William Beaumont Hospital - Royal Oak v. Burwell

Filing 22

OPINION AND ORDER DENYING PLAINTIFF'S MOTION FOR JUDGMENT, DENYING DEFENDANT'S MOTION FOR JUDGMENT, AND ORDERING FURTHER BRIEFING Signed by District Judge Robert H. Cleland. (NAhm) Modified on 3/30/2018 (LWag).

UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

WILLIAM BEAUMONT HOSPITAL –
ROYAL OAK,
Plaintiff,
v.

Case No. 16-13528

THOMAS E. PRICE, Secretary, Department
of Health and Human Services,
Defendant.
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OPINION AND ORDER DENYING PLAINTIFF’S MOTION FOR JUDGMENT,
DENYING DEFENDANT’S MOTION FOR JUDGMENT, AND ORDERING FURTHER
BRIEFING
This case is before the court on Plaintiff William Beaumont Hospital’s request for
judicial review of a final decision by Defendant Secretary of Health and Human
Services. In the decision below, the Secretary determined that Beaumont had not
brought forth sufficient, contemporaneous evidence showing that Beaumont was
entitled to Medicare reimbursement for certain costs it incurred in providing clinical
training to nursing students. Before the court are the parties’ cross motions for
judgment. (Dkt. ##15, 17.) The motion is, per the court’s earlier directives, fully briefed
(Dkt. ##15, 17, 18, 21) and the court has determined that a hearing is unnecessary.
E.D. Mich. L.R. 7.1(f)(2). For the following reasons, the court must deny both
Beaumont’s and the Secretary’s motion, and order further briefing.1

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The court will also order that the name of Defendant Secretary be changed on
the docket. At the time this action was filed, the Secretary of the Department of Health
and Human Services was Sylvia Mathews Burwell, and her name appears on the

I. BACKGROUND
A. Regulatory Framework
Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395–1395lll, commonly
known as the Medicare Act, “primarily provides medical benefits to eligible persons over
the age of 65” and to persons with disabilities. Med. Rehab. Servs., P.C. v. Shalala, 17
F.3d 828, 830 (6th Cir. 1994); Battle Creek Health Sys. v. Leavitt, 498 F.3d 401, 403
(6th Cir. 2007). Under the Medicare Act, certain health care providers are eligible for
reimbursement by the Secretary of Health and Human Services for services they
provide to Medicare beneficiaries. Providers seeking reimbursement submit their yearly
cost reports to a fiscal intermediary (also known as a Medicare Administrative
Contractor, or “MAC”) acting as an agent for the Secretary. 42 C.F.R. § 405.1801(b);
see also Your Home Visiting Nurse Servs., Inc. v. Shalala, 525 U.S. 449, 451 (1999).
After reviewing the cost reports and determining how much is due for reimbursement,
the MAC issues a “notice of program reimbursement.”
Relevant here, federal law permits health care providers to be reimbursed for
their costs associated with “the clinical training of students enrolled in an approved
nursing or allied health education program that is not operated by the provider.” 42
C.F.R. § 413.85(g). For eligible providers, reimbursements “are paid on a reasonable
cost basis.” Id. “Reasonable costs” are those “actually incurred, excluding therefrom any
part of incurred cost found to be unnecessary in the efficient delivery of needed health
services.” 42 U.S.C. § 1395x(v)(1)(A); see also 42 C.F.R. § 413.9(a) (defining

court’s docket. The Secretary now, however, is Thomas E. Price, M.D. The parties have
listed Thomas E. Price, M.D., as the Defendant in the captions in their papers, but have
not moved to update the docket; the court now does so sua sponte.

