ALLINA HEALTH SERVICES et al v. BURWELL

Filing 23

MEMORANDUM OPINION to the Order denying the Motion to Dismiss. Signed by Judge Gladys Kessler on 10/29/15. (CL)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
ALLINA HEALTH SERVICES,
et al.,
Plaintiffs,

)
)
)
)

v.

)

Civil Action No. 14-1415 (GK)

)

SYLVIA M. BURWELL, Secretary
United States Department of
Health and Human Services,

)
)
)
)

Defendant.

)

~~~~~~~~~~~~~~~~->

MEMORANDUM OPINION

Plaintiffs Allina Heal th Services,
bring

this

action against

Sylvia M.

et al.

Burwell,

("Plaintiffs") ,
in her official

capacity as Secretary of the United States Department of Health
and Human Services
calculation of

("Secretary" or "Defendant"), challenging the

certain disproportionate

share hospital

( "DSH")

payments as procedurally and substantively invalid.
This matter is before the Court on the Defendant's Motion to
Dismiss

for

Lack

of

Jurisdiction

or

in

the

Alternative

for

Voluntary Remand [Dkt. No. 15]. Upon consideration of the Motion,
Opposition [Dkt. No. 16], Reply [Dkt. No. 18], the entire record
herein, and for the reasons set forth below, the Motion shall be
denied.

1

I.

Background
A.

Factual Overview1

In Allina Health Services v. Sebelius, a group of hospitals,
including the Plaintiffs in the present case, challenged a 2004
rulemaking by the Secretary

( "2004

Final Rule")

calculations for Disproportionate Share Hospital
determinations under Medicare.
November 2012,

the Court

See No.

(Collyer,

pertaining to
("DSH") payment

10-cv-1463

J.)

(D.D.C.).

In

granted summary judgment

for the plaintiffs, finding that the 2004 Final Rule violated the
procedural
("APA")

requirements

and

vacating

of

the

the
rule.

Administrative
See

Allina

Sebelius, 904 F. Supp. 2d 75 (D.D.C. 2012)
On appeal,

Procedure

Health

Act

Servs.

v.

("Allina I").

our Court of Appeals affirmed the part of the

Allina I Court's decision vacating the 2004 Final Rule. But, the
Court

of

directed

Appeals
the

held

Secretary

that
to

the Allina
calculate

I

Court

the

DSH

erred when
payments

in

it
a

particular manner, rather than simply remanding. See Allina Health
Servs. v. Sebelius, 746 F.3d 1102, 1111 (D.C. Cir. 2014).

For purposes of ruling on a motion to dismiss, the factual
allegations of the complaint must be presumed to be true and
liberally construed in favor of the plaintiff. Aktieselskabet AF
21. November 2001 v. Fame Jeans Inc., 525 F.3d 8, 15 (D.C. Cir.
2008); Shear v. Nat'l Rifle Ass'n of Am., 606 F.2d 1251, 1253 (D.C.
Cir. 1979). Therefore, the facts set forth herein are taken from
Plaintiffs' Complaint [Dkt. No. 1].
1

2

Plaintiffs allege that after the D.C. Circuit's opinion, the
Secretary published calculations for federal fiscal year 2012 DSH
payments

("2012 DSH Calculations")

2

based on the 2004 Final Rule

that had been vacated.

Plaintiffs also allege that the new 2012

DSH

procedurally

Calculations

are

invalid.

Compl.

~~

47-49.

Plaintiffs timely appealed to the Provider Reimbursement Review
Board ("PRRB")
~~

36-39,

and requested that the PRRB grant expedited judicial

review. Id.
The

challenging the 2012 DSH Calculations, see Compl.

~

PRRB

41.
is

an

independent

administrative

tribunal

that

resolves disputes regarding hospital reimbursement determinations
by Medicare contractors or the Centers for Medicare
Services ("CMS"). See 42 U.S.C.
certain

payment

disputes

guidance, see 42 C.F.R.

§

§

&

Medicaid

1395oo(a). The PRRB may resolve

without

following

low-level

policy

405.1867; however, it is bound by agency

regulation and rulings, id., and cannot decide "question[s] of law
or regulations." 42 U.S.C.

§

1395oo(f) (1). Section 1395oo(f) gives

providers "the right to obtain judicial review of any action .
which involves a question of law or regulations . . . whenever the
[PRRB] determines . . . that it is without the authority to decide
the question." Id.

2

Although the calculations are for the 2012 fiscal year, they were
published on June 30, 2014, after the Court of Appeals vacated the
