Baptist Memorial Hospital-Golden Triangle, Inc. et al v. Price et al
Filing
30
Memorandum Opinion and Order granting plaintiffs' 21 Motion for Summary Judgment; denying defendants' 23 Motion for Summary Judgment. A separate judgment will be entered. Signed by District Judge Tom S. Lee on 6/25/18 (LWE)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION
BAPTIST MEMORIAL HOSPITAL-GOLDEN
TRIANGLE, INC., CALHOUN HEALTH
SERVICES, DELTA REGIONAL MEDICAL
CENTER, GRENADA LAKE MEDICAL
CENTER, MERIT HEALTH BATESVILLE,
FORMERLY KNOWN AS TRI-LAKES MEDICAL CENTER,
MISSISSIPPI, BAPTIST MEDICAL CENTER, INC.,
ST. DOMINIC-JACKSON MEMORIAL HOSPITAL,
AND TISHOMINGO HEALTH SERVICES, INC.
VS.
PLAINTIFFS
CIVIL ACTION NO. 3:17CV491TSL-LRA
ALEX AZAR, IN HIS OFFICIAL
CAPACITY AS SECRETARY OF THE UNITED
STATES DEPARTMENT OF HEALTH AND HUMAN
SERVICES, SEEMA VERMA, IN HER OFFICIAL
CAPACITY AS ADMINISTRATOR, CENTERS FOR
MEDICARE & MEDICAID SERVICES, AND
CENTERS FOR MEDICARE AND MEDICAID SERVICES
DEFENDANTS
MEMORANDUM OPINION AND ORDER
Plaintiffs in this cause are Mississippi licensed hospitals
which participate in the Mississippi Medicaid Program and have
been designated as disproportionate share hospitals pursuant to 42
U.S.C. § 1396r-4.
Defendants are Alex Azar, in his official
capacity as Secretary of the United States Department of Health
and Human Services (HHS), the federal agency responsible for the
administration of federal responsibilities under the Medicaid
statute; Seema Verma, in her official capacity as Administrator of
the Center for Medicare and Medicaid Services; and Centers for
Medicare & Medicaid Services (CMS), the federal agency responsible
for administering the Medicaid and disproportionate hospital share
(DHS) program.
In this action, plaintiffs challenge defendants’
enforcement of certain policies and/or rules relating to the
calculation of the hospital-specific limit (HSL) of the Medicaid
Disproportionate-Share Hospital program (DSH), 42 U.S.C. § 1396r4.
The case is presently before the court on the parties’ cross-
motions for summary judgment.
The court, having considered the
memoranda of authorities submitted by the parties, concludes that
plaintiffs’ motion for summary judgment should be granted and
defendants’ motion denied.
Plaintiffs herein first allege that certain policies/rules
posted on defendant CMS’s website in 2010 in the form of responses
to Frequently Asked Questions (FAQs) 33 and 34 regarding the
calculation of the HSL under 42 U.S.C. § 1396r-4(g)(1) are invalid
on procedural and substantive grounds.
A number of courts have
considered identical challenges to either or both of the FAQs,1
and all have concluded that the FAQs are procedurally invalid for
the reason that they are “substantive legislative rule[s] that
should have been, but [were] not, promulgated through the
notice-and-comment rulemaking process required by the APA.”
Children's Health Care v. Centers for Medicare & Medicaid Servs.,
1
Each of these courts has set forth in meticulous detail
the pertinent statutory and regulatory background, described the
applicable standard of review, and explained the parties’ various
arguments, which are essentially the same in all these cases.
This court can add nothing to what has already been written on
these matters and finds it unnecessary to cover this ground again.
2
No. 16-CV-4064 (WMW/DTS), 2017 WL 3668758, at *8 (D. Minn. June
26, 2017).
See New Hampshire Hosp. Ass’n v. Azar, 887 F.3d 62, 77
(1st Cir. 2018) (holding that the rule announced in the FAQs 33 and
34 is legislative and is procedurally improper for noncompliance
with the notice-and-comment procedures prescribed by the APA);
Texas Children’s Hosp. v. Azar, Civ. Action No. 14-2060 (EGS),
2018 WL 2464462 (D.D.C. June 1, 2018) (concluding that FAQ 33 was
not “a mere interpretation of a governing statute or regulation”
but rather an attempt to promulgate a legislative rule and thus
could have been promulgated only in accordance with the
notice-and-comment provisions of the APA); Mo. Hosp. Ass’n v.