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reasonable costs as including “all necessary and proper costs incurred in furnishing the
services”).
Eligibility for Medicare reimbursement requires providers to supply “adequate
cost data”: data “based on their financial and statistical records” that is “capable of
verification by qualified auditors.” 42 C.F.R. § 413.24(a). Federal regulations further set
forth the requirements for adequate cost information:
Adequate cost information must be obtained from the provider’s records to
support payments made for services furnished to beneficiaries. The
requirement of adequacy of data implies that the data be accurate and in
sufficient detail to accomplish the purposes for which it is intended.
Adequate data capable of being audited is consistent with good business
concepts and effective and efficient management of any organization,
whether it is operated for profit or on a nonprofit basis. It is a reasonable
expectation on the part of any agency paying for services on a costreimbursement basis. In order to provide the required cost data and not
impair comparability, financial and statistical records should be maintained
in a manner consistent from one period to another. However, a proper
regard for consistency need not preclude a desirable change in
accounting procedures if there is reason to effect such change.
42 C.F.R. § 413.24(c). In addition, 42 C.F.R. § 413.20 describes recordkeeping
requirements for providers, noting first that “[t]he principles of cost reimbursement
require that providers maintain sufficient financial records and statistical data for proper
determination of costs payable under the program.” Section 413.20(d)(1) requires
providers to “furnish such information to the intermediary as may be necessary to—(i)
Assure proper payment by the program . . . ; (ii) Receive program payments; and
(iii) Satisfy program overpayment determinations.” It also requires providers to “permit
the contractor to examine such records and documents as are necessary to ascertain
information pertinent to the determination of the proper amount of program payments
due.” 42 C.F.R. § 413.20(d)(2).

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Non-binding guidelines and interpretive rules also appear in the Secretary’s
Provider Reimbursement Manual, which may assist providers and intermediaries in
implementing Medicare Regulations.2 See Battle Creek, 498 F.3d at 404. Section 2304
of the Manual provides that cost information must be current, accurate, and sufficiently
detailed, including “all ledgers, books, records and original evidences of cost.” Section
2312.2(E) further provides that when it comes to split salary costs—reimbursement
where employees spend some, but not all, of their time on reimbursable work—the
intermediary may approve the use of periodic “time studies,” instead of “ongoing time
reports,” to establish those costs.
After the MAC issues its notice of program reimbursement, the provider may
request a hearing with the Provider Reimbursement Review Board, an intermediate
administrative body established by the Secretary. 42 U.S.C. § 1395oo(a). The decision
of the Board is final unless the Secretary initiates review. 42 U.S.C. § 1395oo(f)(1); 42
C.F.R. § 405.1875(a). Where review is initiated, the Administrator for the Centers for
Medicare and Medicaid Services (“CMS”) may review the Board’s decision on behalf of
the Secretary. 42 U.S.C. § 1395oo(f)(1); 42 C.F.R. § 405.1875(a). The Administrator’s
review acts as the Secretary’s final decision. 42 C.F.R. § 405.1877(a). Providers may
appeal that decision to federal court in certain circumstances. 42 U.S.C. § 1395oo(f); 42
C.F.R. § 405.1877.

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Available at https://www.cms.gov/Regulations-and-Guidance/Guidance/
Manuals/Paper-Based-Manuals.html.

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B. Beaumont’s Medicare Reimbursement for Clinical Nurse Training
The following facts are drawn from the testimony and documents in the
administrative record and the parties’ respective briefing; they are agreed upon unless
otherwise noted.
Plaintiff William Beaumont Hospital – Royal Oak (“Beaumont”) is a Magnet
Hospital and level one trauma center in Southeast Michigan. It is also one of the largest
teaching hospitals in the area: it provides clinical training to nursing students—training
that is required for nursing students to receive their degrees.
Medicare reimburses Beaumont for its costs for the clinical training of nursing
school students. The reimbursement happens on a pass-through basis—Beaumont
“passes-through” the costs to Medicare for payment. The reimbursements reflect
Beaumont’s “incremental costs”—costs for employees and overhead to run the clinical
nursing training program above what the hospital would normally incur as part of its
regular functioning. The amount of these reimbursements for Beaumont is substantial.
According to the record, Beaumont’s total reimbursement for the 1988 cost report year
was over $250 million. (AR, Dkt. #8 Pg. ID 242.)3 Of that total, the reimbursement for
clinical nursing training costs in particular was over $1.7 million. (Id. at Pg. ID 240.)
Beaumont was reimbursed on a pass-through basis for its clinical training costs
from 1988 through 2004 without notable issue. In 2010, the MAC reviewed Beaumont’s
clinical training costs for fiscal years 2005 and 2006, the stated purpose for which was
“to determine if the costs [were] properly documented” for the nurse training program.

