United States District Court, D. Connecticut
RULING ON DEFENDANT'S MOTION TO DISMISS FOR LACK
OF SUBJECT MATTER JURISDICTION (DOC NO. 16) AND
PLAINTIFF'S MOTION FOR LEAVE TO FILE A SUR-REPLY (DOC.
C. Hall Judge.
Yale New Haven Hospital (“YNH”), brought this
action against defendant, Alex M. Azar II, Secretary of the
United States Department of Health and Human Services,
pursuant to Title XVIII of the Social Security Act, section
1395 et seq. of title 42 of the United States Code
(“Medicare Act”), and the Administrative
Procedure Act (“APA”), section 551 et
seq. of title 5 of the United States Code. Complaint
(“Compl.”) ¶ 1. YNH seeks, inter
alia, (1) an order reinstating its appeal of the Centers
for Medicare and Medicaid Services (“CMS”) policy
concerning Disproportionate Share Hospital
(“DSH”) payments to merged hospitals under
Medicare for the 2014 Federal Fiscal Year
(“FFY”); (2) an order invalidating said policy;
(3) an order requiring the Secretary to recalculate YNH's
DSH payment for FFY 2014; and (4) the issuance of a writ of
mandamus requiring the same recalculation. See
Compl. at 24.
the court is the Secretary's Motion to Dismiss for Lack
of Subject Matter Jurisdiction (“Mot. to
Dismiss”) (Doc. No. 16) and YNH's Motion for Leave
to File a Sur- Reply (Doc. No. 26). For the reasons stated
below, the Motion to Dismiss is granted in part and denied in
part, and the Motion for Leave to File a Sur-Reply is denied.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(1), “[a] case is
properly dismissed for lack of subject matter jurisdiction .
. . when the district court lacks the statutory or
constitutional power to adjudicate it.” Makarova v.
United States, 201 F.3d 110, 113 (2d Cir. 2000). The
plaintiff bears the burden of proving the existence of
subject matter jurisdiction. Id. In determining
whether the plaintiff has met this burden, the court must
accept as true all factual allegations in a complaint and
draw all reasonable inferences in favor of the plaintiff.
Carter v. Healthport Techs., LLC, 882 F.3d 47, 57
(2d Cir. 2016); Aurecchione v. Schoolman Transp. Sys.,
Inc., 426 F.3d 635, 638 (2d Cir. 2005). In addition, a
district court “may refer to evidence outside the
pleadings” when resolving a motion to dismiss for lack
of subject matter jurisdiction under Rule 12(b)(1).
Makarova, 201 F.3d at 113.
Administrative Procedure Act “embodies the basic
presumption of judicial review to one ‘suffering legal
wrong because of agency action, or adversely affected or
aggrieved by agency action within the meaning of a relevant
statute.” Abbott Labs. v. Gardner, 387 U.S.
136, 140 (1967), abrogated on other grounds,
Califano v. Sanders, 430 U.S. 99 (1977). Therefore,
“[i]n determining whether a statute precludes judicial
review, the court must heed the APA's basic presumption
of judicial review that will not be cut off unless there is
persuasive reason to believe that such was the purpose of
Congress.” Texas All. for Home Care Servs. v.
Sebelius, 681 F.3d 402, 408 (D.C. Cir. 2012). “The
presumption favoring judicial review of administrative
action, ” however, “is just that-a
presumption” and, “like all presumptions used in
interpreting statutes, may be overcome by specific language
or specific legislative history that is a reliable indicator
of congressional intent.” Id. (quoting
Block v. Cmty. Nutrition Inst., 467 U.S. 340, 349
Medicare Act establishes a system of insurance for qualifying
beneficiaries. See 42 U.S.C. § 1395c. The
Medicare program is administered by the Secretary through CMS
and its contractors. 42 U.S.C. § 1395kk. The Medicare
program is split into five parts: A, B, C, D, and E. Relevant
to this case, CMS pays providers, including YNH, for covered
services under Part A. In 1983, Congress adopted the
inpatient prospective payment system (“IPPS”) to
reimburse providers for inpatient hospital operating costs.
See Social Security Amendments of 1983, Pub.L. No.
98-21, 97 Stat. 65 (1983). Under the IPPS, CMS makes payments
to providers for operating costs based on nationally
applicable rates, subject to certain payment adjustments. One
such adjustment is the DSH payment.
