UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
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DCH REGIONAL MEDICAL CENTER, )
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Plaintiff, )
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v. ) No. 16-cv-0212 (KBJ)
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THOMAS E. PRICE, in his capacity as )
Secretary of the United States )
Department of Health and Human )
Services, )
)
Defendant. )
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MEMORANDUM OPINION
On April 13, 2016, this Court granted Defendant’s uncontested motion to stay the
proceedings in the instant Medicare case pending the D.C. Circuit’s resolution of an
appeal in Florida Health Sciences Center, Inc. v. Secretary of Health and Human
Services (“Florida Health I”), 89 F. Supp. 3d 121 (D.D.C. 2015). (See Def.’s Mot. to
Stay Proceedings, ECF No. 11, at 12; Min. Order of Apr. 13, 2016.) 1 The district
court in Florida Health I had “held that 42 U.S.C. § 1395ww(r)(3) bars judicial review
of the Secretary’s calculation of” a figure “known as ‘Factor Three,’ that is used to
determine the amount of a hospital’s disproportionate share payments under the federal
Medicare program[,]” and Defendant here maintained that “[t]he same threshold
question is present in this case[.]” (Def.’s Mot. to Stay Proceedings at 12.)
1
Page-number citations to documents the parties have filed refer to the page numbers that the Court’s
electronic filing system assigns.
On July 26, 2016, the D.C. Circuit issued an opinion that affirmed the district
court’s holding. See Florida Health Scis. Ctr., Inc. v. Sec’y of Health and Human
Servs. (“Florida Health II”), 830 F.3d 515 (D.C. Cir. 2016). Specifically, in Florida
Health II, the D.C. Circuit concluded that section 1395ww(r)(3)’s “bar on judicial
review of the Secretary’s estimate” of a hospital’s amount of uncompensated care
likewise “precludes review of the underlying data” upon which the Secretary relies in
reaching that estimate, because the data “are inextricably intertwined with the
Secretary’s estimate of uncompensated care[.]” Id. at 517, 521 (emphasis added); see
also id. at 521 (explaining that “[t]he dispositive issue is whether the challenged data
are inextricably intertwined with an action that all agree is shielded from review,
regardless of where that action lies in the agency’s decision tree” (emphasis in
original)). The D.C. Circuit further noted that “the data are the entire basis for” the
Secretary’s estimate of uncompensated care, and therefore, “[a] challenge to the data
would eviscerate the bar on judicial review” of the Secretary’s estimate. Id. at 519
(internal quotation marks and citation omitted).
For the reasons explained below, this Court concludes that the D.C. Circuit’s
reasoning in Florida Health II compels the rejection of the instant challenge to the
Secretary’s estimate-generating methodology. (See Compl. ECF No. 1, at 1.)
Consequently, Defendant’s motion to dismiss the complaint must be GRANTED, and
this case must be DISMISSED. A separate Order that is consistent with this
Memorandum Opinion shall follow.
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DISCUSSION
In its complaint, Plaintiff DCH Regional Medical Center (“DCH”) “challenge[s]
the methodology adopted and employed by [former] Defendant Sylvia Burwell, in her
capacity as [former] Secretary of the United States Department of Health and Human
Services[,]” whereby “the calculation [the Secretary] used to determine the
disproportionate share payments owed to qualifying hospitals participating in Medicare
was restricted, in part, to data associated with a single provider number[.]” (Compl.,
ECF No. 1, at 1; see also id. (explaining that, when two hospitals merge during the
relevant time period, the challenged methodology results in an understated estimate of
the surviving hospital’s disproportionate share payment); id. at 10 (“The problem lies in
her restriction that data (specifically, Medicaid and SSI days) only be collected from a
single hospital’s” provider number (emphasis omitted)).) 2 However, this Court discerns
no meaningful difference between the so-called methodological challenge that DCH
raises in this case (see id. at 15 (characterizing the Secretary’s methodology as arbitrary
and capricious insofar is it considers “only data associated with a single hospital’s”
provider number and thus does “not use ‘appropriate data’”)), and the data-based
challenge that the D.C. Circuit considered in Florida Health II, see 830 F.3d at 518
(“Tampa General seeks to challenge the Secretary’s refusal to use the most recent
available data to estimate the hospital’s 2014 DSH payment.”). That is, both the
underlying data and the methodology the Secretary employs when analyzing that data
are “‘indispensable’ and ‘integral’ to, and ‘inextricably intertwined’ with[] the
2
Thomas Price has been automatically substituted as the Defendant in this action pursuant to Federal
Rule of Civil Procedure 25(d).
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Secretary’s estimate” of each hospital’s amount of uncompensated care, id. at 519,
because the estimate is the figure that the Secretary generates by evaluating the
underlying data in conjunction with a defined methodology. Cf. Florida Health I, 89 F.
Supp. 3d at 132 (explaining that, while “Congress did not specifically prohibit review
of the methodology used to calculate the ‘estimated’ amount of hospitals’
uncompensated care in factor three, and it did not expressly bar review of the
‘appropriate data’ upon which the estimate would be based, . . . it did plainly and
broadly prohibit any legal challenge to the estimate itself”). Thus, an argument that
attempts to distinguish between data and methodology vis-à-vis the estimate is little
more than an exercise in semantics, and it can fare no better than the challenge to the
Secretary’s choice of data that the D.C. Circuit rejected on jurisdictional grounds in
Florida Health II.