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“AR” refers to the administrative record, filed in this action at Dkt. ##8, 8-1, 8-2.
Though the AR contains page numbers, the court cites the Page IDs of its own docket
for ease of reference.

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(AR, Dkt. #8-2 Pg. ID 790.) The MAC ultimately disallowed the costs as pass-through,
reclassifying them so as to allow them as operating costs. (AR, Dkt. #8-2 Pg. ID 802.)
The parties dispute why that happened. According to Beaumont, the MAC
demanded in 2010 that Beaumont produce documentation from 2005 and 2006 that had
never been requested from Beaumont before. Specifically, Beaumont says that for the
first time the MAC asked for “time studies” documenting the amount of time Beaumont’s
registered nurse clinical trainers spent training students. (Dkt. #15 Pg. ID 1179.)
Beaumont, not realizing that time studies would be required, had none to provide. (Id.)
The Secretary, on the other hand, says that the costs were disallowed as pass-through
because Beaumont “lack[ed] actual support for its nursing school costs.” (Dkt. #17 Pg.
ID 1282.)
On April 1, 2010, the MAC issued its Notice of Program Reimbursement for
Beaumont’s 2005 and 2006 fiscal years. (AR, Dkt. #8-2 Pg. ID 1070–72, 988–90.)
Beaumont appealed the determinations to the Provider Reimbursement Review Board
(“the Board”); in particular, it appealed the reclassification of the costs of the nurse
training program. (See AR Dkt. #8-2 Pg. ID 957–61, 875–80.)
The Board held a hearing in March 2014. Beaumont and the MAC each
presented evidence to the Board, and each called and cross-examined witnesses.
Several of Beaumont’s witnesses collectively testified to the number of students in the
clinical nursing education program in 2005 and 2006 based on Beaumont’s rosters.
(AR, Dkt. #8 Pg. ID 268.) Registered nurses who provided clinical training estimated
that they spent no less than 1.5 hours per 8-hour shift training nursing students. (Id. at
Pg. ID 302; see also AR, Dkt. #8-1 Pg. ID 526–31.) And, the 1.5 hour estimate

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represented time over and above the nurses’ regular responsibilities on a shift. (AR,
Dkt. #8 Pg. ID 312.)
Beaumont also presented as a witness Sue Liu, a former government auditor
who took over as Beaumont’s Director of Reimbursement in April 2013. Using the
student rosters, the nurses’ time estimates, and a database purportedly recording the
number of hours per day that nursing students spent at Beaumont, Liu calculated an
estimate for Beaumont’s nursing school costs. (Id. at Pg. ID 243.) Specifically, Liu (1)
calculated how many hours nursing students spent at Beaumont in 2005 and 2006, (2)
converted the number of hours spent at Beaumont into days, and (3) assuming that
registered nurses spent 1.5 hours per day training students, multiplied a nurse hourly
rate by the number of hours spent training students. (Id.) Using these figures, Beaumont
estimated conservatively that it had incurred $414,826 of costs in 2005 and $550,600 of
costs in 2006. (AR Dkt. #8-1 Pg. ID 534, 595.)
In addition to the hours registered nurses spent teaching, Beaumont claimed
costs for support staff salaries based on the amount of time staff spent administering
the nurse training program. At the hearing before the Board, Beaumont submitted two
job descriptions of support staff, each dated in 2013. (AR, Dkt. #8-1 Pg. ID 458–63.)
Beaumont also called the manager of the Nursing Education and Research Department
at Beaumont to testify; though she became manager in 2007, she described her
understanding of the relevant positions in 2005 and 2006. (AR, Dkt. #8 Pg. ID 277.) She
also testified that as part of Beaumont’s calculation of costs for 2005 and 2006, she had
provided the hospital’s Reimbursement Department with the relevant job descriptions,
the annual salary of those positions, and the percentage of time those employees spent

