Canon Hospice, LLC v. Burwell
MEMORANDUM OPINION AND ORDER denying 14 Motion for Summary Judgment; granting 17 Motion for Summary Judgment. Ordered that Canon's claims are dismissed with prejudice and the decision of the PRRB is AFFIRMED. Signed by Chief District Judge Louis Guirola, Jr on 9/1/2015. (JCH)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
CANON HOSPICE, LLC
CAUSE NO. 1:14CV313-LG-RHW
SYLVIA MATHEWS BURWELL,
Secretary of the United States
Department of Health and Human Services
MEMORANDUM OPINION AND ORDER GRANTING
DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND
DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
BEFORE THE COURT are the Motion for Summary Judgment  filed by
the plaintiff Canon Hospice, LLC, and the Motion for Summary Judgment  filed
by the defendant Sylvia Mathews Burwell, Secretary of the United States
Department of Health and Human Services. No responses were filed in opposition
to the Motions. After reviewing the Motions, the administrative record in this
matter, and the applicable law, the Court finds that Secretary Burwell’s Motion for
Summary Judgment should be granted, and the decision of the Provider
Reimbursement Review Board (PRRB) should be affirmed. The Court further finds
that Canon’s Motion for Summary Judgment should be denied.
Canon became a Medicare-certified hospice on January 3, 2007. Canon’s
designated Medicare intermediary, Palmetto GBA, determined that Canon had
exceeded the Medicare program’s twenty percent limitation on inpatient days for
the period January 3, 2007 through October 31, 2008. Thus, Palmetto notified
Canon that it was required to reimburse $344,263.00 in payments previously made
by Medicare. Canon timely appealed Palmetto’s decision to the PRRB. The PRRB
[Palmetto] erred in calculating the Inpatient Day Limitation over a
period greater than 12 months for [Canon’s] cap year ended October
31, 2008. The Inpatient Day Limitation should have been calculated
separately at the end of the cap periods ended October 31, 2008, and
October 31, 2007.
(Admin. Rec. at 31, ECF No. 10). The Administrator of the Centers for Medicare
and Medicaid Services declined to review the PRRB’s decision. Thus, the PRRB’s
decision became the final decision of the United States Department of Health and
Human Services. See 42 U.S.C. § 1395oo(f)(1).
Canon filed this administrative appeal seeking judicial review of the PRRB’s
decision to the extent that the PRRB determined that an inpatient day limitation
should be calculated for the cap period ending October 31, 2007. Canon argues that
it is improper to calculate an inpatient day limitation for this period, because Canon
had not been in operation for the entire twelve month period preceding October 31,
2007. Canon and Secretary Burwell have filed cross-motions for summary
42 U.S.C. § 1395oo(f)(1) provides for judicial review of final decisions made by
the PRRB. The statute requires courts to apply the standard of review applicable to
actions arising under the Administrative Procedure Act, 5 U.S.C. § 706(2)(A).
Community Care, LLC v. Leavitt, 537 F.3d 546, 548 (5th Cir. 2008). Therefore, the
proper standard of review is whether the agency action was “arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance with the law . . . .” Id. (citing
5 U.S.C. § 706(2)(A). This standard of review is “highly deferential,” requiring a
“presumption of regularity” on the part of the agency. Hayward v. United States
Dep’t of Labor, 536 F.3d 376, 379-80 (5th Cir. 2008).1 The United States Supreme
Court, while addressing a Medicare appeal, explained:
We must give substantial deference to an agency’s interpretation of its
own regulations. Our task is not to decide which among several
competing interpretations best serves the regulatory purpose. Rather,
the agency’s interpretation must be given controlling weight unless it
is plainly erroneous or inconsistent with the regulation. In other
words, we must defer to the Secretary’s interpretation unless an
alternative reading is compelled by the regulation’s plain language or
by other indications of the Secretary’s intent at the time of the
regulation’s promulgation. This broad deference is all the more
warranted when, as here, the regulation concerns a complex and
highly technical regulatory program in which the identification and
classification of relevant criteria necessarily require significant
expertise and entail the exercise of judgment grounded in policy
Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994) (internal citations and
quotation marks omitted).
Title XVIII of the Social Security Act establishes the Medicare program,
which provides health insurance for the elderly and disabled. See 42 U.S.C. § 1395
et seq. In 1982, Congress expanded the Medicare Act to include hospice care for
Canon argues that the PRRB’s decision is not entitled to deference pursuant
to Bowen v. Georgetown University Hospital, 488 U.S. 204, 212 (1988), which held
“we have never applied [deference] to agency litigating positions that are wholly
unsupported by regulations, rulings, or administrative practice.” As explained
infra, the PRRB decision in the present case is supported by the plain language of
the Medicare statute, regulations, and Claims Processing Manual. Therefore, the
Bowen decision is distinguishable.
terminally ill beneficiaries. See Tax Equity and Fiscal Responsibility Act of 1982,
Pub.L. 97-248, § 122, 96 Stat. 365, 364. Congress authorizes and requires the
Secretary of Health and Human Services to implement regulations necessary to
administer the Medicare program. 42 U.S.C. § 1395ff(a)(1); 42 U.S.C.
