circuit. Still, the Northeast Hospital court went
on to conclude that the HHS interpretation, whether “permissible” or not (a question it
did not reach), could not be upheld. Even though the Northeast Hospital ruling did not
follow Jewish Hospital, it did not result in or approve any other definition of “entitled
to.” The significance of Northeast Hospital is further undercut by the fact that Jewish
Hospital has been followed in published decisions of three of our sister Circuits. See
Cabell Huntington Hosp., Inc. v. Shalala, 101 F.3d 984, 988 (4th Cir. 1996); 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).

Neither is the majority’s position otherwise persuasive. Granted, one panel of
the Sixth Circuit is not bound by dictum in an earlier published panel opinion. BDT
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 40

Products, Inc. v. Lexmark Int’l, Inc., 602 F.3d 742, 750 (6th Cir. 2010). But the line
between holding and dictum is not always clear. A “holding” is a court’s “determination
of a matter of law pivotal to its decision; a principle drawn from such a decision.”
Black’s Law Dictionary (9th ed. 2009). The holding of a decision, which has
precedential effect, is to be contrasted with “obiter dictum,” which does not have
precedential effect. “Obiter dictum,” “something said in passing” in Latin, is a “judicial
comment while delivering a judicial opinion, but one that is unnecessary to the decision
before the court and therefore not precedential.” Id. “Judicial dictum,” however, is an
“opinion by a court on a question that is directly involved, briefed, and argued by
counsel, and even passed on by the court, but that is not essential to the decision.” Id.
Judicial dictum, sometimes referred to as “considered dictum,” albeit not necessarily
binding, is entitled to considerable weight. See ACLU v. McCreary County, Ky., 607
F.3d 439, 448 (6th Cir. 2010) (recognizing that appellate courts consider themselves
bound by Supreme Court’s considered dicta almost as firmly as by its holdings); PDV
Midwest Refining, LLC v. Armada Oil and Gas Co., 305 F.3d 498, 510 (6th Cir. 2002)
(lengthy discussion, though arguably dictum, followed as well-reasoned and persuasive);
Schwab v. Crosby, 451 F.3d 1308, 1325 (11th Cir. 2006) (collecting cases recognizing
that considered dictum is not to be taken lightly).

With these definitions in mind, the notion that Jewish Hospital’s definition of
“entitled to” is dictum comes into focus. As I acknowledged above, the court did not
have to define “entitled to” in order to determine the meaning of “eligible for.” To the
extent that its definition of “entitled to” was not strictly necessary to its holding, the
definition has characteristics of obiter dictum. But the Jewish Hospital definition of
“entitled to” was not merely “a thing said in passing.” Far from it.

The Jewish Hospital court clearly considered both terms—terms that both appear
in the same statutory provision—as operating in tandem with each other. The court
defined each term with explicit and dependent reference to the other. In other words, the
integrity of the Jewish Hospital court’s holding that “eligible for” has a clear and
unambiguous meaning in Congress’s scheme—in terms of how it operates in the DPP
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 41

formula—is dependent on its determination that “entitled to,” as it appears in the same
formula, also has a clear and unambiguous meaning. The Jewish Hospital definition of
“entitled to” thus appears to be a determination on a question that was “directly
involved” and “passed on by the court.” In this respect, the definition has the
characteristics of judicial or considered dictum, entitled to careful respect, if not outright
adherence, per 6th Cir. R. 32.1.

Furthermore, as explained above, a fair reading of the court’s opinion reveals that
its definition of “entitled to” is so integral to its reasoning and holding on the precise
question before it as to be fairly characterized as “pivotal,” representing a principle that
can and should be drawn from the decision. For this reason, the Jewish Hospital
definition of “entitled to” is properly deemed part of the court’s holding and should be
considered binding precedent in the Sixth Circuit.

D. Compelling Justification

As such, we are constrained to follow Jewish Hospital absent compelling
justification. Hilton, 502 U.S. at 202. Ordinarily, compelling justification would consist
of some intervening controlling authority, like a decision of the Supreme Court
mandating modification of our prior precedent. See United States v. Lucido, 612 F.3d
871, 876 (6th Cir. 2010); Sierra Club v. Korleski, 681 F.3d 342, 354 (6th Cir. 2012)
(Cole, J., dissenting). The majority has not identified any such intervening Supreme
Court authority or any other compelling justification. Rather, the bulk of its opinion is
devoted to explaining why the Secretary’s interpretation of “entitled to” is superior to
that declared in Jewish Hospital. Right or wrong, this is an exercise we are not at liberty
to undertake. It is contrary to the Supreme Court’s rulings in Brand X and Home
Concrete, which teach that our Jewish Hospital ruling should be deemed to “trump” the
Secretary’s contrary interpretation.

Jewish Hospital is still good law. Its analysis has been followed in several other
circuits. Whether we think it wise or not, stare decisis and 6th Cir. R. 32.1 demand our
adherence, for the sake of stability and predictability in the law and respect for judicial
Nos. 11-2465/2466 Metro. Hosp. v. HHS et al. Page 42

authority. See Hilton, 502 U.S. at 202. If Jewish Hospital is in need of modification,
this must be accomplished by the Sixth Circuit en banc, not by the majority in this case.

Accordingly, I respectfully dissent. I would affirm the judgment of the district
court.