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coordinating the nursing school program. (Id. at Pg. ID 290.) Based on that information,
the Reimbursement Department concluded that Beaumont incurred $50,000 in
incremental costs for administrative and clerical support staff each year. (Id.)
The Board issued a unanimous decision in favor of Beaumont in June 2016. (AR,
Dkt. #8 Pg. ID 149–55.). Specifically, the Board determined that the MAC improperly
requested time studies for the first time in 2010, and that such time studies were not
required by federal regulations. (Id. at Pg. ID 152.) Additionally, based on the testimony
and evidence in the record, the Board found that “Beaumont has submitted adequate
documentation that is auditable to support the incremental clinical training costs that it
incurred for [fiscal years] 2005 and 2006.” (Id. at Pg. ID 152–53.) It similarly found that
Beaumont had adequately supported $50,000 in incremental costs for two employees
who worked in support of the clinical training program, though it noted that it had
insufficient evidence to apportion the amount between the two. (Id. at Pg. ID 153–54.)
The Board ordered that the MAC allow $361,001 and $496,835 in pass-through costs
for 2005 and 2006, respectively, and that it apportion the salaries of the two claimed
employees up to a cap of $50,000 per year. (Id. at Pg. ID 154.)
The MAC timely requested a review of that decision by the CMS Administrator.
(Id. at Pg. ID 118.) The CMS Administrator, on behalf of the Secretary, reversed the
Board. (Id. at Pg. ID 110.) On review, the Administrator noted that the issue before it
was “whether [Beaumont] submitted sufficient documentation for its non-Provideroperated nurse clinical training program costs to support pass-through reimbursement
for fiscal years (FYs) 2005 and 2006.” (Id.) The Administrator concluded that Beaumont
had not done so. In particular, after setting out the relevant statutory and regulatory

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background, the Administrator found “that [Beaumont] did not maintain
contemporaneous records to support its claimed FY 2005 and 2006 incremental costs
associated with providing clinical training to nursing students.” (Id. at Pg. ID 114.)
Instead, according to the Administrator, Beaumont had improperly relied on “nothing
more than estimates as to nursing and administrative staff time and salaries,” none of
which had been provided to the MAC during the audits at issue. (Id. at Pg. ID 115.) The
Administrator finally found that Beaumont had improperly relied on noncontemporaneous information to establish the costs related to its two claimed
employees, and the Board had therefore wrongly ordered the MAC to apportion $50,000
as to them. (Id. at Pg. ID 115–16.)
The Administrator’s final decision constitutes the final decision on behalf of the
Secretary. Beaumont timely appealed that decision to this court.
II. STANDARD
The parties submitted a joint statement on the standard of review in this action.
(Dkt. #13.) They agree that because Beaumont seeks judicial review of a final agency
decision by the Secretary of the Department of Health and Human Services, the court’s
review is governed by 42 U.S.C. § 1395oo(f)(1). Under that provision, the court reviews
the Secretary’s decision in accordance with the Administrative Procedure Act (“APA”).
As relevant here, the APA provides that a “reviewing court shall . . . hold unlawful
and set aside agency action, findings, and conclusions found to be — (A) arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with law,” or “(E)
unsupported by substantial evidence in a case . . . reviewed on the record of an agency
hearing provided by statute[.]” 5 U.S.C. § 706(2)(A), (E).

