United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 22, 2010 Decided April 30, 2010
No. 09-5248
BAPTIST MEMORIAL HOSPITAL,
APPELLANT
v.
KATHLEEN SEBELIUS, SECRETARY, DEPARTMENT OF HEALTH
AND HUMAN SERVICES,
APPELLEE
Appeals from the United States District Court
for the District of Columbia
(No. 1:02-cv-01919-PLF)
No. 09-5258
ST. AGNES MEDICAL CENTER,
APPELLANT
v.
KATHLEEN SEBELIUS, SECRETARY, U.S. DEPARTMENT OF
HEALTH AND HUMAN SERVICES,
APPELLEE
2
Appeal from the United States District Court
for the District of Columbia
(No. 1:06-cv-00820)
Leslie D. Alderman III argued the cause for appellant
Baptist Memorial Hospital. With him on the briefs was Kenneth
R. Marcus.
Thomas J. Weiss, pro hac vice, argued the cause for
appellant St. Agnes Medical Center.
Christine N. Kohl, Attorney, U.S. Department of Justice,
argued the cause for appellee. With her on the brief was
Anthony J. Steinmeyer, Assistant Director. Gerard Keating,
Attorney, U.S. Department of Health & Human Services, and R.
Craig Lawrence, Assistant U.S. Attorney, entered appearances.
Before: GINSBURG, TATEL, and GRIFFITH, Circuit Judges.
Opinion for the Court filed by Circuit Judge TATEL.
TATEL, Circuit Judge: In these consolidated cases, two
hospitals seek mandamus to compel the Secretary of Health and
Human Services to reopen final Medicare reimbursement
determinations regarding inpatient services provided by the
hospitals. Concluding that the Secretary had no clear duty to
reopen the payment decisions, the district court dismissed both
cases for lack of mandamus jurisdiction. We agree with the
district court on all counts and therefore affirm.
3
I.
The central issue presented in these cases has been the
focus of extensive litigation culminating in two controlling
decisions from this court—In re Medicare Reimbursement
Litigation, 414 F.3d 7 (D.C. Cir. 2005), and Monmouth Medical
Center v. Thompson, 257 F.3d 807 (D.C. Cir. 2001). We
therefore provide only the following brief overview of the
applicable statutory and regulatory regime.
Under the Medicare Act, the Secretary of Health and
Human Services (HHS) reimburses hospitals for covered
inpatient services provided to Medicare beneficiaries. 42 U.S.C.
§ 1395ww. HHS administers these payments through the
Centers for Medicare and Medicaid Services, formerly the
Health Care Financing Administration (HCFA). To obtain
reimbursement, hospitals submit yearly cost reports to fiscal
intermediaries—typically private insurance companies acting on
behalf of the Secretary. After auditing the cost report, the
intermediary issues a Notice of Program Reimbursement (NPR),
in which it determines the amount owed to the hospital for the
cost reporting year at issue. 42 C.F.R. § 405.1803. Hospitals
can appeal that determination to the Provider Reimbursement
Review Board (“the Board”) and then to federal district court.
42 U.S.C. § 1395oo(a), (f).
Hospitals serving a disproportionately high number of low-
income Medicare patients receive increased reimbursements
known as “disproportionate share hospital” (DSH) adjustments.
Congress has set forth a formula for determining DSH
adjustments based, in part, on the number of days that a hospital
treated patients entitled to state Medicaid payments. Id.
§ 1395ww(d)(5)(F)(vi)(II). Previously, HCFA interpreted this
statutory formula to include only those days for which hospitals
actually received Medicaid payments—an interpretation that the
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Fourth, Sixth, Eighth, and Ninth Circuits struck down as
inconsistent with the Medicare Act. Cabell Huntington Hosp.,
Inc. v. Shalala, 101 F.3d 984 (4th Cir. 1996); Legacy Emanuel
Hosp. & Health Ctr. v. Shalala, 97 F.3d 1261 (9th Cir. 1996);
Deaconess Health Servs. Corp. v. Shalala, 83 F.3d 1041 (8th
Cir. 1996) (per curiam); Jewish Hosp., Inc. v. Sec’y of Health &
Human Servs., 19 F.3d 270 (6th Cir. 1994). In 1997,
acknowledging that its prior interpretation was “contrary to the
applicable law in four judicial circuits,” HCFA issued Ruling
97-2, which instructed intermediaries to include all Medicaid-
eligible days in the DSH adjustment calculation, regardless of
whether the hospital actually received payments for those days.
