Waterbury Hosp Ctr et al v. United States Dept of Health & Human Svcs
ORDER denying 22 Motion for Summary Judgment; granting 24 Motion for Summary Judgment. Signed by Judge Robert N. Chatigny on 9/29/12. (Gillenwater, J)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
WATERBURY HOSPITAL CENTER,
KATHLEEN G. SEBELIUS,
CASE NO. 3:09-CV-1701(RNC)
RULING AND ORDER
This case concerns the amount of Medicare reimbursement the
plaintiffs should receive for serving a disproportionate share of
Plaintiffs are four Connecticut hospitals
that accept Medicare and Medicaid patients: Waterbury Hospital
Center (“Waterbury Hospital”), Middlesex Hospital, The William W.
Backus Hospital (“Backus Hospital”), and Danbury Hospital.1
bring this action under 42 U.S.C. § 1395oo(f) seeking judicial
review of a final Medicare reimbursement decision by the
Secretary of the Department of Health and Human Services (“the
The Secretary decided that the plaintiffs are not
entitled to include in the calculation of their Medicare
Disproportionate Share Hospital (“DSH”) adjustment for the years
at issue (1995-1998) patient days for patients covered by
Connecticut’s State Administered General Assistance program
A fifth hospital, St. Vincent’s Medical Center (“St.
Vincent’s”), has withdrawn its claims.
(“SAGA”), which provides medical assistance to uninsured lowincome patients not eligible for other medical assistance
programs, including Medicaid.
The Secretary concluded that the
Medicare statute allows a DSH adjustment only for patient days
attributable to individuals eligible for Medicaid.
have moved for summary judgment.
In cases involving similar
challenges by Medicare-participating hospitals to the Secretary's
interpretation of the Medicare statute's formula for providing
DSH reimbursements, courts of appeals have affirmed decisions
granting summary judgment against the hospitals and in favor of
See Adena Reg'l Med. Ctr. V. Leavitt, 527 F.3d
176 (D.C. Cir. 2008); Univ. Of Wash. Med. Ctr. V. Sibelius, 634
F.3d 1029 (9th Cir. 2011); Cooper Univ. Hosp. v. Sibelius, 636
F.3d 44 (3d Cir. 2010).
I agree with these courts that the
Secretary's legal position is correct and therefore grant the
defendant’s motion for summary judgment and deny the plaintiffs'
Medicare is a federally funded health insurance program
designed to provide assistance to the elderly and disabled.
42 U.S.C. §§ 1395-1395cc.
Part A of the Medicare statute
provides for payments to participating hospitals for inpatient
See 42 U.S.C. § 1395d(a)(1).
These payments are
determined by fiscal intermediaries, known as medicare
administrative contractors (“MACs”), which contract with the
See 42 U.S.C. § 1395h, 42 C.F.R. §§ 413.20 and
At the end of each fiscal year, hospitals prepare cost
reports and request payments; the MACs analyze the reports and
issue each hospital a Notice of Program Reimbursement (“NPR”).
See 42 C.F.R. § 405.1803.
A hospital may appeal the NPR
determination to the Provider Reimbursement Review Board
(“PRRB”), an administrative body appointed by the Secretary.
42 U.S.C. § 1395oo(a); 42 C.F.R. §§ 405.1835-1837.
final decision is subject to review by the Administrator of the
Centers for Medicare and Medicaid Services (CMS), whose decision
becomes the final decision of the Secretary.
Medicare reimburses hospitals through a prospective payment
system ("PPS") based on what it would cost an efficient hospital
to treat a patient with a given diagnosis.
See 42 U.S.C. §
Hospitals can obtain a variety of adjustments,
This case concerns the "disproportionate share
hospital," or “DSH” adjustment.
The DSH adjustment is designed
to provide adequate compensation to hospitals that serve a
significantly disproportionate number of low-income patients.
U.S.C. § 1395ww(d)(5)(F)(ii).
Whether a hospital is eligible for a DSH adjustment, and the
amount of the adjustment, are based on its “disproportionate
patient percentage,” calculated as the sum of two fractions,
which are referred to as the Medicare and Medicaid fractions.
See 42 U.S.C. § 1395ww(d)(5)(F)(v) and (vi).
At issue in this
case is the numerator of the Medicaid fraction.
statute defines this numerator as "the number of the hospital's
patient days for such period which consists 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 [i.e.
Medicare Part A]."