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The court’s review under an arbitrary and capricious standard is a narrow one.
Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29,
43 (1983). The court “is not to substitute its judgement for that of the agency.” Id. The
agency, however, must still “examine the relevant data and articulate a satisfactory
explanation for its action including a rational connection between the facts found and
the choice made.” Id. (internal quotation omitted). When a case involves an agency’s
interpretation of its own regulations, the court gives substantial deference to that
interpretation. Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994).
As to the agency’s factual findings, the court reviews for substantial evidence.
Substantial evidence is “such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.” Richardson v. Perales, 402 U.S. 389, 401 (1971)
(internal quotation omitted).
III. DISCUSSION
A reviewing court affords deference to an agency’s interpretation of its own
ambiguous regulation. See Auer v. Robbins, 519 U.S. 452, 461–62 (1997). But broad
deference is unwarranted in some circumstances, such as when the agency’s
interpretation is “plainly erroneous or inconsistent with the regulation.” Id. at 461
(quoting Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 359 (1989)).
Deference may also be withheld where there is evidence that the agency’s
interpretation “does not reflect the [agency’s] fair and considered judgment.” Id. at 462;
see also Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 155 (2012). “This
might occur when the agency’s interpretation conflicts with a prior interpretation, or
when it appears that the interpretation is nothing more than a convenient litigating

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position, or a post hoc rationalization advanced by an agency seeking to defend past
agency action against attack.” SmithKline, 567 U.S. at 155 (internal quotations and
alterations omitted).
According to Beaumont, this case is precisely the type of case at issue in
Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 155 (2012)—that is, a case in
which the agency’s interpretation of its ambiguous regulation should not be afforded the
deference it would normally be due. In SmithKline, the plaintiffs were pharmaceutical
sales representatives; they brought suit against their employer, SmithKline Beecham,
on the basis that they had been improperly denied overtime as “outside salesmen,” a
category of employees not subject to the overtime payment requirements of the Fair
Labor Standards Act (“FLSA”). The district court granted summary judgment to
SmithKline on the basis that the plaintiffs were outside salesmen, and the Ninth Circuit
affirmed.
The preliminary question before the Court in SmithKline was whether to grant
deference to a Department of Labor (“DOL”) interpretation of its own regulation defining
“outside salesman.” 567 U.S. at 153–54. According to the DOL interpretation, advanced
for the first time in an amicus brief in another case, the SmithKline plaintiffs were
improperly designated as outside salesmen. Id. at 153.
The Court disagreed. Answering the preliminary question, the Court found that
the DOL’s interpretation was due no deference under Auer. Citing the “unfair surprise”
resulting from the DOL’s sudden about-face on its interpretation of the regulation, the
Court noted that the DOL had never initiated enforcement actions in the industry as to
pharmaceutical representatives—despite the industry’s longstanding treatment of such

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representatives as outside salesmen. SmithKline, 567 U.S. at 157–58. So, too, did the
Court note that the DOL’s interpretation would “impose potentially massive liability . . .
for conduct that occurred well before that interpretation was announced.” Id. at 155–56.
The Court summarized: “To defer to the agency’s interpretation in this circumstance
would seriously undermine the principle that agencies should provide regulated parties
‘fair warning of the conduct [a regulation] prohibits or requires.’” Id. at 156 (alteration
original) (quoting Gates & Fox Co. v. Occupational Safety & Health Review Comm’n,
790 F.2d 154, 156 (D.C. Cir. 1986)).
The court here agrees with Beaumont that, under the reasoning in SmithKline,
the Secretary’s interpretation of its regulations in this case (42 C.F.R. § 413.24(c) and
42 C.F.R. § 413.20) are due no deference. The Administrator’s decision makes clear
that it interpreted these regulations to include a new requirement: that the records be
“contemporaneous” with the incurred costs. This requirement does not appear in the
text of the regulations, but the Administrator nevertheless read it in; after quoting the
regulatory language, the Administrator found “that [Beaumont] did not maintain
contemporaneous records to support its claimed FY 2005 and 2006 incremental costs.”
(AR, Dkt. #8 Pg. ID 114 (emphasis added).) The Administrator similarly noted that “[t]he
record further shows that [Beaumont] did not keep contemporaneous records capable of
being verified and audited.” (Id. at Pg. ID 115 (emphasis added).)
Nor is it apparent from the Secretary’s enforcement of these regulations—at least
as it relates to Beaumont—that it had ever interpreted the regulation to require
“contemporaneous” records before. Though the Secretary skirts the issue in briefing
(see, e.g., Dkt. #17 Pg. ID 1310–12), he nowhere challenges head-on Beaumont’s