2004 Final Rule. Compl. ~ 36.
3

By letter dated August 13, 2014, the PRRB granted Plaintiffs'
request for expedited judicial review, finding that "it is without
the

authority

to

decide

regulation regarding
whether the
Allina

[I]

the

the

legal

[2012

legal.

/1

of

DSH Calculations]

Secretary's actions
are

question

subsequent

Letter from

the

to

the

is valid and

the decision

in

Provider Reimbursement

Review Board to Stephanie Webster 6 (Aug. 13, 2014)
1]

whether

[Dkt. No. 14-

( "PRRB Decision") .
B.

On

Procedural Background

August

19,

2014,

Plaintiffs

filed

their

Complaint,

pursuant to the PRRB's grant of expedited judicial review

[Dkt.

No. 1]. Plaintiffs filed a Notice of Related Case on the same day
[Dkt. No. 2]. Judge Collyer granted Defendant's objection to the
related case designation on May 18, 2015, and the case was randomly
reassigned to this Court. Minute Order dated May 18,

2015; Case

Assignment [Dkt. No. 20].
On October 27,

2014, Defendant filed her Motion to Dismiss

for Lack of Jurisdiction or in the Alternative for Voluntary Remand
[Dkt.

No.

15]

("Motion") .

Plaintiffs filed their Opposition on

November 10, 2014 [Dkt. No. 16]

("Opp'n"), and Defendant filed her

Reply on November 20, 2015 [Dkt. No. 18]
II.

("Reply").

Standard of Review Under Fed. R. Civ. P. 12{b) (1)

As courts of
only those powers

limited jurisdiction,

federal

specifically granted to
4

courts possess

them by Congress or

directly by the U.S. Constitution.
Co.

of Arn.,

511 U.S.

375,

377

Kokkone~

(1994).

v. Guardian Life Ins.

The plaintiff bears the

burden of establishing by a preponderance of the evidence that the
Court has subject matter jurisdiction to hear the case. See Shuler
v. United States, 531 F.3d 930, 932 (D.C. Cir. 2008). In deciding
whether to grant a motion to dismiss for lack of jurisdiction under
Rule

12 (b) (1),

allegations

the

in

[the]

court

must

complaint

"accept
as

all

of

true [.] "

the

factual

Jerome

Stevens

Pharmaceuticals, Inc. v. Food & Drug Adrnin., 402 F.3d 1249, 1253-54
(D.C. Cir. 2005)

(internal quotation marks omitted)

States v. Gaubert, 499 U.S. 315, 327

(citing United

(1991)). The Court may also

consider matters outside the pleadings, and may rest its decision
on its own resolution of disputed facts. See Herbert v. Nat'l Acad.
of Sciences, 974 F.2d 192, 197 (D.C. Cir. 1992).
III. Analysis
The Defendant has moved to dismiss this case on the ground
that

the PRRB

improvidently granted expedited judicial review.

Defendant alleges

the

PRRB reached the

"without authority to decide"

conclusion that

Plaintiffs'

it was

challenge to the 2012

DSH Calculations because it erroneously believed "it was 'bound'
to apply the vacated 2004 Final Rule."

Motion at 5.

Dismissal,

Defendant argues, will permit the PRRB to reconsider Plaintiffs'
challenge. Id. at 1-2.

5

In the alternative, Defendant requests that the Court "grant
a voluntary remand to the agency,
adjudicate

(P]laintiffs'

claims

which will allow the PRRB to
without

consideration

of

the

vacated (2004 Final Rule]." Id. at 2.
Plaintiffs oppose Defendant's Motion, arguing that the PRRB's
expedited judicial review determination is final and not subject
to review.

See Opp'n at 6-11.

Plaintiffs also contend that,

if

subject to review, the PRRB's determination was correct, and that
voluntary remand is improper. The Court will address each argument
in turn.
A.

The Court Has Authority to Review the PRRB Expedited
Judicial Review Determination

Plaintiffs argue that judicial review of the PRRB's lack of
authority
1395oo(f)

determination

is

improper.

Opp'n

at

7-8.

Section

itself makes plain that judicial review is available.

Section 1395oo(f) (1)

states that providers "shall have the right

to obtain judicial review of any final decision of the [PRRB] ." 42
U.S.C.

§

1395oo(f) (1)

(emphasis added). In the same paragraph, the

statute designates the PRRB's determination of its authority to
decide

the question of

law or regulations

"a final

decision":