42 U.S.C. § 1395ww(d)(5)(F)(vi)(II).
Medicaid is a joint federal and state program under which
the state establishes a federally-approved plan to provide
medical assistance to low-income individuals.
statute requires a state plan to include certain groups of
individuals (the “categorically needy”) and permits a state plan
the option of including other groups (the “medically needy”).
State plans must comply with the requirements of Title XIX and be
approved by the Secretary.
Once a state’s plan is approved, the
Secretary is authorized to pay the state matching funds for
These funds are commonly referred to as
Federal Financial Participation (“FFP”).
Connecticut has an approved Medicaid plan.
It also runs a
State Administered General Assistance program (“SAGA”).
Eligibility for the SAGA program is based solely on income and
SAGA patients are not eligible for Medicare or for
Connecticut’s Medicaid program.
The benefits provided to SAGA
patients are not identical to those provided under Medicaid.
SAGA is completely state funded.2
Like Medicare, Medicaid also allows DSH adjustments.
state is given considerable discretion in determining how to
calculate Medicaid DSH adjustments under its plan.
statute allows a state to base its DSH adjustment on services to
"patients eligible for medical assistance under [an approved]
State plan . . . or to low-income patients."
42 U.S.C. §
Connecticut’s Medicaid plan bases its DSH adjustments in
part on a hospital’s SAGA patient days.3
During the relevant
period, Connecticut claimed and received FFP for DSH adjustments
based on SAGA patient days.
It did not receive any other federal
funds for SAGA patients.
During the period of time at issue, the SAGA statute
provided that no person eligible for Medicaid was eligible for
SAGA benefits. See 1995 Conn. Acts 351, § 8 (Reg. Sess.). The
statute was later amended to explicitly exclude from SAGA
eligibility any individual eligible for Medicaid. See 2004 Conn.
Acts 258, § 9 (Reg. Sess.). It was amended again in 2007 and may
now allow some individuals to participate who also qualify as
medically needy under Medicaid. See 2007 Conn. Acts 185, § 2
(Reg. Sess.). However, even if there is now some overlap between
persons eligible for Medicaid and persons eligible for SAGA
benefits, the overlap does not affect the outcome here. Any SAGA
participants also eligible for Medicaid can be counted directly
in the Medicaid DSH fraction as individuals eligible for medical
assistance under a state plan.
The SAGA patient days serve as a proxy for low-income
The four hospitals bringing this action participate in
Medicare and serve SAGA patients.
All four filed Medicare cost
reports for the years at issue, 1995 to 1998.
Services (“Empire”), the plaintiffs’ fiscal intermediary, issued
NPRs for the relevant reporting periods without including SAGA
patient days in the numerator of the Medicaid fraction.
plaintiffs appealed individually to the PRRB.4
They then filed a
request for a group appeal to the PRRB.5
On April 24, 2007, the PRRB held a hearing to determine
whether Empire’s calculation of the DSH adjustment (excluding
Middlesex Hospital did not file an appeal for its 1995 NPR
and Waterbury Hospital did not file an appeal for its 1996 NPR.
Waterbury Hospital did ask Empire to reopen the NPR for 1996, but
did not seek to have SAGA patient days included in its Medicare
DSH calculation. Empire reopened the 1996 NPR and revised it to
include additional Medicaid patient days, but not SAGA days.
Waterbury Hospital subsequently appealed the revised NPR to the
The Board found that it did not have jurisdiction over
Waterbury Hospital’s appeal seeking to include SAGA patients in
its Medicare DSH adjustment. Appeals of revised NPRs (“RNPRs”)
are limited to the specific issue for which the NPR was reopened.
See Little Co. of Mary Hosp. v. Sebelius, 587 F.3d 849, 852 (7th
Cir. 2009). Waterbury Hospital argues that the “specific issue”
in its RNPR was the Medicaid DSH adjustment. Defendant disagrees
and contends that Waterbury Hospital would have had to
specifically raise the issue of SAGA days in order to appeal
their exclusion. It is unnecessary to address this disagreement
concerning the Board's jurisdiction because, as discussed in the
text, SAGA participants are excluded from the Medicare DSH
adjustment; therefore, even if the Board had jurisdiction,
Waterbury Hospital could not have obtained the relief sought.
The group originally included five hospitals and fourteen
cost years. St. Vincent’s withdrew its four cost years and
Middlesex Hospital withdrew its 1994 cost year.
SAGA patient days) was proper.
On June 17, 2009, the PRRB issued
It concluded that the statutory language “medical
assistance under a State plan approved under [Title XIX]”
excludes days funded only by the State and charity care days,
even though such days may be counted when calculating the State’s
Medicaid DSH adjustment.