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assertion that it was asked in 2010 to provide documentary information,
contemporaneous with events of years earlier, and of a kind it had never before been
asked to provide. Indeed, the MAC itself noted that in prior years, Beaumont’s costs for
the clinical training program had been approved based on Beaumont’s own calculations,
which “calculated [the number] of students, approximated [the number] of RNs[,] and
estimated the RN salaries.” (AR, Dkt. #8-2 Pg. ID 802; see also id. at Pg. ID 790.)
Based on this 17-year history of non-enforcement of a more specific contemporaneous
documentation standard, Beaumont would reasonably conclude that the data it did
provide were entirely “adequate cost data” under the regulations. This is especially true
in light of the regulation’s requirement that, “[i]n order to provide the required cost data
and not impair comparability, financial and statistical records should be maintained in a
manner consistent from one period to another.” 42 C.F.R. § 413.24(c) (emphasis
added).
The record also reveals the “potentially massive liability” Beaumont faces “for
conduct that occurred well before that interpretation was announced.” SmithKline, 567
U.S. at 155–56. The Board’s order, if not reviewed, would have resulted in
reimbursements to Beaumont in the hundreds of thousands of dollars—and the Board
itself noted that its order was a conservative one. Read generously, the record reveals
that the earliest point at which the Secretary arguably set forth this “contemporaneous
documentation” requirement was 2010, when the MAC required new documentation for
the 2005 and 2006 fiscal years. Such an interpretation would present massive liabilities
for Beaumont for conduct—or, accepting the Secretary’s interpretation, lack of
conduct—that occurred years before.

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In sum, despite approving for 17 years pass-through treatment of incurred costs
based on Beaumont’s calculations, the Secretary now seeks to hold Beaumont to a
standard never before imposed, requiring that records maintained by Beaumont be
created “contemporaneously” to the costs incurred. Such a requirement does not
appear in the text of the regulations, is contrary to the Secretary’s longstanding practice,
and—unless voided—would result in just the sort of “unfair surprise” that concerned the
SmithKline Court. Under these circumstances, the Secretary’s interpretation of these
regulations as it relates to Beaumont may not be afforded the deference generally
granted.
The Secretary resists this conclusion. He argues that there was no new
“interpretation” of the regulations; the MAC and the Secretary were simply “enforcing
longstanding Medicare statutes, regulations, and subregulatory guidance.” (Dkt. #17 Pg.
ID 1306.) But this argument ignores SmithKline. The regulations themselves may have
remained constant, but—as this case illustrates—the Secretary’s enforcement of them
has not. The Secretary offers three reasons to distinguish this case from SmithKline—
three reasons that, he argues, the court should disregard the unfair surprise and
massive liabilities it proposes to impose on Beaumont: (1) “it is not feasible for the
Secretary to list every type of support a provider might maintain or an auditor might
request,” (2) “given the scale of Medicare, not every line item can be fully reviewed each
year,” and (3) “[e]ven if the auditor does not request support, the provider must maintain
documentation to substantiate its actual costs incurred.” (Dkt. #17 Pg. ID 1307–08.)
Each of these points may be—indeed, is likely—true. But they do not overcome the
court’s conclusion that the Secretary’s interpretation requiring contemporaneous

