Kingston Hospital v. Sebelius et al

Filing 32

MEMORANDUM-DECISION and ORDER - That Plaintiffs' 24 Motion for Summary Judgment is DENIED. That the Defendants' 27 Cross Motion for Summary Judgment is GRANTED in part and the Secretary's findings are AFFIRMED as to: 1. The valid ity of the Secretary's written agreement requirement in 42 C.F.R. 413.86(f)(4); 2. The lack of relief available to palintiffs under Section 713 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003, Pub. L. No. 108-173. T hat the defendants' 27 cross motion for summary judgment is DENIED in part as tot he sufficiency of the April 26, 2011 agreement between Kingston and the Institute. That the action is remanded to the Secretary to answer the following question s: 1. Whether the April 26, 2001 agreement between Kingston and the Institute satisfied th written agreement requirement in 42 C.F.R. 413.86(f)(4). 2. Whether Kingston "incur[red] all or substantially all of the costs for the training program in the nonhospital setting in accordance with the definition of paragraph (b) of this section" as required to satisfy 42 C.F.R. 413.86(f)(4)(iii) for the period July 1, 2001 to December 31, 2001. That upon a final determination by the Secretar y on the question(s) presented on remand, Kingston Hospital may appeal the Secretary's decision, if it so chooses, in accordance with 42 U.S.C. 1395oo(f)(1). That the parties notify the court upon the Secretary's final determination on the question(s) presented on remand. That the Clerk terminate Benedictine Hospital as a party to this case. Signed by Judge Gary L. Sharpe on 12/8/2011. (jel, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
_________________________________________
KINGSTON HOSPITAL and
BENEDICTINE HOSPITAL,
Plaintiffs,

1:09-cv-1303
(GLS/RFT)

v.
KATHLEEN SEBELIUS, in her official
capacity as Secretary of Health and
Human Services and NATIONAL
GOVERNMENT SERVICES BLUE
CROSS/BLUE SHIELD ASSOCIATION,
Defendants.
_________________________________________
APPEARANCES:
OF COUNSEL:
FOR THE PLAINTIFFS:
Garfunkel, Wild Law Firm
Great Neck Office
111 Great Neck Road
Great Neck, NY 11021
FOR THE DEFENDANTS:
U.S. Dept. of Health and Human
Services
Office of the General Counsel - CMS
Division, Room 5344
330 Independence Avenue SW
Washington, DC 20201
HON. RICHARD S. HARTUNIAN
Office of United States Attorney
445 Broadway, 218 James T. Foley
Courthouse
Albany, NY 12207-2924

COURTNEY A. ROGERS, ESQ.
ROY W. BREITENBACH, ESQ.

JONATHAN C. BRUMER, ESQ.

DIANE CAGINO
WILLIAM F. LARKIN
Assistant United States Attorneys

Gary L. Sharpe
District Court Judge
MEMORANDUM-DECISION AND ORDER
I. Introduction
Plaintiffs Kingston and Benedictine Hospitals commenced this action
against defendants Kathleen Sebelius, in her official capacity as Secretary
of Health and Human Services (“Secretary”), and National Government
Services Blue Cross/Blue Shield Association (“NGS”), pursuant to 42
U.S.C. § 1395oo, seeking judicial review of the Secretary’s denial of
reimbursements for costs associated with offsite training of residents during
fiscal years 2000 and 2001.1 (Compl., Dkt. No. 1; Compl., Dkt. No. 1, 1:10cv-868.2) Pending are plaintiffs’ motion for summary judgment and
defendants’ cross-motion for summary judgment. (Dkt. Nos. 24, 27.) For
the reasons that follow, defendants’ motion is granted in part and denied in
part, and plaintiffs’ motion is denied.

1

Benedictine seeks review only of the Secretary’s denial of reimbursement for fiscal
year 2000. (Compl., Dkt. No. 1, 1:10-cv-868.)
2

Plaintiffs’ separate appeals were consolidated into the present action on November
18, 2010. (Dkt. No. 18.)