"[T]he determination shall be considered a final decision and not
subject to review by the Secretary." Id. Consequently, the statute
is

clear

that

the

PRRB' s

authority

determination

decision and therefore subject to judicial review. Id.

6

is

a

final

The Seventh Circuit reached the same conclusion in Edgewater
Hosp. ,

Inc.

v.

Bowen,

establishes

a

stating that

right

to

" [Section 13 9500 ( f)]

judicial

review

of

itself
[PRRB's]

the

determination that it lacks the authority to decide a question of
law or regulations." 857 F.3d 1123, 1130 (7th Cir. 1989); accord
Providence Yakima Medical Center v. Sebelius, 611 F.3d 1181, 118788 (9th Cir. 2010)

(appellate court held PRRB's lack of authority

determination was incorrect and remanded to District Court with
instructions to remand to PRRB) .
The only case Plaintiffs cite in support of their argument is
Lion Health Servs.,

Inc.

v.

Sebelius,

a case from the Northern

District of Texas that is not binding on this Court.
at 7 (citing 689 F. Supp. 2d 849
on other grounds, 635 F.3d 693
court addressed the
stating in a

issue of

See Opp'n

(N.D. Tex. 2010), rev'd in part

(5th Cir. 2011)). The Lion Health
judicial review only in passing,

footnote that its subject matter jurisdiction was

premised on 42 U.S.C.

§

1395oo(f) (1) and that it "s[aw] no reason

why it should review the PRRB's determination of its own authority
at th[at] time." Lion Health, 689 F. Supp. 2d at 856 n.6.
Lion Health lends little support to Plaintiffs' argument. The
Lion Health court did not engage in any in-depth analysis of the
issue,

nor

did

it

definitively hold

unavailable.

7

that

judicial

review was

Plaintiffs

next

argue

that

the

Secretary

is

statutorily

barred from interfering with the PRRB Decision. See Opp'n at 6-7;
42

u. s . c .

§

13 9 5 00 ( f ) ( 1)

("the

[expedited

judicial

review]

determination shall be considered a final decision and not subject
to review by the Secretary") .

Plaintiffs are correct that

the

Secretary may not directly overturn the PRRB's determination, but
I

that is not what the Secretary is attempting to do here--rather,
the Secretary is asking the Court to review the PRRB's lack of
authority determination. 3
For all the foregoing reasons,

the Court concludes that it

has the authority to review the PRRB's determination that it is
without the authority to decide the legal questions at hand.
B.

The PRRB Correctly
Necessary Authority

The Secretary argues

Determined

that

the

that

It

Lacks

the

PRRB erroneously determined

that it is without authority to decide Plaintiffs'

case because

the PRRB believed it was "bound" to apply the vacated 2004 Final
Rule. Motion at 5. The crux of the Secretary's argument is, because
the 2004 Final Rule was vacated, it no longer existed and th_erefore
the PRRB "could not have been 'bound by'

that nonexistent rule."

Plaintiffs also argue that the Court "cannot look behind the
[PRRB' s] determination of its own authority to grant relief." Opp' n
at 10 (citing Affinity Healthcare Servs., Inc. v. Sebelius, 746 F.
Supp. 2d 106, 115 (D.D.C. 2010)). Affinity Healthcare is not
instructive here, as that case involved the CMS Administrator's
reversal of the PRRB' s authority determination, not judicial
review of the determination.

3

8

Id. at 6. The Secretary also argues that the PRRB was under "the
misimpression that

the Secretary had a

policy of applying the

regulation notwithstanding" the vacatur. Id.
Plaintiffs argue that, despite her contentions in this case,
the

Secretary's

usual

position

is

that

vacatur

does

not

automatically eliminate the binding nature of a rule, and that a
vacated rule remains binding until

the Secretary affirmatively

acquiesces. See Opp'n at 14-15. Therefore, Plaintiffs contend that
the PRRB correctly determined it was bound by the vacated 2004
Final Rule.
The Court need not determine at this time whether a vacated
rule immediately becomes nonbinding or if it remains binding until
the Secretary affirmatively acquiesces to it, because Plaintiffs
allege that the Secretary did in fact apply the vacated 2004 Final