Health Care Financing Administration Ruling 97-2 (Feb. 27,
1997) (“Ruling 97-2” or “HCFAR 97-2”).
The two cases before us involve the intersection of Ruling
97-2 and HHS regulations authorizing the reopening of
intermediary reimbursement determinations. Pursuant to 42
C.F.R. § 405.1885(a) (1997), as that regulation existed at all
relevant times, an intermediary’s reimbursement determination
“may be reopened” if the affected hospital moves to do so
“within 3 years of the date of the notice of the intermediary
determination.” Unlike NPR determinations themselves, an
intermediary’s decision whether to reopen a determination under
this provision is both discretionary and unreviewable. Your
Home Visiting Nurse Servs., Inc. v. Shalala, 525 U.S. 449, 452–
56 (1999). Additionally, 42 C.F.R. § 405.1885(b) (1997)—the
key provision at issue here—provides that a determination
rendered by the intermediary “shall be reopened and revised by
the intermediary if, within the aforementioned 3-year period,
[HCFA] notifies the intermediary that such determination or
decision is inconsistent with the applicable law, regulations, or
general instructions issued by [HCFA].”
5
In Monmouth, the first of our two previous decisions
regarding this issue, we concluded that Ruling 97-2 constitutes
notice under section 405.1885(b) that HCFA’s former method of
calculating DSH adjustments was “inconsistent with the
applicable law.” 42 C.F.R. § 405.1885(b). Accordingly, we
held that because section 405.1885(b) speaks in mandatory
terms, it imposes a nondiscretionary duty on the Secretary,
enforceable through mandamus, to reopen NPRs decided within
the three years before the issuance of Ruling 97-2—
notwithstanding the fact that Ruling 97-2 itself states that the
agency “will not reopen settled cost reports based on this issue.”
See Monmouth, 257 F.3d at 814–15. Then, in In re Medicare,
we clarified that this clear duty to reopen applies to NPRs issued
during the three years prior to Ruling 97-2 even for hospitals
that had failed to appeal a cost report or request reopening:
“given that section 405.1885(b) does not require hospitals to file
anything at all to obtain relief, we see no basis for holding that
only those hospitals that appealed or sought section 405.1885(a)
reopening have a personal right to the reopening required by
section 405.1885(b).” In re Medicare, 414 F.3d at 11.
Relying on our decisions in Monmouth and In re Medicare,
the two hospitals in these consolidated appeals seek mandamus
to compel the Secretary (through her intermediaries) to reopen
their cost reports and apply the more favorable DSH calculation
adopted in Ruling 97-2. See 28 U.S.C. § 1361. The first
hospital, Baptist Memorial, challenges a 1993 NPR that
determined, pursuant to HCFA’s former eligible days
calculation, that it was ineligible for a DSH adjustment for its
FY 1991 cost report. In 1994, Baptist appealed that decision to
the Board. While that appeal was still pending, HCFA issued
Ruling 97-2. The Board then advised Baptist of the filing
schedule for the appeal and warned that its case would be
dismissed if Baptist missed the applicable deadlines. Despite
this reminder, Baptist failed to submit its “position papers” on
6
time, and the Board consequently dismissed its appeal for want
of prosecution in 1998. Four years later, Baptist filed this
mandamus action in the U.S. District Court for the District of
Columbia, seeking an order compelling the Secretary to reopen
and correct the 1993 reimbursement determination pursuant to
the eligible but unpaid days calculation set forth in Ruling 97-2.
The second hospital before us, St. Agnes Medical Center,
challenges its intermediary’s 1992 NPR determination regarding
its FY 1990 cost report. In 1995, St. Agnes asked the
intermediary to reopen the cost report and provide a DSH
adjustment, but the intermediary rejected that request. St. Agnes
appealed that decision to the Board, and on June 4, 1997 (after
Ruling 97-2’s issuance), the parties settled, agreeing that the
intermediary would reopen St. Agnes’s cost report to apply a
DSH adjustment. After doing so and applying the former
eligible days calculation, however, the intermediary informed
St. Agnes that it failed to meet the qualifying threshold for an
adjustment. Then, in 1999, the Board dismissed St. Agnes’s
appeal on the ground that it lacked jurisdiction over that appeal
in view of Your Home Visiting Nurse Services, Inc. v. Shalala,
525 U.S. at 453, in which the Supreme Court held that the Board
lacks authority to review an intermediary’s refusal under section
405.1885(a) to reopen a reimbursement determination. Seven
years after the dismissal of its appeal, St. Agnes sought
mandamus relief in the district court.