2

II. Background3
A.

Regulatory Framework and Appeals Process
The Department of Health and Human Services (“HHS”) is charged

with administering the Medicare program, which was established to provide
health insurance to the aged and disabled. (Dkt. No. 1, Attach. 1 at 4.)
Under the Medicare program, private insurance companies known as fiscal
intermediaries (“intermediaries”) are contracted to perform payment and
audit functions. (Id.)
To receive reimbursement under Medicare, health service providers
(“providers”) must submit to their assigned intermediary a report at the
close of each fiscal year detailing costs incurred and the portion of those
costs to be allocated to Medicare. (Id. citing 42 C.F.R. § 413.20.) The
intermediary determines the amount of Medicare reimbursement to which
the provider is entitled, and issues a Notice of Program Reimbursement
(“NPR”). (Id.) Providers may appeal adverse NPR determinations to the
Provider Reimbursement Review Board (“Review Board”) within 180 days
of the issuance of the NPR. (Id.) Absent further action by the Secretary
within 60 days, the Review Board’s decision is final. 42 C.F.R. §§
3

The facts are undisputed unless otherwise noted.

3

405.1871(b), 405.1875(a). A provider may obtain judicial review of a final
decision by means of a civil action brought within 60 days of notification of
such decision. 42 U.S.C. § 1395oo(f)(1).
B.

Medicare Payment for Costs of Medical Education
Medicare reimburses providers for the direct and indirect costs of

graduate medical education. (Dkt. No. 1, Attach. 1 at 4.) The Medicare
statute in place during the relevant period provided for reimbursement for
time spent by residents in non-hospital settings where the resident was
engaged in patient care activities and “the hospital incur[red] all, or
substantially all, of the costs for the training program in that setting.” 42
U.S.C. §§ 1395ww(d)(5)(B)(iv), (h)(4)(E) (2000). In promulgating
regulations to facilitate the implementation of this statute, the Secretary
further required a written agreement between providers and non-hospital
sites indicating that the provider bore responsibility for incurring the cost of
residents’ salaries and fringe benefits as well as compensation for
supervisory teaching activities. 42 C.F.R. §§ 413.86(f)(4), 412.105(f) (2000
& 2001).
C.

Factual History
In 1983, plaintiffs Kingston and Benedictine—both hospitals in
4

Kingston, New York—jointly established the Mid-Hudson Family Health
Services Institute (“Institute”). (Dkt. No. 27, Attach. 4 ¶ 7.) The Institute
operated a diagnostic and treatment center as well as an accredited
residency program. (Id. ¶ 8.) Between 1983 and 2001, Kingston and
Benedictine executed three agreements by which they agreed to, inter alia,
cover the Institute’s deficits and provide the Institute with adequate cash
flow. (Dkt. No. 1, Attach. 1 at 6.) During 2000 and 2001, the residency
program was comprised of approximately 20 residents who divided their
time between Kingston, Benedictine and non-hospital locations. (Dkt. No.
24, Attach. 2 at 7.)
On June 8, 2004 and July 8, 2005, NGS, Kingston’s intermediary,4
issued its NPR for fiscal years 2000 and 2001, respectively. (Id.) In both
NPRs, NGS found that the time spent by Kingston residents in non-hospital
settings throughout 2000 and 2001 should not be counted for Medicare
reimbursement, resulting in a disallowance of over $1 million. (Id. at 7-8.)
On June 18, 2004, NGS issued a substantially identical NPR in relation to
Benedictine’s reimbursement for fiscal year 2000, resulting in a
4

At the time that it issued the NPRs in question, NGS operated under the name
“Empire Medicare Services.” (Pls.’ Statement of Material Facts (“SMF”) ¶ 4, Dkt. No. 24,
Attach. 4.) To maintain consistency with the parties’ submissions, the court refers to the
intermediary as NGS.

5

disallowance of over $550,000. (Id. at 8.)
D.