To the extent that DCH attempts to reframe its challenge as a procedural
objection to the general rule that led to the Secretary’s estimate (see Pl.’s Opp’n to
Def.’s Mot. to Dismiss (“Pl.’s Opp’n”), ECF No. 15, at 1315), this Court is
unpersuaded. To be sure, “the D.C. Circuit recently stated that, where judicial review
of [an agency’s] decision is barred, judicial review is still appropriate over general rules
leading to that decision.” (Id. at 13 (citing Florida Health II, 830 F.3d at 52122).)
But the Florida Health II court also “clarified that judicial review is not permitted
‘when a procedure is challenged solely in order to reverse an individual . . . decision’
that [a court] otherwise cannot review.” Florida Health II, 830 F.3d at 521 (second
alteration and emphasis added) (quoting Palisades Gen. Hosp. Inc. v. Leavitt, 426 F.3d
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400, 405 (D.C. Cir. 2005)). And even a cursory reading of DCH’s complaint reveals
that its suit does just that—i.e., its aim is not to “present[] a challenge to a general rule
applied by the Secretary” (Pl.’s Opp’n at 15); rather, DCH “is simply trying to undo the
Secretary’s estimate of the hospital’s uncompensated care by recasting its challenge to
the Secretary’s choice of [methodology] as an attack on the general rules leading to her
estimate[,]” Florida Health II, 830 F.3d at 522.
Notably, DCH struggles mightily to characterize its complaint as a procedural
challenge. To this end, it points to allegations in the complaint that charge the
Secretary with failing to “properly consider or respond to comments during the rule -
making process regarding the inherent flaw in her methodology[.]” (Compl. at 15; see
also Pl.’s Opp’n at 7, 15 n.1.) But, the indisputable gravamen of DCH’s complaint is
that the Secretary improperly calculated the amount of uncompensated care for DCH—
which merged with Northport Regional Medical Center (“Northport”) on May 1, 2011
(see Compl. at 11)—by basing the agency’s calculation on data associated solely with
DCH, rather than data associated with both DCH and Northport. (See id. (“[U]nder the
Secretary’s flawed methodology, [the agency’s] Factor 3 calculation for DCH
disregarded seven (7) months of relevant data associated with Northport’s [provider
number], resulting in a substantial reduction in DCH’s reimbursement.”).) And one
need look no further than DCH’s own request for relief to see clearly that what is at
stake in this action is DCH’s requested individualized recalculation of the
uncompensated care figure rather than any reformulation of the agency’s general rule;
in fact, the complaint seeks neither invalidation of any agency rule nor a remand so that
the Secretary may better explain her methodology. (See id. at 16.) Instead, the
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complaint requests that this Court “[v]acate the Secretary’s Fiscal Year 2014 Factor 3
calculation for Plaintiff” and remand the case to the Secretary “with an order
compelling her to recalculate the Fiscal Year 2014 disproportionate share adjustment
owed to Plaintiff[.]” (Id. (emphasis added).) Thus, just as in Florida Health II, DCH’s
belated contention that the complaint presents an “attack on the general rules leading to
[the Secretary’s] estimate” is actually a misguided attempt to “recast[]” the complaint’s
core challenge to the methodology that the Secretary used to calculate the estimate, 830
F.3d at 522, and as such, it must be rejected.
Nor can this Court accept DCH’s argument that its legal “claim includes a
challenge to [the Secretary’s] ultra vires action[,]” and thus this Court retains
jurisdiction over its complaint. (Pl.’s Opp’n at 17 (citing COMSAT v. FCC, 114 F.3d
223, 224 (D.C. Cir. 1997)).) A challenge to agency action on the ground that it is ultra
vires requires a plaintiff to establish “a patent violation of agency authority[,]” Florida
Health II, 830 F.3d at 522 (internal quotation marks and citation omitted) ; see also id.
(“A violation is ‘patent’ if it is ‘[o]bvious’ or ‘apparent.’” (citation omitted)), and under
the circumstances presented here, DCH has demonstrated no such thing. The
Secretary’s choice of the methodology to be applied to the data when generating the
sacred estimate is not beyond the terms of the statute, which unquestionably gives the
Secretary wide latitude to formulate the estimate figure. Moreover, in the merger
context, it is far from apparent that it was inappropriate for the Secretary to restrict the
underlying data to a single hospital’s provider number, and to decline to consider the
provider numbers associated with both the acquired and surviving hospital. See 42
U.S.C. § 1395ww(r)(2)(C)(i) (directing that the Secretary’s estimate of “the amount of
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uncompensated care” for a hospital be “based on appropriate data”); (Compl. at 12
(noting that the Secretary justified the data restriction by characterizing it as “consistent
with the treatment of other IPPS payment factors,” because “[d]ata associated with a
[provider number] that is no longer in use are not used to determine [other] IPPS
hospital payments under the surviving” provider number)); see also Florida Health II,
830 F.3d at 522. Consequently, DCH’s ultra vires argument, too, is unavailing.
CONCLUSION
It is clear to this Court that DCH’s challenge to the methodology that the
Secretary used to calculate the estimate at issue is “inextricably intertwined with the
Secretary’s estimate of uncompensated care,” Florida Health II, 830 F.3d at 521, and
therefore, per the D.C. Circuit’s holding in Florida Health II, this Court lacks
jurisdiction to hear this case. Accordingly, as set forth in the accompanying Order,
Defendant’s motion to dismiss is GRANTED, and this case will be DISMISSED in its
entirety.
DATE: July 6, 2017 Ketanji Brown Jackson
KETANJI BROWN JACKSON
United States District Judge
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