It determined that, because SAGA
beneficiaries are not eligible for Medicaid, and SAGA services
are not directly matched by the federal government, SAGA patient
days were properly excluded from the Medicare DSH calculation.
The CMS Administrator decided to review the PRRB’s decision.
a decision dated August 13, 2009, the Administrator affirmed the
decision of the PRRB.
The decision represents the final decision
of the Secretary.
Under the Administrative Procedure Act (“APA”), the
Secretary’s decision must be affirmed unless it is arbitrary and
capricious, an abuse of discretion, contrary to law, or
unsupported by substantial evidence.
5 U.S.C. § 706(2).
42 U.S.C. § 1395oo(f)(1);
The Secretary’s decision is evaluated under
the two-step process outlined in Chevron U.S.A., Inc. v. Natural
Res. Def. Council, Inc., 467 U.S. 837, 842-43 (1984).
Court must determine whether Congress has spoken directly to this
If so, the clear meaning of the statute
If the statute is ambiguous, the Court must determine
whether the Secretary’s interpretation is permissible.
The outcome in this case hinges on the meaning of the
phrase “eligible for medical assistance under a State plan
approved under subchapter XIX” contained in 42 U.S.C. §
The Medicare statute does not define
The Medicaid statute, however, does define
the term: under 42 U.S.C. § 1396d(a), “medical assistance” means
payment of all or part of the cost of certain services to
individuals eligible for Medicaid.6
As SAGA participants are
ineligible for Medicaid, they are excluded by this definition.
Plaintiffs contend that SAGA participants are “eligible for
medical assistance under a State plan” because they are included
in Connecticut’s Medicaid DSH adjustment calculation.7
Second Circuit has not addressed the issue whether a state’s
inclusion of a patient population in its Medicaid DSH calculation
constitutes "medical assistance under a state plan" for purposes
The statute enumerates the covered services and lists the
criteria to qualify for Medicaid.
Connecticut has used its discretion under the Medicaid DSH
provision to include SAGA participants as a proxy for low-income
patients. Therefore, the greater the number of SAGA patients a
hospital treats, the greater the DSH payment it receives under
Connecticut’s Medicaid plan. Connecticut receives matching
federal funds for its Medicaid DSH payments. As a result,
hospitals indirectly receive federal funds when they serve SAGA
patients. But SAGA is separate from Connecticut’s Medicaid plan,
SAGA patients do not receive direct Medicaid assistance, and the
benefits available to SAGA participants differ from those
available to individuals covered by Connecticut’s Medicaid plan.
of the Medicare DSH adjustment.
However, several courts of
appeals have ruled on this issue.
Adena Regional Medical Center v. Leavitt, 527 F.3d 176 (D.C.
Cir. 2008), involved essentially the same situation presented
Ohio’s Hospital Care Assurance Program (“HCAP”) provides
free services to indigent patients who are ineligible for
Medicaid, and Ohio includes HCAP patients in its Medicaid DSH
The Court held that “medical assistance" has the
same meaning in the Medicare DSH provision as in the Medicaid
See id. at 179-80.8
Because HCAP patients were not
eligible for Medicaid, HCAP patient days were properly excluded
in calculating the Medicare DSH adjustment.9
The Ninth Circuit reached the same conclusion in University
of Washington Medical Center v. Sebelius, 634 F.3d 1029 (9th Cir.
Washington has two state-funded programs that provide
medical assistance to persons ineligible for Medicaid: General
The Court applied the general presumption that “identical
words used in different parts of the same act are intended to
have the same meaning.” Adena, 527 F.3d at 180 (quoting Atl.
Cleaners & Dryers, Inc. v. United States, 286 U.S. 427, 433
(1932)). It also noted that the Medicare DSH provision
specifically references the Medicaid statute by referring to a
state plan approved under Title XIX.
Plaintiffs seek to distinguish this case on the basis of
differences between Ohio’s HCAP program and Connecticut’s SAGA
program. In both cases, however, the state has included
Medicaid-ineligible individuals in its Medicaid DSH calculations
using its discretion to treat them as proxies for low income
Assistance-Unemployable (“GAU”) and Medically Indigent (“MI”).
Washington includes both groups in its Medicaid DSH calculation.
The Court ruled that these patients were not eligible for medical
assistance under Washington's Medicaid plan and thus their
patient days were properly excluded from the plaintiff's Medicare
The Court rejected the plaintiff's argument that
because the GAU and MI patients were mentioned in Washington's
Medicaid plan, and indirectly benefitted from federal Medicaid
dollars through Medicaid DSH payments to hospitals, they should
be deemed eligible for medical assistance under the plan.