Procedural History
Kingston timely appealed both its 2000 and 2001 NPRs to the

Review Board. (Id. at 9.) In light of the similarities between the respective
appeals, the Review Board considered both NPRs in a consolidated
October 17, 2008 hearing. (Id.) In a September 23, 2009 decision, the
Review Board affirmed NGS’ disallowance of reimbursement for time spent
by Kingston residents in non-hospital settings during fiscal years 2000 and
2001. (Dkt. No. 1, Attach. 1 at 13.) Specifically, the Review Board found
that: the written agreement requirement promulgated by the Secretary was
properly prescribed; plaintiffs did not qualify for relief under Section 713 of
the Medicare Prescription Drug, Improvement and Modernization Act of
2003, Pub.L. No. 108-173; and the covenants entered into by plaintiffs
between 1983 and 2001 failed to satisfy the written agreement requirement
of 42 C.F.R. § 413.86(f)(4). (Dkt. No. 1, Attach. 1 at 11-12.) The Review
Board subsequently affirmed Benedictine’s 2000 NPR as well.5 (Id.)
Kingston and Benedictine timely appealed the Review Board’s decisions to

5

Because of the extensive similarities with the previously-decided Kingston appeal,
Benedictine and NGS waived their rights to a formal hearing and the Review Board considered
the appeal on the record. (Id.)

6

this court on November 11, 2009 and July 15, 2010, respectively. (Id. at 910.) These appeals were consolidated into the present action in an Order
dated November 18, 2010. (Dkt. No. 18.)
III. Standard of Review
The standard of review under Fed. R. Civ. P. 56 is well established
and will not be repeated here. For a full discussion of the standard, the
court refers the parties to its decision in Wagner v. Swarts, No. 1:09-cv652, 2011 WL 5599571, at *4 (N.D.N.Y. Nov. 17, 2011).
Under the Administrative Procedure Act, “a party seeking to upset
agency action must demonstrate that the decision was arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance with law.” St.
Mary’s Hosp. of Troy v. Blue Cross & Blue Shield Ass’n/Blue Cross & Blue
Shield of Greater N.Y., 788 F.2d 888, 890 (2d Cir. 1986) (citing 5 U.S.C. §
706(2)(A)). Under the “arbitrary and capricious” standard, agency action
may be invalidated if it is not “rational and based on consideration of the
relevant factors.” F.C.C. v. Nat’l Citizens Comm. for Broad., 436 U.S. 775,
803 (1978) (internal citation and quotation omitted). While review “is to be
searching and careful, the court is not empowered to substitute its
judgment for that of the agency.” Id. (internal citation and quotation
7

omitted). Where an agency has taken adjudicative action, a reviewing
court “should accept the agency’s factual findings if those findings are
supported by substantial evidence on the record as a whole.” Arkansas v.
Oklahoma, 503 U.S. 91, 113 (1992).
“[T]he focal point for judicial review should be the administrative
record already in existence, not some new record made initially in the
reviewing court.” Camp v. Pitts, 411 U.S. 138, 142 (1973). If the agency
has failed to consider all relevant factors, its action is unsupported by the
record, or the record is insufficient for the reviewing court to evaluate the
challenged action, “the proper course, except in rare circumstances, is to
remand to the agency for additional investigation or explanation.” Fla.
Power & Light Co. v. Lorion, 470 U.S. 729, 744 (1985).
IV. Discussion
A.

Validity of Written Agreement Requirement
The first ground upon which Kingston and Benedictine seek to

invalidate the Secretary’s denial of reimbursement is that the written
agreement requirement contained in 42 C.F.R. § 413.86(f)(4) (2000 &

8

2001)6 is invalid as contrary to law. (Dkt. No. 24, Attach. 2 at 12.)
Defendants contend that the Secretary has the authority to implement the
written agreement requirement and that the Review Board correctly found
the regulation to be properly prescribed. (Dkt. No. 27, Attach. 1 at 12.)
The court agrees with defendants.
An agency’s interpretation of a statute it is responsible for
administering is entitled to deference “so long as it is reasonable in light of
the two-step analysis set forth in Chevron, U.S.A., Inc. v. Natural Res. Def.
Council, Inc., 467 U.S. 837, 842-44 (1984).” Mei Fun Wong v. Holder, 633
F.3d 64, 68 (2d Cir. 2011). The first question under Chevron is “whether
Congress has directly spoken to the precise question at issue.” 467 U.S. at
842. Here, the precise question is “whether the Secretary may require a
written agreement before counting time spent by residents in non-hospital