Congress imposed a cap on each hospice provider’s overall Medicare
reimbursement for each fiscal year. 42 U.S.C. § 1395(f)(i)(2). The Secretary
implemented this overall cap on reimbursements by promulgating 42 C.F.R. §
418.309. Congress also imposed an inpatient day limitation on providers by
including the following provision:
The term “hospice program” means a public agency or private
organization . . . which . . . provides assurance satisfactory to the
Secretary that the aggregate number of days of inpatient care . . .
provided in any 12-month period to individuals . . . does not exceed 20
percent of the aggregate number of days during that period on which
such elections for such individuals are in effect . . . .
42 U.S.C. § 1395x(dd)(2)(A)(iii). To enforce the inpatient day limitation, the
Secretary implemented a regulation providing that “the total payment to the
hospice for inpatient care (general or respite) is subject to a limitation that total
inpatient care days for Medicare patients not exceed 20 percent of the total days for
which these patients had elected hospice care.” 42 C.F.R. § 418.302(f)(1). The
regulation further provides that the intermediary must calculate the limitation on
payment for inpatient care “[a]t the end of the cap period.” 42 C.F.R. §
418.302(f)(2). “Cap period means the twelve-month period ending October 31 . . . .”
42 C.F.R. § 418.3. The regulations require hospices to reimburse the Medicare
program for payments made for inpatient stays that exceeded the twenty-percent
inpatient day limitation. 42 C.F.R. § 418.302(f).
Palmetto, the Medicare intermediary assigned to Canon, determined that
Canon had exceeded the twenty percent inpatient day limitation for the period
January 3, 2007 through October 31, 2008. Thus, Palmetto notified Canon that it
was required to reimburse $344,263.00 in payments made by Medicare. Canon
appealed, arguing that Palmetto improperly considered a time period greater than
twelve months when evaluating Canon’s percentage of inpatient days. Palmetto
argued that its determination was proper, citing the following provision of the
Medicare Claims Processing Manual:
The hospice cap is calculated in a different manner for new hospices
entering the program if the hospice has not participated in the
program for an entire cap year. In this situation, the initial cap
calculations for newly certified hospices must cover a period of at least
12 months but not more than 23 months.
Ctrs. for Medicare & Medicaid Servs., Medicare Claims Processing Manual, Pub.
100-04, ch. 11, § 184.108.40.206 In a well-reasoned opinion, the PRRB determined that this
provision of the Manual applied solely to the overall cap imposed by 42 U.S.C. §
1395(f)(i)(2), not the inpatient day limitation.
With regard to the statute, 42 U.S.C. § 1395x(dd)(2)(A)(iii), the Board stated,
“Through its use of the phrase ‘provided in any 12-month period,’ the Board finds
This provision has since been relocated to the Medicare Benefit Policy
that the statute does not say the hospice must be open for the entire 12-month
period, just that a 12-month period will be used for the calculation of the inpatient
day limitation.” (Admin. Rec. at 29, ECF No. 10). The PRRB further found that the
regulation “unambiguously requires the Intermediary to calculate the limitation at
the end of a cap period.” (Id.); see also 42 C.F.R. § 418.302(f)(2) (“”At the end of the
cap period, the intermediary calculates a limitation of payment for inpatient care . .
. . ). The PRRB noted that the regulation does not contain any exception to this
requirement for providers that have been in operation for less than one year. As a
result, the PRRB found that the inpatient day limitation pertaining to Canon
should have been calculated separately on October 31, 2007, and October 31, 2008.
Canon asserts that the PRRB’s decision does not change the amount of funds
that it will be required to reimburse Medicare. (Pl.’s Mem. at 8, ECF No. 15).
Therefore, it has filed this request for judicial review, claiming that the PRRB
ruling improperly applies the inpatient day limitation to a period less than twelvemonths– the period beginning January 3, 2007, and ending October 31, 2007–
because Canon was not in operation prior to January 3, 2007. Essentially, Canon
argues that it should be exempted from the inpatient day limitation for the cap
period ending October 31, 2007, because it was not in operation during that entire
Canon first argues that the Medicare statute, regulations, manual provisions,
and agency practice require that the inpatient day limitation be applied to a period
of at least twelve months, but none of the authority cited by Canon expressly
requires a minimum period of time. The statute only refers to “the aggregate
number of days of inpatient care . . . provided in any 12-month period to
individuals.” 42 U.S.C. § 1395x(dd)(2)(A)(iii). The regulation merely provides that
the intermediary must calculate the limitation on payment for inpatient care “[a]t
the end of the cap period.” 42 C.F.R. § 418.302(f)(2). Neither the statute nor the
regulation provides that a hospice must be in operation for the entire cap period
before the inpatient day limitation can be applied.
Canon primarily relies on the agency’s alleged practice3 of applying section
80.2.1 of chapter 11 of the Medicare Claims Processing Manual to the inpatient day
limitation. As explained previously, this Manual provision advises that “the initial
cap calculations for newly certified hospices must cover a period of at least 12
months but not more than 23 months.” However, Canon successfully argued before
the PRRB that this provision pertaining to new hospices should not be applied to
the inpatient day limitation. Therefore, all of Canon’s arguments related to prior
agency practice and the new hospice provision of the Manual are completely without
merit in this appeal pursuant to Canon’s own arguments before the PRRB.
