United States Court of Appeals, District of Columbia Circuit
February 12, 2018
from the United States District Court for the District of
Columbia (No. 1:15-cv-01659)
C. Morrison, Jr. argued the cause for appellants. With him on
the briefs were Stephen A. Calhoun, Tim S. Leonard, and
Barron P. Bogatto.
Melissa N. Patterson, Attorney, U.S. Department of Justice,
argued the cause for appellee. With her on the brief were
Chad A. Readler, Acting Assistant Attorney General, Jessie K.
Liu, U.S. Attorney, and Michael S. Raab, Attorney.
Before: Garland, Chief Judge, and Kavanaugh and Katsas,
KATSAS, CIRCUIT JUDGE
2013, the Secretary of Health and Human Services promulgated
a regulation that bars hospitals from seeking additional
Medicare payments by challenging factual determinations that
are relevant to the payment year at issue, but that were made
many years earlier. By its terms, the 2013 regulation applies
only to reopenings, which are proceedings through which
various administrative actors within HHS may reconsider their
own prior decisions. We consider whether the regulation also
applies to appeals from one set of administrative actors to
Medicare program provides federally-funded health insurance
to qualifying elderly and disabled individuals. 42 U.S.C.
§ 1395 et seq. As originally enacted, Medicare
paid hospitals for any "reasonable costs" of
providing covered services to beneficiaries. See
Methodist Hosp. of Sacramento v. Shalala, 38 F.3d 1225,
1227 (D.C. Cir. 1994). In 1983, however, Congress created a
new Prospective Payment System, under which hospitals are
paid a fixed amount for each beneficiary treated, regardless
of their actual costs. See id.
payment amounts are determined annually, under a statutory
formula that depends in part on base rates known as
"standardized amounts." See 42 U.S.C.
§ 1395ww(d)(2)(C). In turn, the standardized amounts
depend in part on the "allowable operating costs per
discharge of inpatient hospital services." See
id. § 1395ww(d)(2)(A). Although prospective payment
amounts are adjusted over time in various ways, the
standardized amounts themselves are not. See id.
§ 1395ww(d)(3). Those amounts were calculated in 1983,
based on hospitals' cost-reporting data from 1981.
See Prospective Payments for Medicare Inpatient
Hospital Services, 48 Fed. Reg. 39, 752, 39, 763-67 (Sept. 1,
1983). To this day, therefore, Medicare payments for
inpatient services depend in part on factual determinations
derived from 1981 data and embedded in 1983 calculations,
including the calculation of "allowable operating costs
first instance, decisions about how much to pay individual
hospitals are made by fiscal intermediaries (now called
"Medicare administrative contractors") acting on
behalf of the Centers for Medicare & Medicaid Services
("CMS"), the component within HHS that administers
Medicare for the Secretary. See 42 U.S.C. §
1395h; Sebelius v. Auburn Reg'l Med. Ctr., 568
U.S. 145, 150 (2013). At the end of every year, participating
hospitals submit a cost report to an intermediary, which
reviews the report, determines appropriate payments for the
services rendered, and then issues a Notice of Program
Reimbursement. See id.
dissatisfied hospital has two ways to challenge such an
annual reimbursement decision. First, under the Medicare Act,
the hospital may appeal as of right to the Provider
Reimbursement Review Board ("PRRB" or
"Board"), an administrative tribunal appointed by
the Secretary, within 180 days of receiving notice of the
fiscal intermediary's final decision. 42 U.S.C. §
1395oo(a)(3). After an adverse PRRB decision, a
hospital may seek further review by the Secretary and then by
a federal district court. See id. §
1395oo(f)(1). Second, under HHS regulations, a
hospital may request the "reopening" of a
"Secretary determination, a contractor determination, or
a decision by a reviewing entity." 42 C.F.R. §
405.1885(a)(1). Such a request must be received "no
later than 3 years after the date of the determination or
decision that is the subject of the requested
reopening." Id. § 405.1885(b)(2)(i).
Reopenings are considered by the entity whose decision is at
issue. See id. § 405.1885(a)(1). The decision
whether to reopen is purely discretionary, and it thus
"is not subject to further administrative review or
judicial review." Id. § 405.1885(a)(6).
recurring issue under this scheme has been whether a
hospital, in the course of pursuing a timely-filed reopening
or PRRB appeal, may contest so-called "predicate
facts"-factual determinations that are relevant to the
payment year at issue, but that were made in earlier years.
The Secretary has argued that the three-year limitations
period in the reopening regulation bars hospitals from
challenging-in either reopenings or appeals to the PRRB-any
predicate facts determined more than three years before the
reopening or the appeal was begun.
addressed such a contention in Kaiser Foundation
Hospitals v. Sebelius, 708 F.3d 226 (D.C. Cir. 2013).
Although Kaiser involved an appeal to the PRRB, we
rejected the Secretary's argument under the plain terms
of the reopening regulations in effect at the time. We
reasoned that the "determination of an
intermediary" subject to reopening was the bottom-line
"determination of the amount of total
reimbursement." Id. at 230-31 (quoting 42
C.F.R. §§ 405.1801(a), .1885(a) (2001)). We further
reasoned that reopenings examined only "findings on
matters at issue," a term that we construed to mean
findings as relevant to the payment year for which the
hospital was seeking additional reimbursement. Id.
at 231-32 (quoting 42 C.F.R. § 405.1885(a) (2001)). We
therefore held that "the reopening regulation allows for
modification of predicate facts in closed years provided that
the change will only impact the total reimbursement
determination in open years." Id. at 232-33.
response to Kaiser, the Secretary promulgated the
2013 amendments to the reopening regulation directly at issue
here. Provider Reimbursement Determinations and Appeals, 78
Fed. Reg. 74, 826, 75, 162-69 (Dec. 10, 2013). The amended
regulation provides that a decision may be reopened
"with respect to specific findings on matters at
issue"-a term now defined to "include a predicate
fact" that was "first determined for a cost
reporting period that predates the period at issue." 42
C.F.R. § 405.1885(a)(1), (a)(1)(iii). Moreover, the
regulation now provides that the three-year limitations
period for seeking a reopening "applies to, and is
calculated separately for, each specific finding on a matter