6

The regulation at issue specifically states that:
The written agreement between the hospital and the nonhospital
site must indicate that the hospital will incur the cost of the
resident’s salary and fringe benefits while the resident is training in
the nonhospital site and the hospital is providing reasonable
compensation to the nonhospital site for supervisory teaching
activities. The agreement must indicate the compensation the
hospital is providing to the nonhospital site for supervisory teaching
activities.

42 C.F.R. § 413.86(f)(4) (2000 & 2001). The same requirements are also incorporated
into 42 C.F.R. § 412.105(f), and the court’s analysis of both regulations is identical.

9

settings.” Cottage Health Sys. v. Sebelius, 631 F. Supp. 2d 80, 92 (D.D.C.
2009). While 42 U.S.C. § 1395hh(a)(1) grants the Secretary broad
authority to “prescribe such regulations as may be necessary to carry out
the administration of” the Medicare program, and 42 U.S.C. §
1395ww(h)(4)(E) directs the Secretary to “establish rules consistent with
this paragraph,” neither statutory provision speaks directly to the
permissibility of a written agreement requirement. The Medicare statute is
therefore silent as to this query.
This silence leads the court to step two of the Chevron test, under
which an agency’s statutory interpretation is only disturbed if it is “arbitrary
or capricious in substance, or manifestly contrary to the statute.” Mayo
Found. for Med. Educ. & Research v. United States, 131 S.Ct. 704, 711
(2011) (internal quotation and citation omitted). The statutory provisions at
issue here both mandate that all time spent by residents in non-hospital
settings be counted toward a provider’s reimbursement calculation if: (1)
the time is spent in patient care activities; and (2) the provider incurs all, or
substantially all, of the training costs in that setting. 42 U.S.C. §§
1395ww(d)(5)(B)(iv), (h)(4)(A), (E) (2000). Kingston and Benedictine argue
that because the statutes impose only those two requirements, the
10

Secretary’s promulgation of a written agreement requirement is
inconsistent with congressional intent and contrary to law. (Dkt. No. 24,
Attach. 2 at 12-13.)
The Secretary’s written agreement requirement, however, reflects a
reasonable construction of the Medicare statute. The purpose of the
requirement is to, inter alia, “identify the costs of offsite training and to
determine whether a hospital seeking Medicare reimbursement . . . paid all
or substantially all [of those] costs.” Medicare Program: Payments to
Hospitals for Graduate Medical Education Costs, 75 Fed. Reg. 71800,
72134 (Nov. 24, 2010) (to be codified at 42 C.F.R. pts. 410-13, 416, 419,
489). With this goal in mind, the Secretary could “permissibly conclude that
a written agreement is not a new substantive requirement but a procedural
mechanism for satisfying the two statutory requirements.” Covenant Med.
Ctr., Inc. v. Sebelius, 424 F. App’x 434, 438 (6th Cir. 2011). Congress’
endorsement of the Secretary’s authority to require documentation prior to
reimbursement is evident by its mandate that payment not be made unless
the provider has “furnished such information as the Secretary may request
in order to determine the amounts due such provider.” 42 U.S.C. §
1395g(a); see also Covenant, 424 F. App’x at 438. It is entirely reasonable
11

for the Secretary to determine that “the written agreement would improve
administrability, and thereby avoid the wasteful litigation and continuing
uncertainty that would inevitably accompany a purely case-by-case
approach.” Id. (internal quotation and citations omitted).
In light of the authority granted by Congress to the Secretary, and the
deference owed the Secretary under Chevron,7 the written agreement
requirement is neither arbitrary, capricious nor contrary to law. See
Covenant, 424 F. App’x at 439; Cottage Health, 631 F. Supp. 2d at 91-93;
Chestnut Hill Hosp. v. Thompson, No. 04-1228, 2006 WL 2380660, at *4
(D.D.C. Aug. 15, 2006). The Review Board’s determination that the
regulation was properly prescribed is therefore affirmed.
B.