Hargan, Case No. 2:17-CF-04052-BCW, 2018 WL 814589, at *9 (W.D.
Mo. Feb. 9, 2018) (holding that FAQs 33 and 34 were subject to
notice-and-comment procedures as they “substantively impact the
HSL calculation, as opposed to simply interpreting the contours of
the statute and the 2008 Rule” and thus are “legislative in
nature”); Tennessee Hosp. Ass'n v. Price, No. 3:16-CV-3263, 2017
WL 2703540, at *7 (M.D. Tenn. June 21, 2017) (finding that FAQs 33
and 34 make a substantive change to existing law without
observance of procedure required by law as they were not
promulgated pursuant to the required notice-and-comment
rule-making procedures); Children's Hosp. of the King's Daughters,
Inc. v. Price, 258 F. Supp. 3d 672, 689 (E.D. Va. 2017)
(concluding that “FAQ 33 is a substantive rule that should have
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been promulgated pursuant to notice-and-comment”).2
This court
finds the reasoning of these courts to be sound and the conclusion
that defendants’ responses to FAQs 33 and 34 are not interpretive
but rather legislative in nature to be obviously correct.
Therefore, as it is undisputed that FAQs 33 and 34 were not put
through the APA’s rule-making (notice-and-comment) procedures, it
follows that they are invalid and cannot be enforced.
Accordingly, plaintiffs’ motion for summary judgment as to FAQs 33
and 34 will be granted and defendants’ cross-motion denied.
In addition to challenging FAQs 33 and 34, plaintiffs allege
in their complaint that a rule promulgated by defendants in April
2017 following notice-and-comment that in substance parroted the
responses to FAQs 33 and 34 (the 2017 Final Rule) is substantively
unlawful and should be set aside because it directly conflicts
with the plain language of § 1396r-4(g)(1)(A) and is thus beyond
defendants’ statutory authority.
In their motion for summary
judgment, plaintiffs acknowledged that defendants have stipulated
that the 2017 Final Rule is operative only from its June 2, 2017
effective date and is not retroactive.
2
For this reason, and for
Some of these courts have also found the rules reflected
in defendants’ responses to FAQs 33 and/or 34 invalid on
substantive grounds. See Missouri Hosp. Ass’n v. Hargan, No.
2:17-CV-04052-BCW, 2018 WL 814589 (W.D. Mo. Feb. 9, 2018);
Children's Hosp. of the King's Daughters, Inc. v. Price, 258 F.
Supp. 3d 672, 689 (E.D. Va. 2017); Tennessee Hosp. Ass'n v. Price,
No. 3:16-CV-3263, 2017 WL 2703540, at *7 (M.D. Tenn. June 21,
2017).
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the further reason that the 2017 Final Rule has recently been
vacated by the court in Children’s Hospital Association of Texas,
Civ. Action No. 17-844 (EGS), 2018 WL 1178024 (D.D.C. Mar. 6,
2018), the court finds that plaintiffs’ motion for summary
judgment as it relates to the 2017 Final Rule should be granted
and defendants’ cross-motion denied.3
Based on the foregoing, it is ordered that plaintiffs’ motion
for summary judgment is granted and that defendants’ motion for
summary judgment is denied.
A separate judgment will be entered in accordance with Rule
58 of the Federal Rules of Civil Procedure.
SO ORDERED this 25th day of June, 2018.
/s/ Tom S. Lee
UNITED STATES DISTRICT JUDGE
3
While the court in Missouri Hospital Association, 2018
WL 814589, ruled that the plaintiff therein was “entitled to
summary judgment that the Final Rule is in excess of Defendants’
statutory authority” and ordered the Final Rule set aside, the
court did not specifically state that it intended its order to
have effect beyond the parties to that case. The court in
Children’s Hospital Association of Texas, Civ. Action No. 17-844
(EGS), 2018 WL 1178024 (D.D.C. Mar. 6, 2018), however, was clear.
The court did not rule that the 2017 Final Rule was set aside as
it applied to the plaintiffs in that case but rather that it was
vacated and no longer in effect.
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