of the Patient Protection and Affordable Care Act
(“ACA”), Congress enacted the Uncompensated Care
DSH (“UC DSH”) payment system. See 42
U.S.C. § 1395ww(r). Pursuant to the UC DSH payment
system, beginning in FFY 2014, a disproportionate share
hospital received two DSH payments. The first
payment was equal to 25% of the amount due to the hospital
under the DSH system that existed prior to the enactment of
the ACA. The second payment, known as the UC DSH payment, is
the hospital's share of 75% of the national total DSH
payment, calculated using a methodology outlined in section
3133 of the ACA. Under the new methodology, CMS calculates
the UC DSH payment for each eligible hospital based on the
product of three factors: Factors 1, 2, and 3. Factor 3,
which is the only factor relevant in this case, is equal to a
fraction, where the numerator is the amount of uncompensated
care for [an eligible] hospital for a period selected by the
Secretary (as estimated by the Secretary, based on
appropriate data (including, in the case where the Secretary
determines that alternative data is available which is a
better proxy for the costs of subsection (d) hospitals for
treating the uninsured, the use of such alternative data)),
and the denominator is “the aggregate amount of
uncompensated care for all [eligible] hospitals that receive
a payment . . . for such period (as so estimated, based on
such data).” 42 U.S.C. § 1395ww(r)(2)(C). Put
simply, Factor 3 is equal to each eligible hospital's
uncompensated care, stated as a percentage of the total
national uncompensated care for all qualifying hospitals.
Compl. ¶ 24.
calculates UC DSH payments in advance of each FFY, as part of
the annual IPPS rulemaking. Id. ¶ 25. CMS uses
historical data to estimate UC DSH payments. For FFY 2014,
CMS used data submitted by hospitals for the 2010 and 2011
Medicare cost reports, depending on which reporting period
yielded more recent data. Id. ¶ 26.
to the pending Motion to Dismiss is that the ACA includes a
review preclusion statute, codified at section 1395ww(r)(3)
of title 42 of the United States Code, that limits judicial
review of the Secretary's DSH payment estimates.
See 42 U.S.C. § 1395ww(r)(3). The preclusion
shall be no administrative or judicial review under section
1395ff of this title, section 1395oo of this title, or
otherwise of the following:
(A) Any estimate of the Secretary for purposes of determining
the factors described in paragraph (2).
(B) Any period selected by the Secretary for such purposes.
Id. The question before the court is whether this
provision precludes judicial review of the Secretary's
actions in calculating the UC DSH payment.
merged with another hospital, Hospital of Saint Raphael
(“HSR”), effective September 12, 2012. Compl.
¶ 35. As a result of the transaction, YNH assumed
HSR's Medicare provider agreement, and HSR's CMS
certification number (“CCN”) was subsumed under
YNH's CCN. Id. In the IPPS Proposed Rule for FFY
2014, CMS announced its proposed methodology to calculate UC
DSH payments for FFY 2014. Id. ¶ 36;
see 78 Fed. Reg. 27, 486. CMS did not mention, in
either the preamble or text of the proposed rule, that it
intended to change from the prior policy of calculating
post-merger Medicare payments using data from both the
surviving and non-surviving hospital. Compl. ¶ 36.
Furthermore, in the data table published by CMS with the FFY
2014 IPPS Proposed Rule, data for both YNH and HSR appeared,
and a projected UC DSH payment was calculated for both
hospitals. Id. ¶ 37.
not submit a comment to CMS on the calculation of FFY 2014 UC
DSH payments. Id. at ¶ 38. However, another
hospital, which, like YNH, had completed a merger during the
relevant time period, submitted a comment noting its concern
that CMS had “calculated Factor 3 using only the
surviving hospital's cost report data, ” and
“requesting that [CMS] account for the merger and
include both hospitals' data.” Id. ¶
39. CMS responded to that comment, in its publication of the
IPPS Final Rule, that Factor 3 would be calculated using only
the surviving hospital's data, because use of such data
was “consistent with the treatment of other IPPS
payment factors.” Reply at 9. YNH contacted CMS to
request a correction rule be issued to include the data of
both parties to a merger in calculating Factor 3. Compl.
¶ 40. CMS declined. Id. As a result, CMS
excluded the inpatient days from HSR when calculating
YNH's FFY 2014 UC DSH payment. Id. ¶
timely appealed its FFY 2014 UC DSH payment through a letter
dated January 24, 2014. Id. ¶ 48. The appeal
was dismissed for lack of jurisdiction, based on the
preclusion statute, and the CMS Administrator has not
responded to an appeal of that dismissal. Id.
alleges six claims against the Secretary. Counts I, II, and
III arise under the Medicare Act and the APA. Compl. at
20-22. Count IV is brought pursuant to the mandamus statute,
Count V pursuant to the All Writs Act, and Count VI under the
Due Process Clause of the United States Constitution.
Id. at 22-23. The Secretary argues that all of the
claims are subject to dismissal.
Medicare and APA Claims (Counts I, II, and III).
Count I, YNH alleges that the Secretary violated the APA and
the Medicare Act by calculating the UC DSH payment
“without including HSR's data.” Id.
¶ 57. In Count II, YNH alleges that “[t]he FFY
2014 Merged Hospital Policy and the Hospital's FFY 2014
DSH payment are procedurally unlawful and should be set aside
because that payment was calculated using the FFY 2014 Merged
Hospital Policy, which the Secretary did not adopt properly
under the APA and the Medicare Act.” Id.
¶ 60. In Count III, YNH alleges that the FFY 2014 Merged
Hospital Policy and YNH's resultant DSH payment