Sufficiency of Written Agreements
Kingston and Benedictine argue next that even if the written

agreement requirement is valid, it was satisfied by their 1983 and 2001

7

Contrary to the contentions of Kingston and Benedictine, the Secretary’s 2004
addition of an alternative means by which providers may establish compliance with the
statutory cost requirement, see 42 C.F.R. § 413.78(e) (2011), does not alter the deference
owed the Secretary in relation to the written agreement rule. Nat’l Cable & Telecomm. Ass’n v.
Brand X Internet Serv., 545 U.S. 967, 981 (2005) (holding that “if the agency adequately
explains the reasons for a reversal of policy, change is not invalidating, since the whole point of
Chevron is to leave the discretion provided by the ambiguities of a statute with the
implementing agency.” (internal quotations and citation omitted)). Here, the Secretary has not
invalidated the written agreement requirement—it is still a permissible means of meeting the
statutory cost requirement—but rather has simply offered providers alternative avenues of
compliance.

12

undertakings. (Dkt. No. 24, Attach. 2 at 17-21.) Defendants aver that the
Review Board’s findings to the contrary are supported by the substantial
evidence of the record. (Dkt. No. 27, Attach. 1 at 29.) The court finds merit
in both arguments.
In a 1983 undertaking establishing the Institute, Kingston and
Benedictine agreed to “jointly and severally guarantee and agree to
contribute to the Institute, on at least an annual basis, sufficient funds to
meet any annual deficits incurred by the Institute, and to provide an
adequate cash flow to the Institute in order to assure the Institute’s financial
viability.” (Dkt. No. 27, Attach. 4 ¶¶ 10-11.) The Review Board found that
this undertaking failed to satisfy the written agreement requirement
because it: (1) was between hospitals, not the hospitals and non-hospital
sites; (2) made “no provision for the costs of the residents’ salaries and
fringe benefits”; and (3) was “silent relative to the compensation the
hospital [was] providing to the nonhospital site for supervisory teaching
activities.” (Dkt. No. 1, Attach. 1 at 12.) While Kingston and Benedictine
argue that the 1983 undertaking rendered them “effectively responsible for
paying” for the residency program (see Dkt. No. 24, Attach. 2 at 19), the
Review Board’s determination that the writing fell short of the specific
13

requirements of the regulation is clearly supported by substantial evidence.
On April 26, 2001, Kingston and the Institute entered into an
“Affiliation Agreement” with an effective date of July 1, 2001, and
Benedictine left the residency program. (Dkt. No. 27, Attach. 1 at 34.)
Because the effective date of the agreement was found to be “six months
after the beginning of FY 2001 and after residents were placed into
nonhospital settings,” the Review Board did not address the writing on the
merits.8 Relying on its previous decision in Hallmark Health Sys., PRRB
Dec. No. 2008-D4 (Oct. 16, 2007), the Review Board stated that an
agreement “which post dates the placement of residents in the nonhospital
setting cannot be applied retroactively to establish compliance with the
regulation.” (Dkt. No. 1, Attach. 1 at 12.) In Hallmark, the Board read 42
C.F.R. § 413.86(f)(4)(ii) to require that the written agreement be in place
“within the relevant fiscal year or before the time that the . . . residents
begin their ‘rotations.’” (Dkt. No. 24, Attach. 3 at 7.)
While the court does not question the Secretary’s interpretation of its
own regulation as requiring a contemporaneous written agreement, the

8

In a Concurring Opinion, Review Board member Yvette C. Hayes analyzed the 2001
Affiliation Agreement on the merits and determined that it did not satisfy the written agreement
requirement. (Dkt. No. 1, Attach. 1 at 14.)