Canon further argues:
Applying the rule over months prior to the initial participation date is
Canon frequently claims that the Medicare program has never previously
applied the inpatient day limitation to a period of less than twelve months, but the
supporting basis for this assertion is unclear from the record. Canon merely relies
on arguments and statements made by Palmetto before the PRRB. Nevertheless,
the Court will assume that Canon’s assertion is correct for the purposes of this
improper because it doesn’t give the hospice a full twelve-month period
to come into compliance with the rule. It also subjects the hospice to
Medicare rules before it ever signed its provider agreement with
[Medicare]. It simply had no obligation to comply with that rule prior
to the effective date of its provider agreement.
(Pl.’s Mem. at 12, ECF No. 15). First, as explained previously, neither the statute
nor the regulation provide or imply that new hospices are entitled to operate for a
full twelve month period before application of the inpatient day limitation. In fact,
the regulation provides that the inpatient day limitation should be calculated at the
end of each twelve-month cap period, and the statute only defines the term “hospice
program” to include hospices that provide satisfactory assurance to the Secretary
that the inpatient day limitation will be satisfied. Neither of these provisions
creates any room for an exception for newly created hospices. Second, the Secretary
is certainly not requiring Canon to satisfy the requirement during months it is not
in operation, because there can be no “inpatient care”4 during months when the
hospice is not operating. Medicare is simply requiring Canon to satisfy the statute’s
twenty percent inpatient day limitation during the time that it actually cared for
patients participating in the Medicare program.
Next, Canon argues that the PRRB’s decision violates 42 U.S.C. §
1395hh(a)(2) and (e)(1) because “it results in a change in the substantive legal
The statute refers to 42 U.S.C. § 1395x(dd)(1)(G) for the definition of
“inpatient care.” This provision pertains to “short-term inpatient care (including
both respite care and procedures necessary for pain control and acute and chronic
symptom management) in an inpatient facility meeting such conditions as the
Secretary determines to be appropriate to provide such care . . . .”
standard governing the payment of services without being promulgated by the
Secretary by regulation and it applies that change retroactively and to Canon’s
detriment.” (Pl.’s Mem. at 13, ECF No. 15). 42 U.S.C. § 1395hh(a)(2) merely
provides that “[t]he Secretary shall prescribe such regulations as may be necessary
to carry out the administration of the [Medicare program].” 42 U.S.C. §
1395hh(e)(1) provides that:
A substantive change in regulations, manual instructions, interpretive
rules, statements of policy, or guidelines of general applicability under
[the Medicare program] shall not be applied (by extrapolation or
otherwise) retroactively to items and services furnished before the
effective date of the change, unless the Secretary determines that
(i) such retroactive application is necessary to comply with statutory
requirements; or (ii) failure to apply the change retroactively would be
contrary to the public interest.
Contrary to Canon’s assertions, the PRRB did not amend the Manual or the
regulations at issue. The PRRB merely held that Palmetto, Canon’s intermediary,
had improperly applied section 80.2.1 of the Manual to the inpatient day limitation.
This determination was based on the plain language of the statute, the plain
language of the regulation, and the plain language of sections 80.1, 80.2 and 80.2.1
of the Manual.5 None of the language in any of this authority was changed by the
PRRB; the language of this authority was actually relied upon and enforced by the
PRRB. Since there was no change in the regulations, manual instructions,
interpretive rules, statements of policy, or guidelines of general applicability, the
Section 80.1 of the Manual, which explicitly pertains to the inpatient day
limitation, provides, “This limitation is applied once each year, at the end of the
hospices’ ‘cap period’ (November 1 - October 31).”
PRRB’s decision cannot be considered a retroactive change under 42 U.S.C. §
The Court finds that the PRRB decision was reasonable and it was based on
the plain language of the statute, regulations, and Manual at issue. Canon has not
demonstrated that the decision should be overturned. Therefore, Canon’s Motion
for Summary Judgment is denied, and the Secretary’s Motion for Summary
Judgment is granted.
For the foregoing reasons, the Secretary’s Motion for Summary Judgment is
granted, and Canon’s Motion for Summary Judgment is denied. The decision of the
PRRB is affirmed.
IT IS, THEREFORE, ORDERED AND ADJUDGED that the Motion for
Summary Judgment  filed by the plaintiff Canon Hospice, LLC, is DENIED,
and the Motion for Summary Judgment  filed by the defendant Sylvia Mathews
Burwell, Secretary of the United States Department of Health and Human Services
IT IS, FURTHER, ORDERED AND ADJUDGED that Canon’s claims are
DISMISSED WITH PREJUDICE and the decision of the PRRB is AFFIRMED.
SO ORDERED AND ADJUDGED this the 1st day of September, 2015.
Louis Guirola, Jr.
LOUIS GUIROLA, JR.
CHIEF U.S. DISTRICT JUDGE
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