The district court dismissed both mandamus actions for
lack of jurisdiction. Noting that the two hospitals sought
reopening of NPRs issued more than three years prior to Ruling
97-2’s issuance in 1997, the court concluded that neither
hospital could show that it had a clear right to relief or that the
Secretary had a nondiscretionary duty to act under the
regulation—prerequisites for mandamus jurisdiction. See
Power v. Barnhart, 292 F.3d 781, 784 (D.C. Cir. 2002)
7
(outlining requirements for mandamus relief). In reaching this
conclusion, the district court also rejected the hospitals’
argument that they were entitled to mandamus relief because
they had jurisdictionally proper appeals pending when HCFA
issued Ruling 97-2. Baptist Mem’l Hosp. v. Johnson, 603 F.
Supp. 2d 40, 45–46 (D.D.C. 2009); St. Agnes Med. Ctr. v.
Sebelius, 628 F. Supp. 2d 78, 83–84 (D.D.C. 2009).
Baptist and St. Agnes appealed the denials of their
mandamus petitions. Because both cases require us to answer
the same principal question—whether section 405.1885(b)
mandates reopening of NPRs issued more than three years prior
to issuance of Ruling 97-2 where the hospitals had appeals
pending at that time—we consolidated the appeals.
II.
The Mandamus Act grants district courts original
jurisdiction over “any action in the nature of mandamus to
compel an officer or employee of the United States or any
agency thereof to perform a duty owed to the plaintiff.” 28
U.S.C. § 1361. A court may grant mandamus relief “only if:
(1) the plaintiff has a clear right to relief; (2) the defendant has a
clear duty to act; and (3) there is no other adequate remedy
available to plaintiff.” Power, 292 F.3d at 784 (internal
quotation marks omitted). We review a district court’s
determination whether a plaintiff has satisfied these standards de
novo. In re Medicare, 414 F.3d at 10.
In Monmouth and In re Medicare, we held that the
Secretary had a clear duty to reopen the hospitals’ NPRs
pursuant to section 405.1885(b) because the notice of
inconsistency—i.e., Ruling 97-2—occurred within the three-
year period after the date of the challenged reimbursement
determinations. Baptist and St. Agnes concede, as they must,
8
that unlike the hospitals in Monmouth and In re Medicare, they
seek reopening of “intermediary determinations that were issued
before the three-year reopening window, as measured from the
issuance of HCFAR 97-2.” Appellants’ Br. 26. They
nonetheless contend that the district court erred in dismissing
their mandamus actions because Ruling 97-2’s “appeal
provision” imposes on the Secretary a nondiscretionary duty to
reopen their cost reports. The portion of Ruling 97-2 on which
the hospitals rely states:
We will not reopen settled cost reports based on this
issue. For hospital cost reports that are settled by
fiscal intermediaries on or after the effective date of
this ruling, these [eligible but unpaid] days may be
included. For hospital cost reports which have been
settled prior to the effective date of this ruling, but for
which the hospital has a jurisdictionally proper appeal
pending on this issue pursuant to either 42 CFR
405.1811 or 42 CFR 405.1835, these [eligible but
unpaid] days may be included for purposes of
resolving the appeal.
Homing in on the last sentence of this paragraph, the hospitals
argue that Ruling 97-2 creates a mandatory duty to reopen their
cost reports because they had “jurisdictionally proper appeal[s]”
pending before the Board when HCFA issued the 1997 ruling.
In arguing that the appeal provision compels the Secretary
to reopen their cost reports, however, the hospitals lose sight of
the fact that under Monmouth and In re Medicare it is section
405.1885(b), not Ruling 97-2, that creates the obligation to
reopen. Ruling 97-2 merely serves as the notice of
inconsistency that triggers the Secretary’s duty to reopen and
revise NPR determinations. But that obligation—and thus the
clear duty to act required for mandamus relief—itself derives
9
from section 405.1885(b)’s “shall be reopened” language. And
the scope of section 405.1885(b)’s mandate is clear: it expressly
limits the duty to reopen to cases in which HCFA provides a
notice of inconsistency to intermediaries within three years of
the NPR. Ruling 97-2’s appeal provision is therefore beside the
point, as it does nothing to alter section 405.1885(b)’s three-year
reopening limitation. See Monmouth, 257 F.3d at 814–15
(“[Section] 405.1885(b) impose[s] a clear duty on intermediaries
to reopen DSH payment determinations for the hospitals. The
portion of HCFAR 97-2 that conflicts with that duty is simply
inapplicable.”); see also 42 C.F.R. § 405.1885(a) (“No such
determination or decision may be reopened after such 3-year
period except as provided in paragraphs (d) and (e) of this
section.”).