In Cooper University Hospital v. Sibelius, 636 F.3d 44 (3d
Cir. 2010), the Third Circuit affirmed a district court's grant
of summary judgment against a hospital in a case involving the
New Jersey Charity Care Program ("NJCCP"), which covers lowincome patients who are ineligible for any private or
governmental coverage, including Medicaid.
See Cooper Univ.
Hosp. v. Sibelius, 686 F. Supp. 2d 483 (D.N.J. 2009).
that had been permitted to include days for NJCCP patients in its
Medicare DSH calculations between 1996 and 1999 was not permitted
to do so in its 2000 calculation.
The hospital sought judicial
review urging that NJCPP patients should be deemed "eligible for
medical assistance under a State plan" within the meaning of 42
U.S.C. § 1395ww(d)(5)(vi)(II) because they are included in the
calculation of Medicaid DSH payments under the state's Medicaid
The Secretary sought summary judgment arguing that the
phrase "eligible for medical assistance" means "only patients who
are eligible for traditional Medicaid."
Id. at 490.
district court concluded that the Secretary's interpretation of
the statute was reasonable and thus entitled to deference under
Id. at 497.
I agree with these courts that “eligible for medical
assistance under a State plan” for purposes of the Medicare DSH
provision does not include individuals who are ineligible for
Medicaid but are factored into the state’s Medicaid DSH
See also Covenant Health Sys. v. Sibelius, 820 F.
Supp. 2d 4, 9 (D.D.C. 2011)(upholding Secretary's decision
excluding patient days associated with charity care patients from
providers's Medicare DSH adjustment calculation because such
patients were not eligible for Medicaid); Ashtabula v. Cnty. Med.
Ctr., 762 F. Supp. 2d 1, 2 (D.D.C. 2011)(same).
The Medicare and
Medicaid statutes are both part of the Social Security Act and
the Medicare DSH provision’s description of eligibility for
medical assistance specifically references Title XIX.
therefore conclude that the definition of “medical assistance” in
§ 1396d(a) applies to the Medicare DSH provision.
Like the Ninth Circuit, I find strong support for this
conclusion in the textual differences between the Medicare and
Medicaid DSH provisions.
See Univ. of Wash. Med. Ctr., 634 F.3d
The Medicare provision includes in the fraction
only patients eligible for medical assistance.
See 42 U.S.C. §
By contrast, the Medicaid
provision allows states to consider either patients eligible for
medical assistance or patients who qualify as low-income.
U.S.C. § 1396r-4(b)(2)-(3) (2006).
Plaintiffs have not identified any usage of “medical
assistance” in the Medicare statute inconsistent with the
Indeed, the examples they cite as evidence
that the Medicaid definition should not apply all relate to the
Medicaid statute, under which “medical assistance” is clearly
Moreover, a plain reading of the provision in question
excludes SAGA participants.
Individual SAGA beneficiaries are
not eligible for medical assistance under Connecticut’s Medicaid
They are included in the plan as an aid to determining
which hospitals serve a disproportionate share of expensive
To say this makes them eligible for medical assistance
under the plan stretches the language too far.
Plaintiffs rely on Environmental Defense v. Duke Energy
Corp., 549 U.S. 561, 574 (2007), and urge that “a given term in
the same statute may take on distinct characteristics from
association with distinct statutory objects.”
In this case,
however, there is no evidence of a different meaning.
Univ. Hosp. v. Sebelius, 686 F. Supp. 2d at 493 (rejecting
argument that “medical assistance” has different meaning in
Medicaid statute and Medicare DSH provision and finding that
Congress repeatedly used “eligible for medical assistance under a
State plan” as long-hand for “eligible for Medicaid”).10
Accordingly, the defendant’s motion for summary judgment
(doc. 24) is hereby granted and the plaintiffs’ motion for
summary judgment (doc. 22) is denied.
So ordered this 29th day of September 2012.
Robert N. Chatigny
United States District Judge
Plaintiffs also rely on Portland Adventist Medical Center
v. Thompson, 399 F.3d 1091 (9th Cir. 2005). That case is
inapposite because it involved an “expansion population” approved
by the Secretary as part of the state’s Medicaid plan. Moreover,
any doubt about the Ninth Circuit’s position on this issue has
been eliminated by the subsequent decision in University of
Washington Medical Center v. Sebelius.
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