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recordkeeping, advanced as to Beaumont for the first time in 2010, should not be
afforded deference under Auer.
For 17 years, the Secretary deemed, either affirmatively or by implication, that
the information supplied by Beaumont constituted “adequate cost data” such that
Beaumont was entitled to pass-through reimbursement. Even the Secretary does not
suggest that Beaumont failed to maintain at least some documentation to substantiate
the costs that it incurred; rather, it quibbles about the quality and sufficiency of that
documentation in light of the regulatory requirements and its decision in 2010 to further
scrutinize Beaumont’s 2005/06 submissions.
At this point, the court concludes that the Secretary’s interpretation of 42 C.F.R.
§ 413.24(c) and 42 C.F.R. § 413.20 are not due deference under Auer.
The parties have not, however, provided the court with sufficient guidance as to
how to proceed past this point. The Supreme Court, after determining that the regulation
at issue in SmithKline was not entitled to deference, undertook its own interpretation of
the regulation. See 567 U.S. at 159. But the parties have not briefed the question of
whether such a court-originated analysis would be appropriate here. Beaumont has
attempted to answer the “what next” question, but unfortunately misses the mark.
According to Beaumont, the Secretary’s decision should be given no deference under
SmithKline and the court should therefore enter judgment in Beaumont’s favor. But
Beaumont provides no analysis as to how the court should interpret the regulations at
issue, except to say that contemporaneous time studies are not required. Neither party,
in fact, has set forth any argument as to just what is required. It seems to the court that
the parties have devoted insufficient time to analyzing what it means, under the

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regulations, to be “capable of being audited,” or “in sufficient detail to accomplish the
purposes for which it is intended.” And though they argue about the reliability and merit
of Beaumont’s presented evidence, neither party actually subjects Beaumont’s
submissions to the relevant regulatory standards in a meaningful way.
The court, in other words, lacks briefing on how it should analyze these
regulations (and whether Beaumont has satisfied them) after concluding that it shall not
afford deference to the Secretary’s interpretation. Perhaps remand is warranted. See,
e.g., Cove Assocs. Joint Venture v. Sebelius, 848 F. Supp. 2d 13, 30 (D.D.C. 2012).
Perhaps time for settlement discussions outside the purview of the court is more apt.
The parties have not addressed any such eventualities.
Given the importance of the matters presented herein, the court will give the
parties an opportunity to be heard on next steps.
IV. CONCLUSION
The parties have made significant headway in moving this case forward, but
more is needed before the court can enter judgment. Accordingly,
IT IS ORDERED that Plaintiff William Beaumont Hospital – Royal Oak’s Motion
for Judgment (Dkt. #15) is DENIED WITHOUT PREJUDICE.
IT IS FURTHER ORDERED that Defendant Secretary of Health and Human
Service’s Motion for Judgment (Dkt. #17) is DENIED WITHOUT PREJUDICE.
IT IS FURTHER ORDERED that the parties meet and confer regarding a
proposed path forward in this case. The court will hold a telephone conference on
April 25, 2018 at 4:00 p.m. and the parties will be expected report the status of their
discussions at that time. In the event that the parties submit a proposed stipulated

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judgment, order of remand, or other case closing document before then, the court will
cancel the telephone conference. If the telephone conference proceeds, the court
anticipates imposing the following briefing schedule after the conference, unless
counsel persuades the court of some other appropriate course:
Plaintiff shall submit to the court a renewed motion for judgment addressing the
issues identified herein no later than April 30, 2018. Defendant’s combined response
and cross motion addressing the issues identified herein shall be due no later than May
21, 2018.4 Plaintiff’s response shall be due no later than June 4, 2018. Defendant’s
optional reply shall be due no later than June 11, 2018.
IT IS FURTHER ORDERED that the Defendant listed on the docket in this action
be changed to Thomas E. Price, M.D., Secretary, Department of Health and Human
Services.
s/Robert H. Cleland
ROBERT H. CLELAND
UNITED STATES DISTRICT JUDGE

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Dated: March 29, 2018
I hereby certify that a copy of the foregoing document was mailed to counsel of record
on this date, March 29, 2018, by electronic and/or ordinary mail.

s/Lisa Wagner
Case Manager and Deputy Clerk
[phone]

S:\Cleland\JUDGE'S DESK\C1 ORDERS\16-13528.BEAUMONT.cross.motions.judgment.RHC.KNP2.docx

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Defendant, as was properly done in the initial briefing, should note near the
document heading that the response and cross motion are combined at the direction of
the court.

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