As the district court explained, moreover, even if the appeal
provision had any effect here, that provision says only that
eligible but unpaid days “may” be included if a hospital has an
appeal pending on the issue: “While the above paragraph
[containing the appeal provision] plainly permitted the Secretary
and the Review Board to rely on HCFAR 97-2’s policy change
when settling appeals pending at the time HCFAR 97-2 was
issued, it does not require them to do so.” Baptist, 603 F. Supp.
2d at 46; see St. Agnes, 628 F. Supp. 2d at 83. The hospitals
respond that although the word “may” usually connotes a degree
of discretion, in this context it actually means “must” or “shall.”
But we agree with the district court that the most natural reading
of this provision is the one that is most obvious: “may” is
permissive rather than obligatory. The appeal provision
therefore cannot provide the “clear duty to act” necessary to
sustain the hospitals’ requests for mandamus relief. Power, 292
F.3d at 784 (internal quotation marks omitted).
Reinforcing this conclusion, the appeal provision specifies
that eligible but unpaid days may be included “for purposes of
10
resolving the appeal” under 42 C.F.R. §§ 405.1811 or 405.1835.
In other words, the appeal provision is just that: it pertains to the
resolution of appeals, not to the reopening of settled cost reports
under section 405.1885. Because neither Baptist nor St. Agnes
had any such appeal pending when it brought its mandamus
action in the district court, there is no extant appeal to
“resolv[e]” through application of the new eligible days
calculation.
Baptist and St. Agnes further contend that even if Ruling
97-2 creates no duty to reopen, the filing of their appeals tolled
the three-year reopening limitation. But because neither
hospital pressed this argument in the district court, they cannot
do so for the first time here. See Adams v. Rice, 531 F.3d 936,
945 (D.C. Cir. 2008) (refusing to consider argument never made
in district court).
III.
Having disposed of the principal argument shared by
Baptist and St. Agnes, we turn to the arguments unique to each
hospital.
Baptist Memorial
Baptist raises an alternative theory of mandamus relief
based on a 1994 policy memorandum HCFA issued in the wake
of the Sixth Circuit’s decision in Jewish Hospital v. Secretary of
Health & Human Services, 19 F.3d 270—the first of the four
circuit court decisions striking down the former eligible days
calculation as inconsistent with the Medicare Act. This “Sixth
Circuit Memorandum” informed the HCFA regional office of
the Jewish Hospital opinion and instructed it to apprise
intermediaries serving hospitals within the Sixth Circuit of the
resulting “change in policy concerning DSH calculations.”
Located within the jurisdiction of the Sixth Circuit, Baptist
11
argues that the Sixth Circuit Memorandum constitutes a notice
of inconsistency for purposes of section 405.1885(b).
If, as Baptist alleges, the Sixth Circuit Memorandum
qualifies as proper notice of inconsistency, then it would indeed
trigger section 405.1885(b)’s duty to reopen. This is because
HCFA issued the memorandum in 1994—comfortably within
the three-year period following Baptist’s 1993 NPR. Although
it is unclear from the record whether HCFA ever conveyed the
new policy articulated in the Sixth Circuit Memorandum to
intermediaries (as required to qualify as notice under section
405.1885(b)), we need not decide whether the memo triggered a
“clear right to relief” or “duty to act” (the first two requirements
for mandamus relief) because Baptist has failed to show that
there was “no other adequate remedy available” (the third
requirement for mandamus relief). Power, 292 F.3d at 784
(internal quotation marks omitted).
Baptist filed its appeal with the Board just a few days after
the Sixth Circuit issued its decision in Jewish Hospital—
controlling authority directly supporting Baptist’s argument that
the intermediary should have calculated its DSH adjustment
using eligible but unpaid days. And while that appeal was
pending, HCFA issued the Sixth Circuit Memorandum, which
adopted Jewish Hospital as binding on intermediaries. Yet
instead of raising the Jewish Hospital decision in its appeal to
the Board and then, if necessary, seeking subsequent court
review pursuant to 42 U.S.C. § 1395oo(f), Baptist abandoned its
appeal altogether. As the district court rightly concluded,
Baptist has offered no “compelling reason for its failure to
pursue these avenues of relief.” Baptist, 603 F. Supp. 2d at 47;
see Heckler v. Ringer, 466 U.S. 602, 616 (1984) (“The common-
law writ of mandamus, as codified in 28 U.S.C. § 1361, is
intended to provide a remedy for a plaintiff only if he has
exhausted all other avenues of relief.”).