Rule in the 2012 DSH Calculations, so as to "constitute unlawful
nonacquiecence

[sic]

of binding D.C. Circuit law." PRRB Decision

at 5; Opp'n at 12. Even if the 2004 Final Rule became non-binding
upon vacatur,

Plaintiffs

continued to apply it.

allege

Therefore,

that

the

Secretary unlawfully

the legality of the 2012 DSH

Calculations is a legal question that the PRRB correctly determined
it does not have the authority to decide.
Although the Secretary's Motion and Reply both ignore it,
Plaintiffs brought a

second allegation before the PRRB:

if the

2012 DSH Calculations do not involve an application of the vacated
9

2004 Final Rule, then the 2012 DSH Calculations are a procedurally
invalid adoption of a new rule.
that

the

Specifically,

Plaintiffs allege

2012 DSH Calculations violate the notice and comment

requirements of the Medicare Act and the APA. Opp'n at 14.
Plaintiffs

correctly

contend

that

the

PRRB

lacked

the

authority to decide this second issue, and Defendant has offered
no argument in opposition. Opp'n at 12-13
For the

foregoing reasons,

the Court finds

that the PRRB

properly determined that it was without the authority to decide
the legal questions brought by Plaintiffs. Because the PRRB's grant
of expedited judicial review was proper,

Defendant's Motion to

Dismiss is denied.

c.

Voluntary Remand Is Improper

The Secretary argues
Decision was proper,
the

PRRB.

The

that

regardless

of whether the

PRRB

the case should be voluntarily remanded to

Secretary's

sole

rationale

is

that

the

PRRB

erroneously concluded that it was bound to apply the 2004 Final
Rule, and therefore the agency should be given the opportunity to
cure its own mistake. See Motion at 7.
The

Court

finds

that

remand

is

not

appropriate

in

this

instance. The Secretary's voluntary remand argument is identical
to its prior argument that the PRRB Decision was erroneous, which
the Court has already rejected.

See supra, Section III.B. To be

clear, the Secretary is not conceding that the vacated 2004 Final
10

Rule was mistakenly applied in the 2012 DSH Calculations, nor is
she

seeking

to

Calculations- -the

cure

any

alleged

only mistake

errors

in

identified by

the

the

2012

Secretary

DSH
is

PRRB's grant of expedited judicial review. However, the Court has
already concluded that expedited judicial review was appropriate.
In addition, any error by the PRRB in its expedited judicial
review determination is not the Secretary's to cure.
Secretary requests that this Court "allow the
own mistake," Mot. at 7 (citing Edward

w.

[PRRB]

While the

to cure its

Sparrow Hosp. Ass'n v.

Sebelius, 796 F. Supp. 2d 104, 207 (D.D.C. 2011)), the PRRB itself
does not allege
139500 (f) (1)

states

determination is
U.S.C.

§

that

it made any mistake at all.

that

the

PRRB' s

expedited

And Section

judicial

review

"not subject to review by the Secretary."

42

1395oo(f) (1). Granting voluntary remand in this instance,

by reason of the Secretary's determination that the PRRB's decision
was a mistake, would circumvent the statute.
Finally,

the Secretary's voluntary remand argument fails to

address one of the bases for the PRRB's decision.

The Secretary

does not argue that the PRRB erred in determining that it does not
have the authority to decide whether the 2012 DSH Calculations
violate procedural requirements.

As there was no error on this

question, voluntary remand would be inappropriate.
For

the

foregoing

reasons,

voluntary remand is denied.
11

the

Secretary's

request

for

IV.

Conclusion

Upon consideration of the Motion, Opposition, Reply, the entire
record herein, and for the foregoing reasons, it is hereby
ORDERED,

that

Defendant's

Motion

to

Dismiss

for

Lack

of

Jurisdiction or in the Alternative for Voluntary Remand is denied;
and it is further
ORDERED,

that an Initial Scheduling Conference shall be held

on this matter on November 3, 2015, at 10:30 a.m.

Gla<Js ~&:J {;~

October 29, 2015

"

United States District Judge

Copies to: attorneys on record via ECF

12