14

facts in the record do not support the conclusion that the 2001 Affiliation
Agreement became effective after residents were placed into non-hospital
settings.9 Kingston’s residency program operates on an academic
calendar year beginning July 1 and ending June 30. (Dkt. No. 30 at 11.)
Because the Affiliation Agreement’s effective date was July 1, 2001, it was
in place when Kingston residents began their rotations on that same date.10
(Id.) Accordingly, the issue is remanded to the Secretary to determine
whether the Affiliation Agreement satisfied the written agreement
requirement of 42 C.F.R. §§ 413.86(f)(4) for the period July 1, 2001 to
December 31, 2001.11
C.

Section 713 Exemption
Finally, Kingston and Benedictine argue that they are exempted from
9

Yvette C. Hayes reached the same conclusion in her Concurring Opinion. (Dkt. No. 1,
Attach. 1 at 14.)
10

Defendants argue that the Affiliation Agreement was not effective as of July 1, 2001
because of technical deficiencies that made the contract aspirational. (Dkt. No. 27, Attach. 1 at
34-37.) Because the Review Board did not address the merits of the Affiliation Agreement,
however, it is not the court’s place to entertain a contract law argument between the parties.
The plain language of the agreement states that the effective date was July 1, 2001. (Dkt. No.
27, Attach. 1 at 34.) Accordingly, a written agreement was in place between Kingston and the
Institute as of July 1, 2001, when the residents began their rotation, and the sufficiency of that
agreement should be determined by the Secretary.
11

Despite defendants’ contentions, the Review Board did not reach a decision as to
whether Kingston “incur[red] all or substantially all of the costs for the training program in the
nonhospital setting.” (Dkt. No. 1, Attach. 1 at 13.) The Secretary need only reach this issue if
it finds that the written agreement rule was satisfied by the Affiliation Agreement during the
specified period.

15

the written agreement requirement by Section 713 of the Medicare
Prescription Drug, Improvement and Modernization Act of 2003, Pub.L. No.
108-173. Defendants contend successfully that the Secretary reasonably
construed Section 713, and that Kingston and Benedictine are not entitled
to an exemption.
Section 713 provides:
During the one year period beginning on January 1, 2004, for
purposes of [calculating the reimbursement owed hospitals for
medical residents training in non-hospital settings], the Secretary
shall allow all hospitals to count residents . . . without regard to
the financial arrangement between the hospital and the teaching
physician practicing in the non-hospital site to which the resident
has been assigned.
Chestnut Hill, 2006 WL 2380660 at *3. The Secretary interpreted Section
713’s moratorium to apply to: “(1) all training that occurred in calendar year
2004”; and “(2) all training that occurred before 2004,” if the intermediary
determined reimbursability during 2004. Chestnut Hill, 2006 WL 2380660,
at *3. Furthermore, the Secretary interpreted Section 713 to require
compliance with all aspects of the written agreement requirement other
than the financial arrangement between the hospital and the teaching
physician at the non-hospital site. Medicare Program; Changes to the
Hospital Inpatient Prospective Payment Systems and Fiscal Year 2005
16

Rates, 69 Fed. Reg. 48916, 49178 (Aug 11. 2004) (to be codified at 42
C.F.R. pts. 403, 412, 413, 418, 460, 480, 482, 483, 485, 489); (Dkt. No. 27,
Attach 1 at 23-24.) Based upon these interpretations, the Review Board
found that Kingston and Benedictine’s lack of a written agreement
foreclosed application of the Section 713 exemption. (Dkt. No. 1, Attach. 1
at 11.) Plaintiffs dispute the Secretary’s statutory interpretations. (Dkt. No.
24, Attach. 2 at 14-16.)
As discussed above, agency interpretation of a statute is analyzed
under the two part Chevron test. Mei Fun Wong, 633 F.3d at 68. Section
713 is ambiguous as to the extent of activity which falls under the “one year
period beginning on January 1, 2004.” The question therefore becomes
whether the Secretary’s construction of this language was reasonable.
Mayo Found., 131 S.Ct. at 711 (internal citation omitted). In light of the
statutory language, reading Section 713 to apply to training that occurred
during calendar year 2004 is indisputably reasonable.
Kingston and Benedictine argue instead that the Secretary’s inclusion
of pre-2004 training for which an intermediary determines reimbursability in
2004 should be expanded to include all pre-2004 training that is before an
intermediary during that year. (Dkt. No. 24, Attach. 2 at 15.) While the
17