12
Baptist insists that it did supply a valid reason for
abandoning its appeal: “the Hospital reasonably believed that it
was unnecessary for it to pursue its appeal of fiscal year 1991
before the [Board] because the Hospital was of the
understanding that the intermediary was required to unilaterally
reopen the cost report to make the DSH adjustment by
including” eligible but unpaid days. Appellants’ Br. 50 (internal
quotation marks omitted). But for purposes of mandamus
jurisdiction, the question is whether Baptist had an adequate
remedy. It did—the administrative appeal that it subsequently
abandoned. Even though this remedy may have been, in
Baptist’s view, redundant (because Baptist thought the
intermediary was obligated to reopen the NPR on its own
initiative), that hardly renders it inadequate. Having failed to
pursue the adequate remedy afforded by the administrative and
judicial appeal processes, Baptist cannot now seek to vindicate
its alleged right to relief through mandamus.
St. Agnes
St. Agnes’s alternative argument suffers from the same
flaw. It contends that once the intermediary reopened its cost
report pursuant to the 1997 settlement agreement, the
intermediary was obligated to include eligible but unpaid days
in the DSH calculation. According to St. Agnes, that obligation
derives from three sources: (1) Ruling 97-2; (2) the Ninth
Circuit’s decision in Legacy Emanuel Hospital & Health Center
v. Shalala, 97 F.3d 1261—the third in the quartet of circuit court
opinions striking down HCFA’s former eligible days
interpretation; and (3) the “Ninth Circuit Memorandum,” a
HCFA directive (analogous to the Sixth Circuit Memorandum
discussed above) instructing the regional office to notify fiscal
intermediaries serving hospitals in the Ninth Circuit, where St.
Agnes is located, of the Legacy Emanuel decision. When
calculating the DSH adjustment for the reopened cost report,
13
however, the intermediary, allegedly in violation of all three of
these authorities, used HCFA’s former eligible days calculation.
St. Agnes complains that it lacked any remedy for this violation
because “once the Board had dismissed [its appeal] for lack of
jurisdiction” pursuant to Your Home, it “was left without a
further avenue to obtain the benefit to which it was entitled
under the reopening.” Reply Br. 31.
Your Home, however, only barred St. Agnes from seeking
review of the intermediary’s refusal to reopen the FY 1990 cost
report; it did not prevent St. Agnes from challenging the
reimbursement determination made by the intermediary after the
intermediary reopened the cost report in 1997. As the Supreme
Court explained, “an intermediary’s affirmative decision to
reopen and revise a reimbursement determination ‘shall be
considered a separate and distinct determination’ to which the
regulations authorizing appeal to the Board are applicable.”
Your Home, 525 U.S. at 453 (quoting 42 C.F.R. § 405.1889).
Although St. Agnes’s intermediary may not have “revise[d]” the
DSH adjustment, the Ninth Circuit has interpreted the appeal
regulations as permitting Board review of “all matters the fiscal
intermediary had reconsidered upon reopening the cost report,”
not just those cost items modified on reopening. French Hosp.
Med. Ctr. v. Shalala, 89 F.3d 1411, 1420 (9th Cir. 1996); see
Edgewater Hosp., Inc. v. Bowen, 857 F.2d 1123, 1135 (7th Cir.
1989) (noting that an intermediary’s decision not to change
challenged cost items “itself was a reconsideration” subject to
appeal), amended by 866 F.2d 228 (7th Cir. 1989).
Yet St. Agnes made no effort to appeal the intermediary’s
1997 reimbursement determination to the Board, and it gives us
no persuasive reason to believe it could not have done so. Nor
did it take any other action to contest the implementation of the
settlement agreement until it filed its mandamus action in the
district court seven years later. Because St. Agnes, like Baptist,
14
failed to seek relief through available administrative and judicial
review procedures, it cannot do so now through mandamus.
IV.
For the foregoing reasons, we affirm the district court’s
dismissals of both mandamus actions.
So ordered.