Secretary’s construction may in some instances place more reliance than is
ideal on the timing of intermediary decision-making,12 its interpretation of
Section 713 is neither arbitrary, capricious nor contrary to law. Mayo
Found., 131 S.Ct. at 711 (internal citation omitted).
Lastly, Kingston and Benedictine aver that the Secretary’s reading of
Section 713 to require compliance with all aspects of the written agreement
requirement except that relating to the financial arrangement between the
hospital and the teaching physician at the non-hospital site is too narrow.
(Dkt. No. 24, Attach. 2 at 15-16.) The plain language of Section 713,
however, makes clear that the Secretary’s interpretation is entirely in line
with the statute. To the limited extent that the statute may be construed as
arbitrary, the Secretary’s reading of it is eminently reasonable.
Having determined that the Secretary’s construction of Section 713 is
reasonable, it is apparent that the Review Board properly determined that
neither Kingston nor Benedictine qualified for an exemption. The 2000
Cost Reports for both hospitals were settled by NGS in 2004, thereby

12

In fact, if the Secretary’s interpretation is flawed at all, it is likely for being too broad,
not too narrow. See Chestnut Hill, 2006 WL 2380660, at *5 (finding that Section 713 is “most
naturally read to apply only to rotations that occurred in 2004.” (internal citation omitted)). The
court’s analysis, however, ends at its determination that the Secretary’s construction is
reasonable under Chevron.

18

meeting Section 713’s temporal requirement. (Dkt. No. 24, Attach. 2 at
15.) As determined above, however, neither hospital had a valid
agreement in place during fiscal year 2000. Kingston’s 2001 Cost Report
was settled by NGS in 2005, rendering the Secretary’s analysis on remand
of the written agreement in place between July 1, 2001 and December 31,
2001 irrelevant to the Section 713 analysis. (Id.) Accordingly, the
Secretary’s finding that neither Kingston nor Benedictine qualified for relief
under Section 713 is affirmed.
V. Conclusion
WHEREFORE, for the foregoing reasons, it is hereby
ORDERED that plaintiffs’ motion for summary judgment (Dkt. No. 24)
is DENIED; and it is further
ORDERED that the defendants’ cross motion for summary judgment
(Dkt. No. 27) is GRANTED in part and the Secretary’s findings are
AFFIRMED as to:
1. The validity of the Secretary’s written agreement requirement
in 42 C.F.R. § 413.86(f)(4); and
2. The lack of relief available to plaintiffs under Section 713 of
the Medicare Prescription Drug, Improvement and
19

Modernization Act of 2003, Pub.L. No. 108-173; and it is further
ORDERED that the defendants’ cross motion for summary judgment
(Dkt. No. 27) is DENIED in part as to the sufficiency of the April 26, 2001
agreement between Kingston and the Institute; and it is further
ORDERED that the action is remanded to the Secretary to answer
the following questions:
1. Whether the April 26, 2001 agreement between Kingston and
the Institute satisfied the written agreement requirement in 42
C.F.R. § 413.86(f)(4); and, if so:
2. Whether Kingston “incur[red] all or substantially all of the
costs for the training program in the nonhospital setting in
accordance with the definition of paragraph (b) of this section”
as required to satisfy 42 C.F.R. § 413.86(f)(4)(iii) for the period
July 1, 2001 to December 31, 2001; and it is further
ORDERED that upon a final determination by the Secretary on the
question(s) presented on remand, Kingston Hospital may appeal the
Secretary’s decision, if it so chooses, in accordance with 42 U.S.C. §
1395oo(f)(1); and it is further
ORDERED that the parties notify the court upon the Secretary’s final
20

determination on the question(s) presented on remand; and it is further
ORDERED that the Clerk terminate Benedictine Hospital as a party
to this case; and it is further
ORDERED that the Clerk provide a copy of this MemorandumDecision and Order to the parties.
IT IS SO ORDERED.
December 8, 2011
Albany, New York

21